Q1 2023 Warner Bros Discovery Inc Earnings Call

May 5, 2023

[music].

Operator: Ladies and gentlemen, thank you for standing by. Today's conference will begin shortly to allow as many participants as possible to join. Until that time, your lines again will be placed on music hold. Thank you for your patience. Ladies and gentlemen, welcome to the Warner Bros. Discovery, Inc., Q1 2023 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Additionally, please be advised that today's conference call is being recorded. I would like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may now begin.

Okay.

Ladies and gentlemen, thank you for standing by today's conference will begin shortly to allow as many participants as possible to join until that time. Your lines again will be placed on music hold thank you for your patience.

[music].

At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Additionally, please be advised that today's conference call is being recorded. I would like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may now begin.

At this time all participant lines are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Additionally, please be advised that today's conference call is being recorded I would like to hand, the conference over to Mr. Andrew Sleep-in Executive Vice President Global Investor strategy, Sir you May now begin.

Andrew Slabin: Good morning and welcome to Warner Bros. Discovery's Q1 earnings call. With me today is David Zaslav, President and CEO, Gunnar Wiedenfels, our CFO, and J.B. Perrette, CEO and President, Global Streaming and Games. Before we start, I'd like to remind you that today's conference call will include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include comments regarding the company's future business plans, prospects, and financial performance. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on factors that could affect these expectations, please see the company's filings with the US.

Good morning, and welcome to Warner Brothers discoveries Q1 earnings call with me today is David Zaslav, President and CEO <unk> <unk>, our CFO and JB, Perrette, CEO and president global streaming and games before we start I'd like to remind you that today's conference call will include forward looking statements that we make pursuant to the safe Harbor.

Provisions of the private Securities Litigation Reform Act of 1995. The forward looking statements include comments regarding the company's future business plans prospects and financial performance. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations in providing projections and other.

These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on factors that could affect these expectations, please see the company's filings with the US.

Looking statements the company disclaims any intent or obligation to update them.

For additional information on factors that could affect these expectations. Please see the company's filings with the U S Securities Exchange Commission, including but not limited to the company's most recent annual report on Form 10-K, and its reports on Form 10-Q, and form 8-K, a copy of our Q1 earnings release trending schedule, an accompanying slide deck is available on our website at IR.

Andrew Slabin: Securities and Exchange Commission, including, but not limited to, the company's most recent annual report on Form 10-K and its reports on Form 10-Q, and Form 8-K. A copy of our Q1 earnings release trending schedule and accompanying slide deck is available on our website at ir.wbd.com. With that, I am pleased to turn the call over to David.

Securities and Exchange Commission, including, but not limited to, the company's most recent annual report on Form 10-K and its reports on Form 10-Q, and Form 8-K. A copy of our Q1 earnings release trending schedule and accompanying slide deck is available on our website at ir.wbd.com. With that, I am pleased to turn the call over to David.

<unk> Dot W. BD dot com and with that I am pleased to turn the call over to David.

David Zaslav: Hello, everyone, and thank you for joining us. We've had a very busy and productive year thus far. And while we have lots more to do and more to attack, and we are aggressively doing just that, the diversified nature of our company continues to provide a strong foundation that enables us to weather challenging environments like the one we're in and still generate meaningful free cash flow. We expected the marketplace to be challenged. And with clear eyes, we remain confident in our strategy and our ability to generate free cash flow and end this year below four times levered, with our streaming service as a tailwind. Gunnar will take you through the specifics. But for some perspective, on a trailing 12-month basis, we generated $2.1 billion in free cash flow, even after absorbing $1.2 billion in cash restructuring and merger-related costs.

Hello, everyone and thank you for joining us.

We've had a very busy and productive year, thus far.

While we have lots more to do and more to attack.

We're aggressively doing just that the diversified nature of our company continues to provide a strong foundation that enables us to weather challenging environments like the one we're in.

And still generate meaningful free cash flow.

We expected the marketplace to be challenged. And with clear eyes, we remain confident in our strategy and our ability to generate free cash flow and end this year below four times levered, with our streaming service as a tailwind.

We expected the marketplace to be challenged.

And with clear eyes, we remain confident in our strategy and our ability to generate free cash flow.

And this year below four times Levered.

With our streaming service as a tailwind.

Gunnar will take you through the specifics. But for some perspective, on a trailing 12-month basis, we generated $2.1 billion in free cash flow, even after absorbing $1.2 billion in cash restructuring and merger-related costs. Turning to the quarter, while Q1 is seasonally our weakest and we saw challenging revenue headwinds, mainly on the linear TV and studio sides, we are on track to achieve this year's financial targets. We see a number of positive proof points emerging across our businesses, with direct-to-consumer perhaps the most prominent.

Gunnar will take you through the specifics.

But for some perspective.

On a trailing 12 month basis, we generated $2 1 billion in free cash flow.

Even after absorbing $1 2 billion in cash restructuring and merger related costs.

David Zaslav: Turning to the quarter, while Q1 is seasonally our weakest and we saw challenging revenue headwinds, mainly on the linear TV and studio sides, we are on track to achieve this year's financial targets. We see a number of positive proof points emerging across our businesses, with direct-to-consumer perhaps the most prominent. We have strong command and control of our DTC business. We made a meaningful turn this quarter, generating $50 million in EBITDA and adding 1.6 million new subscribers. We feel really good about the trajectory we are on. We now expect our US DTC business to not only break even ahead of schedule, but to be profitable for the year 2023, this year, a year ahead of our guidance. It's worth noting HBO Max and Discovery+ are still only available to less than half of the global streaming market.

Okay.

Turning to the quarter.

While Q1 is seasonally our weakest and we saw a challenging revenue headwinds mainly on the linear TV studio sides. We are on track to achieve this year's financial targets and.

And we see a number of positive proof points emerging across our businesses with direct to consumer perhaps the most prominent.

We have strong command and control of our DTC business. We made a meaningful turn this quarter, generating $50 million in EBITDA and adding 1.6 million new subscribers. We feel really good about the trajectory we are on. We now expect our US DTC business to not only break even ahead of schedule, but to be profitable for the year 2023, this year, a year ahead of our guidance. It's worth noting HBO Max and Discovery+ are still only available to less than half of the global streaming market.

We have a strong command and control of our DTC business, we made a meaningful turn this quarter generating $50 million in EBITDA.

And adding $1 6 million new subscribers and we feel really good about the trajectory we're on.

We now expect our U S DTC business to not only break even ahead of schedule.

But to be profitable for the year 2023 this year.

A year ahead of our guidance.

And it's worth, noting HBO, Max and discovery plus are still only available to less than half of the global screaming market.

David Zaslav: So there is significant runway ahead of us, and we are attacking this opportunity. Max launches here in the US on 23 May, with Latin America to follow later this year, and markets in EMEA and APAC in 2024. The service looks terrific and is a broad and compelling offering for everyone in the family. We anticipate having a healthy pipeline of our new content added to Max monthly. Recognizing that one of the real advantages we have as a company is the strength and depth of our franchises, including Harry Potter for a decade, Game of Thrones, and DC, we are delivering on our commitment to reinvigorate the best of them with new, exciting stories for fans around the world. While at launch, the Max offering will feature the full range of entertainment, this is really just the beginning.

So there is significant runway ahead of us, and we are attacking this opportunity. Max launches here in the US on 23 May, with Latin America to follow later this year, and markets in EMEA and APAC in 2024. The service looks terrific and is a broad and compelling offering for everyone in the family. We anticipate having a healthy pipeline of our new content added to Max monthly.

So there were significant runway ahead of us and we are attacking this opportunity.

Max launches here in the U S on may 23rd.

With Latin America to follow later, this year and markets in EMEA and APAC in 2024.

Service looks terrific.

And as a broad and compelling offering for everyone in the family.

We anticipate having a healthy pipeline of our new content added to Max monthly.

Recognizing that one of the real advantages we have as a company is the strength and depth of our franchises, including Harry Potter for a decade, Game of Thrones, and DC, we are delivering on our commitment to reinvigorate the best of them with new, exciting stories for fans around the world.

And recognizing that one of the real advantages we have as a company.

The strength and depth of our franchises, including Harry Potter for a decade game of Thrones and DC.

We are delivering on our commitment to reinvigorate the best of them with new exciting stories for fans around the world.

While at launch, the Max offering will feature the full range of entertainment, this is really just the beginning. We are actively working on options to expand our lineup to include news and sports, acknowledging that this live programming has the power to keep consumers coming back for more and staying longer. We look forward to sharing further details with you in the months ahead.

While it launched the Max offering and will feature the full range of entertainment.

This is really just the beginning.

David Zaslav: We are actively working on options to expand our lineup to include news and sports, acknowledging that this live programming has the power to keep consumers coming back for more and staying longer. We look forward to sharing further details with you in the months ahead. As part of our marketing campaign, under our one-company strategy, we are taking full advantage of the range of available media assets company-wide to include our US cable networks and our popular digital outlets like Bleacher Report and CNN.com. We're planning to roll out Max in most key markets around the world.

We are actively working on options to expand our lineup to include news and sports.

Acknowledging that this live programming has the power to keep consumers coming back for more and staying longer.

We look forward to sharing further details with you in the months ahead.

As part of our marketing campaign, under our one-company strategy, we are taking full advantage of the range of available media assets company-wide to include our US cable networks and our popular digital outlets like Bleacher Report and CNN.com.

As part of our marketing campaign.

Under our one company strategy, we are taking full advantage of the range of available media assets companywide.

To include our U S cable networks and our popular digital outlets like Bleacher report CNN Dot com.

We're planning to roll out Max in most key markets around the world. In an effort to reach the broadest possible audience and in keeping with our second strategic pillar to monetize our content in the most financially advantageous ways, we are also going to continue pursuing other licensing and output deals in markets where either that makes better strategic and financial sense or where HBO Max isn't currently available, often with paths to eventually launch Max when we're ready. Our recent deals in Canada and India, for example, are very lucrative with no expenses against them.

We're planning to rollout Max in most key markets around the world.

David Zaslav: In an effort to reach the broadest possible audience and in keeping with our second strategic pillar to monetize our content in the most financially advantageous ways, we are also going to continue pursuing other licensing and output deals in markets where either that makes better strategic and financial sense or where HBO Max isn't currently available, often with paths to eventually launch Max when we're ready. Our recent deals in Canada and India, for example, are very lucrative with no expenses against them. We already own that content. How we serve consumers is important. But the wealth of our media assets, brands, and IP, and our ability to deliver diverse, high-quality content that viewers want to watch and will pay for is what truly differentiates us and makes the opportunity we have to drive real value so compelling. It's the reason we brought these two companies together.

In an effort to reach the broadest possible audience and in keeping with our second strategic pillar <unk>.

To monetize our content in the most financially advantageous ways.

We are also going to continue pursuing other licensing and output deals in markets, where either that makes better strategic and financial sense.

All where HBO Max isn't currently available.

Often with paths to eventually launch Max when we're ready.

Our recent deals in Canada, and India for example, a very lucrative with no expenses against them.

We already own that content. How we serve consumers is important. But the wealth of our media assets, brands, and IP, and our ability to deliver diverse, high-quality content that viewers want to watch and will pay for is what truly differentiates us and makes the opportunity we have to drive real value so compelling. It's the reason we brought these two companies together. This year, we celebrate Warner Bros.' 100th anniversary. This studio has historically been the crown jewel of the industry, and we are working hard to rebuild it to its former glory.

We already own that content.

How we serve consumers is important.

The wealth of our media assets brands, and IP and our ability to deliver diverse high quality content that viewers want to watch and we will pay for is what truly differentiates us and makes the opportunity we have to drive real value so compelling.

It's the reason we brought these two companies together.

David Zaslav: This year, we celebrate Warner Bros.' 100th anniversary. This studio has historically been the crown jewel of the industry, and we are working hard to rebuild it to its former glory. We're driving meaningful creative momentum with more and more of the most talented storytellers in the business choosing to partner with us. On the film side, after a very challenging year at the box office, we are excited and optimistic about the slate of movies coming, including Dune 2, Barbie, and DC's Blue Beetle and The Flash. We screened The Flash at CinemaCon last week, and early reactions have been overwhelmingly positive. We are committed not just to expanding the size of our film slate next year, but even more important, we are committed to making great, high-quality films that have an impact.

This year, we celebrate Warner brothers 100th anniversary.

This studio has historically been the crown jewel of the industry and we are working hard to rebuild it to its former glory.

We're driving meaningful creative momentum with more and more of the most talented storytellers in the business choosing to partner with us. On the film side, after a very challenging year at the box office, we are excited and optimistic about the slate of movies coming, including Dune 2, Barbie, and DC's Blue Beetle and The Flash. We screened The Flash at CinemaCon last week, and early reactions have been overwhelmingly positive. We are committed not just to expanding the size of our film slate next year, but even more important, we are committed to making great, high-quality films that have an impact.

We're driving meaningful creative momentum with more and more of the most talented storytellers in the business choosing to partner with us.

On the film side after a very challenging year at the box office.

We're excited and optimistic about the slate of movies coming including June two.

Barbie and Dcs blue beetle and the flash.

We screen the flash its cinema Con last week and early reactions have been overwhelmingly positive.

We are committed not just to expanding the size of our film slate next year, but even more important we are committed to making great high quality films that have an impact.

David Zaslav: As I've said many times, and we believe it, it's not about how much. It's about how good. One of the real strengths of our company is the diversity of our storytelling. In this centennial year, we're especially excited to be reinvigorating our feature animation business, which has a long history and a wealth of great IP. Bill Damaschke, the former head of DreamWorks Animation, has taken the helm of our film animation group and is hard at work together with Mike and Pam developing a new slate. While at DreamWorks, Bill oversaw hit productions including Madagascar, Kung Fu Panda, How to Train Your Dragon, and The Croods, and is a great addition to our all-star team. On the interactive side, we're also seeing continuing momentum in our gaming business.

As I've said many times, and we believe it, it's not about how much. It's about how good. One of the real strengths of our company is the diversity of our storytelling. In this centennial year, we're especially excited to be reinvigorating our feature animation business, which has a long history and a wealth of great IP. Bill Damaschke, the former head of DreamWorks Animation, has taken the helm of our film animation group and is hard at work together with Mike and Pam developing a new slate.

As I've said, many times and we believe it.

It's not about how much it's about how good.

One of the real strengths of our company is the diversity of our storytelling.

And it means centennial year, we're especially excited to be reinvigorating, our feature animation business, which has a long history and a wealth of great IP.

<unk>, the former head of Dreamworks animation.

<unk> has taken the helm of our film animation group.

Hard at work together with Mike and Pam developing a new slate while at Dreamworks Bill all of them saw hip productions, including Madagascar, Kung Fu Panda, how to train your dragon and the crudes.

While at DreamWorks, Bill oversaw hit productions including Madagascar, Kung Fu Panda, How to Train Your Dragon, and The Croods, and is a great addition to our all-star team. On the interactive side, we're also seeing continuing momentum in our gaming business.

He is a great addition to our all star team.

On the interactive side, we're also seeing continuing momentum in our gaming business.

David Zaslav: Hogwarts Legacy has amassed more than $1 billion in retail sales and over 15 million units sold worldwide to date. Today, the team is launching the game on the PlayStation 4 and Xbox One platforms. This is our fifth $1 billion-plus gaming franchise alongside Mortal Kombat, Game of Thrones, our Lego games, and DC. There's lots more games coming, including Hogwarts Legacy on Switch later this year. Another area we're very focused on is ad sales. While our results for Q1 continue to reflect the current soft ad market, we are optimistic for a gradual improvement and an eventual upturn in the second half of the year. In a couple of weeks, we'll host our upfront. Last year's upfront was right on the heels of closing of our merger. Since then, we've refined our sales organization and our approach.

Hogwarts Legacy has amassed more than $1 billion in retail sales and over 15 million units sold worldwide to date. Today, the team is launching the game on the PlayStation 4 and Xbox One platforms. This is our fifth $1 billion-plus gaming franchise alongside Mortal Kombat, Game of Thrones, our Lego games, and DC. There's lots more games coming, including Hogwarts Legacy on Switch later this year. Another area we're very focused on is ad sales. While our results for Q1 continue to reflect the current soft ad market, we are optimistic for a gradual improvement and an eventual upturn in the second half of the year. In a couple of weeks, we'll host our upfront.

<unk> legacy has amassed more than $1 billion retail sales.

Over 15 million units sold worldwide to date.

And today the team is launching the game on the Playstation four and Xbox One platforms. This is our fifth $1 billion plus gaming franchise alongside mortal combat game of Thrones, a Lego games in D C.

And there's lots more games coming including Hogwash legacy on switch later this year.

Another area, we're very focused on is AD sales.

While our results for Q1 continue to reflect the current soft ad market.

We are optimistic for a gradual improvement and an eventual upturn in the second half of the year.

And a couple of weeks, we'll host our upfront.

Last year's upfront was right on the heels of closing of our merger. Since then, we've refined our sales organization and our approach. The team is executing against what we believe is a strong strategy. We are also advantaged by the diversity and strength of our ad-supported platforms. In particular, sports and streaming are two key areas for this year's market, and we are extremely well-positioned in both. Looking ahead to the next couple of months, we'll host the NBA Eastern Conference Finals in a few weeks. Given the four teams in the mix, it's shaping up to be a great series.

Last year's upfront was right on the heels of closing of our merger and.

And since then we've refined our sales organization and our approach.

David Zaslav: The team is executing against what we believe is a strong strategy. We are also advantaged by the diversity and strength of our ad-supported platforms. In particular, sports and streaming are two key areas for this year's market, and we are extremely well-positioned in both. Looking ahead to the next couple of months, we'll host the NBA Eastern Conference Finals in a few weeks. Given the four teams in the mix, it's shaping up to be a great series. And in June, we've got the Stanley Cup Finals on TNT. The first time ever that one of the four major professional team sports will air its final series solely on a cable network. We're very excited about that.

And the team is executing against what we believe is a strong strategy.

We're also advantaged by the diversity and strength of our AD supported platforms in particular sports and streaming are two key areas for this year's market.

We are extremely well positioned in both.

Looking ahead to the next couple of months, we'll host the MBA Eastern Conference finals in a few weeks given the four teams in the mix. It is shaping up to be a great series.

And in June, we've got the Stanley Cup Finals on TNT. The first time ever that one of the four major professional team sports will air its final series solely on a cable network. We're very excited about that. On the direct-to-consumer side, we now have more than 15 foundational advertising partners purely on HBO Originals, something you couldn't buy just three months ago, and a truly unique offering for brands. The Mercedes-Benz title sponsorship of Succession is a good example and a first-of-its-kind opportunity.

And in June we've got the Stanley Cup finals on TNT.

The first time ever that one of the four major professional team sports will air its final series solely on a cable network, we're very excited about that.

David Zaslav: On the direct-to-consumer side, we now have more than 15 foundational advertising partners purely on HBO Originals, something you couldn't buy just three months ago, and a truly unique offering for brands. The Mercedes-Benz title sponsorship of Succession is a good example and a first-of-its-kind opportunity. The combination of impactful campaigns and a limited ad-watching experience for consumers, on average, ad-supported subscribers will see one to two minutes of ads per hour, represents a real win-win for all involved. When you consider the quality of the service, the attractive price point, and the limited amount of advertising, it simply can't be beat. We're also providing huge value to advertisers by creating these Sunday-night buzzy shows like Euphoria, Game of Thrones, The Last of Us, and of course, Succession. These shared experiences enable advertisers to build the desired reach quickly.

On the direct to consumer side, we now have more than 15 foundational advertising partners purely on HBO originals, something you couldn't buy just three months ago and a truly unique offering for brands. The Mercedes Benz title sponsorship of succession is a good example.

The combination of impactful campaigns and a limited ad-watching experience for consumers, on average, ad-supported subscribers will see one to two minutes of ads per hour, represents a real win-win for all involved. When you consider the quality of the service, the attractive price point, and the limited amount of advertising, it simply can't be beat. We're also providing huge value to advertisers by creating these Sunday-night buzzy shows like Euphoria, Game of Thrones, The Last of Us, and of course, Succession. These shared experiences enable advertisers to build the desired reach quickly.

And our first of its kind opportunity.

The combination of impactful campaigns and.

In a limited AD watching experience for consumers.

On average AD supported subscribers, we will see one to two minutes of ads per hour.

Ah represents a real win win for all involved.

When you consider the quality of the service the attractive price point and the limited amount of advertising, it's simply can't be beat.

We're also providing huge value to advertisers by creating these Sunday night Buzzy shows like Euphoria game of Thrones, the last of US and of course succession.

These shared experiences enable advertisers to build the desired reach quickly.

David Zaslav: This is expected to be a big year for news as well, with the presidential cycle kicking off soon. We anticipate real growth out of CNN and will be selling heavily into the upfront for town halls, primaries, and conventions. Needless to say, we've got a lot of irons in the fire, and this busy year is looking to get even busier. We're driving leverage down, generating free cash flow, and continuing to build a sustainable business for the long term. And as the macro environment begins to improve, we believe, given the efficiencies we've put in place, command and control, and our diversified portfolio of media assets, storytelling IP, and talent, we are strongly positioned to achieve even higher free cash flow and EBITDA heights and ultimately meaningfully grow shareholder value.

This is expected to be a big year for news as well, with the presidential cycle kicking off soon. We anticipate real growth out of CNN and will be selling heavily into the upfront for town halls, primaries, and conventions. Needless to say, we've got a lot of irons in the fire, and this busy year is looking to get even busier. We're driving leverage down, generating free cash flow, and continuing to build a sustainable business for the long term.

This is expected to be a big year for news as well with the presidential cycle kicking off soon.

We anticipate real growth out of C. N N, who will be selling heavily into the upfront for town halls primaries and conventions.

Needless to say, we've got a lot of irons in the fire in this busy year is looking to get even busier.

We are driving leverage down generating free cash flow and continuing to build a sustainable business for the long term.

And as the macro environment begins to improve, we believe, given the efficiencies we've put in place, command and control, and our diversified portfolio of media assets, storytelling IP, and talent, we are strongly positioned to achieve even higher free cash flow and EBITDA heights and ultimately meaningfully grow shareholder value. And now I'll turn it over to Gunnar, and he'll take you through the financials, the specifics of the quarter, and what's ahead. Gunnar?

And as the macro environment begins to improve we believe given the efficiencies we've put in place command and control and our diversified portfolio of media assets storytelling IP and talent.

We are strongly positioned to achieve even higher free cash flow and EBITDA heights, and ultimately meaningfully grow shareholder value.

David Zaslav: And now I'll turn it over to Gunnar, and he'll take you through the financials, the specifics of the quarter, and what's ahead. Gunnar? Thank you, David. And good morning. On balance, I'm very pleased with where we are and very encouraged by the progress of our priority initiatives, which are all moving forward as planned. We generated 12% constant currency EBITDA growth this quarter, a strong starting point for the year, and also the first quarter of EBITDA growth since closing the merger. I remain confident in our guidance of adjusted EBITDA in the range of low- to mid-$11 billion and 1/3 to 1/2 conversion to free cash flow, with net leverage at the end of 2023 comfortably below 4x. As always, there are a number of moving pieces, and this quarter is no exception.

And now I'll turn it over to Gunnar and he'll take you through the financials and the specifics of the quarter and whats ahead Gunnar.

Gunnar Wiedenfels: Thank you, David. And good morning. On balance, I'm very pleased with where we are and very encouraged by the progress of our priority initiatives, which are all moving forward as planned. We generated 12% constant currency EBITDA growth this quarter, a strong starting point for the year, and also the first quarter of EBITDA growth since closing the merger.

Thank you David and good morning on.

On balance I'm very pleased with where we are and very encouraged by the progress of our priority initiatives, which are all moving forward as planned.

We generated 12% constant currency EBITDA growth this quarter, a strong starting point for the year and also the first quarter of EBITDAR growth since closing the merger.

I remain confident in our guidance of adjusted EBITDA in the range of low- to mid-$11 billion and 1/3 to 1/2 conversion to free cash flow, with net leverage at the end of 2023 comfortably below 4x. As always, there are a number of moving pieces, and this quarter is no exception.

I remain confident in our guidance of adjusted EBITDA in the range of low to mid $11 billion.

And one third to one half conversion to free cash flow.

With net leverage at the end of 2023 comfortably below four times.

As always there are a number of moving pieces in this quarter is no exception, so I'd like to address the key puts and takes impacting our results and outlook.

David Zaslav: I'd like to address the key puts and takes impacting our results and outlook. Starting with D to C, as we enter this next leg of the journey, kicking off with the launch of Max on 23 May, we're already very pleased with the traction we are seeing, having generated $50 million of EBITDA this quarter. Perhaps more importantly, we're continuing to see improvements across key operating KPIs, such as in our retention metrics. We also added 1.6 million subscribers globally, in part due to the strong creative success of The Last of Us. We've driven a healthy amount of lasting efficiency improvements across this business through the initial phase of D to C integration. In fact, D to C operating expenses were down over $760 million or 24% excluding FX on a pro forma basis in Q1.

I'd like to address the key puts and takes impacting our results and outlook. Starting with D to C, as we enter this next leg of the journey, kicking off with the launch of Max on 23 May, we're already very pleased with the traction we are seeing, having generated $50 million of EBITDA this quarter. Perhaps more importantly, we're continuing to see improvements across key operating KPIs, such as in our retention metrics. We also added 1.6 million subscribers globally, in part due to the strong creative success of The Last of Us.

Starting with D to C.

As we enter this next leg of the journey kicking off with the launch of Max on May 23rd we're already very pleased with the traction we are seeing having generated $50 million of EBITDA this quarter.

Perhaps more importantly, we're continuing to see improvements across key operating kpis.

Such as in our retention metrics. We also added $1 6 million subscribers globally in part due to the strong creative success off the last of us.

We've driven a healthy amount of lasting efficiency improvements across this business through the initial phase of D to C integration. In fact, D to C operating expenses were down over $760 million or 24% excluding FX on a pro forma basis in Q1. All of this now provides much greater clarity on the path forward to establishing a sustainable platform set up for dynamic and profitable growth for years to come. As we relaunch here in the US and plan additional launches later in 2023 and into 2024, we'll continue to be guided by a focus on prudent and rational investment.

We've driven a healthy amount of lasting efficiency improvement across this business through the initial phase of D to C integration in fact, DTC operating expenses were down over $760 million or 24%, excluding FX on a pro forma basis in the first quarter.

David Zaslav: All of this now provides much greater clarity on the path forward to establishing a sustainable platform set up for dynamic and profitable growth for years to come. As we relaunch here in the US and plan additional launches later in 2023 and into 2024, we'll continue to be guided by a focus on prudent and rational investment. Additionally, we've benefited from greater insight into the efficiency and effectiveness of our marketing efforts over the last 12 months, and we've seen that we can do more with less. As JB noted during our presentation, we will undertake the largest marketing campaign in the company's history to support the launch of Max. This was, of course, anticipated in our internal budget and guidance.

All of this now provides much greater clarity on the path forward to establishing a sustainable platform setup for dynamic and profitable growth for years to come.

As we relaunch here in the U S and.

And plan additional launches later in 'twenty, three and into 'twenty. Four we will continue to be guided by a focus on prudent and rational investment.

Additionally, we've benefited from greater insight into the efficiency and effectiveness of our marketing efforts over the last 12 months, and we've seen that we can do more with less. As JB noted during our presentation, we will undertake the largest marketing campaign in the company's history to support the launch of Max. This was, of course, anticipated in our internal budget and guidance. We will continue to focus on driving efficiencies throughout our D to C non-content cost structure as we launch Max around the world and get more and more of our digital products on a common platform.

Additionally, we benefited from greater insight into the efficiency and effectiveness of our marketing efforts over the last 12 months.

And we've seen that we can do more with less as.

As JP noted during our precedent we will undertake the largest marketing campaign in the company's history to support the launch of Max. This was of course anticipated in our internal budget and guidance.

David Zaslav: We will continue to focus on driving efficiencies throughout our D to C non-content cost structure as we launch Max around the world and get more and more of our digital products on a common platform. As such, we expect the D to C segment to continue to show improvements with peak EBITDA losses for the year in the second quarter. And when I say peak, I'm talking around $300 million or so. In fact, we're tracking ahead of our profitability target and now expect to be profitable in the US on a full-year basis this year. That is a full year ahead of our original plan of break-even in 2024. And I remain ever confident in our outlook of generating $1 billion or more of profitability in 2025 globally.

We will continue to focus on driving efficiencies throughout our D to C. Non content cost structure as we launched <unk> around the world and get more and more of our digital products on a common platform as such we expect the DTC segment to continue to show improvement with peak EBITDA losses for the year in the second quarter and when I say peak.

As such, we expect the D to C segment to continue to show improvements with peak EBITDA losses for the year in the second quarter. And when I say peak, I'm talking around $300 million or so. In fact, we're tracking ahead of our profitability target and now expect to be profitable in the US on a full-year basis this year. That is a full year ahead of our original plan of break-even in 2024. And I remain ever confident in our outlook of generating $1 billion or more of profitability in 2025 globally.

I'm talking around $300 million in yourself.

In fact, we are tracking ahead of our profitability target and now expect to be profitable in the U S. On a full year basis. This year that is a full year ahead of our original plan of breakeven in 2024.

And I remain ever confident in our outlook of generating $1 billion or more of profitability in 2025 globally.

David Zaslav: Finally, I'd like to remind you about the approximately 4 million overlapping subscribers between HBO Max and Discovery+, consistent with what we outlined for you last summer. While we intend to keep Discovery+ going as a standalone product, we expect a large portion of these 4 million subscribers will likely churn off Discovery+. The exact cadence, of course, being unclear at this time, but we do expect a fair amount of it to happen in the first few months after launch. Turning briefly to the other segments of our portfolio, starting with the advertising market. As expected, we did see a modest sequential improvement in Q1 when adjusting for the Olympics. We do see this underlying trend continuing into Q2 on a like-for-like basis.

Finally, I'd like to remind you about the approximately 4 million overlapping subscribers between HBO Max and Discovery+, consistent with what we outlined for you last summer. While we intend to keep Discovery+ going as a standalone product, we expect a large portion of these 4 million subscribers will likely churn off Discovery+. The exact cadence, of course, being unclear at this time, but we do expect a fair amount of it to happen in the first few months after launch. Turning briefly to the other segments of our portfolio, starting with the advertising market.

Finally, I'd like to remind you about the approximately 4 million overlapping subscribers between HBO, Max and discovery plus consistent with what we outlined for you last summer.

While we intend to keep discovery plus going as a standalone product. We expect a large portion of these 4 million subscribers will likely turn off discovery plus the exact cadence of course being unclear at this time, while we do expect a fair amount of it to happen in the first few months after launch.

Turning briefly to the other segments of our portfolio starting with the advertising market.

As expected, we did see a modest sequential improvement in Q1 when adjusting for the Olympics. We do see this underlying trend continuing into Q2 on a like-for-like basis. That is, after accounting for the NCAA Men's Final Four last year and the Stanley Cup Finals this year, which combined will account for a net 200 basis points headwind to Global Network's advertising revenue.

As expected we did see a modest sequential improvement in Q1, when adjusting for the Olympics.

We do see this underlying trend continuing into Q2 on a like for like basis that.

David Zaslav: That is, after accounting for the NCAA Men's Final Four last year and the Stanley Cup Finals this year, which combined will account for a net 200 basis points headwind to Global Network's advertising revenue. While we see this as encouraging, visibility remains limited and the improvement is gradual. Though the market remains challenged, we are cautiously optimistic, particularly coming into the upfront, which will take place over the next couple of months. With discussions ongoing, we will soon have a much better handle on Q4 and the 2023-2024 season. We see a particularly strong advertising opportunity on Max, both with respect to the more traditional ads on shows like Friends and Big Bang Theory, as well as the very impactful and high-profile opportunity on Max Originals. You will hear lots more about this at our upfront presentation in a few weeks.

That is after accounting for the NCAA men's final four last year and the Stanley Cup finals. This year, which combined will account for a net 200 basis points headwind the global networks advertising revenue.

While we see this as encouraging, visibility remains limited and the improvement is gradual. Though the market remains challenged, we are cautiously optimistic, particularly coming into the upfront, which will take place over the next couple of months.

While we see this as encouraging visibility remains limited and the improvement is gradual.

Though the market remains challenged we are cautiously optimistic, particularly coming into the upfront, which will take place over the next couple of months with discussions ongoing we will soon have a much better handle on Q4, and the 2023 2024 season.

With discussions ongoing, we will soon have a much better handle on Q4 and the 2023-2024 season. We see a particularly strong advertising opportunity on Max, both with respect to the more traditional ads on shows like Friends and Big Bang Theory, as well as the very impactful and high-profile opportunity on Max Originals. You will hear lots more about this at our upfront presentation in a few weeks. Recall this really only kicked off in February, and we're moving slowly and deliberately, ensuring a high-quality, rich advertising experience.

We see a particularly strong advertising opportunity on Max both with respect to the more traditional ads on shows like friends and Big Bang theory, as well as the very impactful in high profile.

<unk>.

Max originals.

You will hear lots more about this at our upfront presentation in a few weeks.

David Zaslav: Recall this really only kicked off in February, and we're moving slowly and deliberately, ensuring a high-quality, rich advertising experience. We see significant further upside for this product line, particularly when the advertising market improves. Briefly on our international markets, on the whole, they continue to perform relatively better, led by key markets like Poland, the Nordics, and Italy, with the UK, Germany, and Brazil on the weaker side, though as in the US, there is limited visibility. In the studio segment, there are a number of moving pieces that will be helpful to unpack. Obviously, Hogwarts Legacy was the key driver here, having performed amazingly well. It is thus far the best-selling game across the industry, with over $1 billion in retail sales, and it is on track to be a top game for all of 2023.

Recall this really only kicked off in February and were moving slowly and deliberately destroying a high quality rich advertising experience and we see significant further upside for this product line, particularly when the advertising market.

We see significant further upside for this product line, particularly when the advertising market improves. Briefly on our international markets, on the whole, they continue to perform relatively better, led by key markets like Poland, the Nordics, and Italy, with the UK, Germany, and Brazil on the weaker side, though as in the US, there is limited visibility.

Briefly on our international markets on the whole they continue to perform relatively better led by key markets like Poland, The Nordics and Italy, with the UK, Germany, and Brazil on the weaker side, though as in the U S. There is limited visibility.

In the studio segment, there are a number of moving pieces that will be helpful to unpack. Obviously, Hogwarts Legacy was the key driver here, having performed amazingly well. It is thus far the best-selling game across the industry, with over $1 billion in retail sales, and it is on track to be a top game for all of 2023.

In the studio segment.

There are a number of moving pieces that will be helpful to unpack, obviously hardware as legacy was the key driver here, having performed amazingly well. It is thus far the best selling game across the industry with over $1 billion in retail sales and it is on track to be a top game for all of 2023.

David Zaslav: Studio's results were, however, negatively impacted by disappointing box office performance, and this was exacerbated by a very difficult comparison against the success of The Batman last year. Similarly, TV licensing revenues declined year over year against certain large deals in Q1 of 2022. As David mentioned, we're coming up on the 2023 summer slate, and early reviews and tracking for The Flash, premiering 16 June 2023, and Barbie on 21 July 2023, look very promising. Both titles have enjoyed major buzz, and we are leaning in. Keep that in mind for the second quarter when the studio segment will see the expense associated with these marketing campaigns, while the revenue opportunity largely impacts Q3 and beyond. Now let me provide some color on free cash flow, our financial North Star, as you know.

Studio's results were, however, negatively impacted by disappointing box office performance, and this was exacerbated by a very difficult comparison against the success of The Batman last year. Similarly, TV licensing revenues declined year over year against certain large deals in Q1 of 2022. As David mentioned, we're coming up on the 2023 summer slate, and early reviews and tracking for The Flash, premiering 16 June 2023, and Barbie on 21 July 2023, look very promising. Both titles have enjoyed major buzz, and we are leaning in.

Studios results were however negatively impacted by disappointing box office performance and this was exacerbated by a very difficult comparison against the success of the Batman last year.

<unk> TV licensing revenues declined year over year against certain large deal in Q1 of 2022.

As David mentioned, we're coming up on the 2023 summers light and early reviews and tracking for the Flash premiering June 16, and Barbie on July 21st look very promising both titles have enjoyed major buzz and we are leaning in.

Keep that in mind for the second quarter when the studio segment will see the expense associated with these marketing campaigns, while the revenue opportunity largely impacts Q3 and beyond. Now let me provide some color on free cash flow, our financial North Star, as you know.

Keep that in mind for the second quarter when the studio segment will see the expense associated with these marketing campaigns or the revenue opportunity largely impacts Q3 and beyond.

Now let me provide some color on free cash flow, our financial North Star as you know as a reminder, free cash flow of negative $930 million in Q1 of this year is not comparable to the positive 238 million reported last year as the latter represented discovery as a Standalone company.

David Zaslav: As a reminder, free cash flow of negative $930 million in Q1 of this year is not comparable to the positive $238 million reported last year, as the latter represented Discovery as a standalone company. While our first quarter free cash flow was negative, as guided to on our fourth quarter earnings call, we have made significant progress with strong improvement versus the underlying trends in the prior year when WarnerMedia had heavily negative free cash flows. A few additional key factors to keep in mind. First, Q1 for both legacy companies has always been the seasonally weakest quarter, in part due to the cadence of the production schedule over the year and the timing of certain payments, such as for sports rights.

As a reminder, free cash flow of negative $930 million in Q1 of this year is not comparable to the positive $238 million reported last year, as the latter represented Discovery as a standalone company. While our first quarter free cash flow was negative, as guided to on our fourth quarter earnings call, we have made significant progress with strong improvement versus the underlying trends in the prior year when WarnerMedia had heavily negative free cash flows.

And while our first quarter free cash flow was negative as guided to on our fourth quarter earnings call. We have made significant progress with strong improvement versus the underlying trends in the prior year when Warner media had heavily negative free cash flow.

A few additional key factors to keep in mind. First, Q1 for both legacy companies has always been the seasonally weakest quarter, in part due to the cadence of the production schedule over the year and the timing of certain payments, such as for sports rights. Second, Q1 and Q3 carry the additional burden of the semiannual coupon payments, in large part for our merger bonds, an impact of over $800 million included in our Q1 free cash flow.

A few additional key factors to keep in mind first Q1 for both legacy companies has always been the seasonally weakest quarter in part due to the cadence of the production schedule over the year and the timing of certain payments such as for sports rights.

David Zaslav: Second, Q1 and Q3 carry the additional burden of the semiannual coupon payments, in large part for our merger bonds, an impact of over $800 million included in our Q1 free cash flow. Lastly, Q1 also contained significant and expected cash out from restructuring and integration costs, close to $500 million during the quarter. Given the quarterly puts and takes, I'd like to point to the trailing 12-month free cash flow to give you a better sense of the true run rate. Our trailing 12-month free cash flow is now at $2.1 billion, with a very clear path to our guidance range. The key drivers for the balance of the year are, number one, expected adjusted EBITDA growth, back-end loaded this year as transformation initiatives continue to unfold, and hopefully with a little help from the ad market backdrop.

In Q1, and Q3 carry the additional burden of the semiannual coupon payments in large part for our merger of bonds and impact of over $800 million included in our Q1 free cash flow.

Lastly, Q1 also contained significant and expected cash out from restructuring and integration costs, close to $500 million during the quarter. Given the quarterly puts and takes, I'd like to point to the trailing 12-month free cash flow to give you a better sense of the true run rate. Our trailing 12-month free cash flow is now at $2.1 billion, with a very clear path to our guidance range. The key drivers for the balance of the year are, number one, expected adjusted EBITDA growth, back-end loaded this year as transformation initiatives continue to unfold, and hopefully with a little help from the ad market backdrop.

Lastly, Q1 also contains significant and expected cash out from restructuring and integration costs close to $500 million during the quarter.

Given the quarterly puts and takes I'd like to point to the trailing 12 months free cash flow to give you a better sense of the true run rate.

Our trailing 12 month free cash flow is now at $2 $1 billion with a very clear path to our guidance range. The key drivers for the balance of the year. Our number one expected adjusted EBITDA growth backend loaded this year as transformation initiatives continue to unfold and hopefully with a little help from the AD <unk>.

David Zaslav: Even though I should say, I have confidence in our guidance rates, even if ad sales don't fully recover in H2 against the much easier prior year comp. Second, seasonally positive change in working capital versus the drag in Q1. Third, a significantly narrowing gap between cash content spend and amortization, as our DTC business absorbs sequentially higher amortization expenses, and we deploy content cash with a more and more rigorous focus on ROI. Finally, the cash benefit from key transformation initiatives will be back-loaded over the year, while cash out for restructuring and integration will be more front-loaded. In fact, our trailing 12-month free cash flow number at the end of Q1 contains $1.2 billion of restructuring and merger-related cash costs in this line item.

Even though I should say, I have confidence in our guidance rates, even if ad sales don't fully recover in H2 against the much easier prior year comp. Second, seasonally positive change in working capital versus the drag in Q1.

Backdrop, even though I should say I have confidence in our guidance range, even if AD sales don't fully recover and age two against the much easier prior year comp.

Second seasonally positive change in working capital versus the drag in Q1.

Third, a significantly narrowing gap between cash content spend and amortization, as our DTC business absorbs sequentially higher amortization expenses, and we deploy content cash with a more and more rigorous focus on ROI. Finally, the cash benefit from key transformation initiatives will be back-loaded over the year, while cash out for restructuring and integration will be more front-loaded.

Third a significantly narrowing gap between cash content spend in amortization as our D to C business absorbed sequentially higher amortization expenses and redeploy content cash with a more and more rigorous focus on ROI.

Finally, the cash benefit from key transformation initiatives will be backend loaded over the year, while cash out for restructuring and integration will be more frontloaded. In fact, our trailing 12 month free cash flow number at the end of Q1 contains $1 $2 billion of restructuring and merger related cash costs in this line item.

In fact, our trailing 12-month free cash flow number at the end of Q1 contains $1.2 billion of restructuring and merger-related cash costs in this line item. We expect that these factors will contribute to a higher conversion rate in the second half of the year and likely again with a disproportionate amount in Q4, not unlike our nearly 100% conversion rate in the fourth quarter of last year. Looking ahead to the second quarter, we are expecting to see a significant positive swing from -$900 million in Q1 to around $900 million for a roughly cash-neutral, maybe positive, H1 free cash flow overall.

David Zaslav: We expect that these factors will contribute to a higher conversion rate in the second half of the year and likely again with a disproportionate amount in Q4, not unlike our nearly 100% conversion rate in the fourth quarter of last year. Looking ahead to the second quarter, we are expecting to see a significant positive swing from -$900 million in Q1 to around $900 million for a roughly cash-neutral, maybe positive, H1 free cash flow overall. This will support further debt reduction this quarter on our way to sub-4x leverage. Separately, as you will see in our 10Q, we temporarily drew down $750 million in our revolver in April to accommodate the intra-quarter timing of certain sports rights payments. I expect this to be fully paid down by the end of this month.

We expect that these factors will contribute to a higher conversion rate in the second half of the year and slightly again with a disproportionate amount in Q4, not unlike our nearly 100% conversion rate in the fourth quarter of last year.

Looking ahead to the second quarter, we are expecting to see a significant positive swing from negative $900 million in Q1, two around positive $900 million for a roughly cash neutral maybe positive H, one free cash flow overall.

This will support further debt reduction this quarter on our way to sub-4x leverage. Separately, as you will see in our 10Q, we temporarily drew down $750 million in our revolver in April to accommodate the intra-quarter timing of certain sports rights payments. I expect this to be fully paid down by the end of this month. To sum up my discussion of free cash flow, the level of transparency into and focus on free cash flow and its drivers has changed dramatically over the past 12 months, and we are in a strong position to capture this tremendous value opportunity over the course of 2023 and beyond.

This will support further debt reduction this quarter on our way to sub four times leverage.

Separately as you will see in our 10-Q, we temporarily drew down $750 million on our revolver in April to accommodate the intra quarter timing of certain sports rights payments I expect this to be fully paid down by the end of this month.

David Zaslav: To sum up my discussion of free cash flow, the level of transparency into and focus on free cash flow and its drivers has changed dramatically over the past 12 months, and we are in a strong position to capture this tremendous value opportunity over the course of 2023 and beyond. In closing, as we lap the one-year mark since closing the merger, candidly, it feels like three. I do come back to the statement I made a few months ago that we've turned a corner at WBD. I continue to view the structural heavy lift as more behind us than in front of us, and I see more and more opportunity with every day I am spending with the iconic brands and the massive global footprint of this combined company.

To sum up my discussion of free cash flow the level of transparency into and focus on free cash flow and its drivers has changed dramatically over the past 12 months and we are in a strong position to capture this tremendous value opportunity over the course of 2023 and beyond.

In closing, as we lap the one-year mark since closing the merger, candidly, it feels like three. I do come back to the statement I made a few months ago that we've turned a corner at WBD. I continue to view the structural heavy lift as more behind us than in front of us, and I see more and more opportunity with every day I am spending with the iconic brands and the massive global footprint of this combined company.

In closing as we lapped the one year Mark since closing the merger candidly it feels like three <unk>.

I do come back to the statement I made a few months ago that we've turned the corner at W. BD I continue to view the structural heavy lift is more behind us than in front of us and I see more and more opportunity with everyday I am spending with the iconic brands and a massive global footprint of the combined company.

David Zaslav: With billions in efficiency gains already in implementation, we really are still in the early innings of unlocking the full potential of Warner Bros. Discovery. We remain as well positioned as any to lean into the many avenues of growth in front of us. With that, I'd like to turn the call back to the operator, and David, JB, and I will take your questions. Thank you. We will now begin the question and answer session. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. Your first question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead. Oh, thanks so much for taking the question.

With billions in efficiency gains already in implementation, we really are still in the early innings of unlocking the full potential of Warner Bros. Discovery. We remain as well positioned as any to lean into the many avenues of growth in front of us. With that, I'd like to turn the call back to the operator, and David, JB, and I will take your questions.

With billions in efficiency gains already in implementation, we really are still in the early innings of unlocking the full potential of Warner Brothers discovery, we remain as well positioned as any to lean into the many avenues of growth in front of us.

With that I'd like to turn the call back to the operator, and David JB and I will take your questions.

Operator: Thank you. We will now begin the question and answer session. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from the queue, simply press star one again. Your first question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.

Thank you we will now begin the question and answer session. If you have a question. Please press star one on your telephone keypad, if you wish to remove yourself from the queue simply press star one again.

Your first question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.

Douglas Mitchelson: Oh, thanks so much for taking the question.

Oh, thanks, so much for taking the question.

David Zaslav: David and JB, I think most interesting, how would you define success for the launch of Max or the relaunch of Max, as you want to define it? I think there was a lot of discussion in terms of choosing Max's brand and the need to build that or rebuild that. David, you mentioned actively trying to include news and sports in the lineup, and so I'm just curious whether it's engagement, whether it's subscribers, whether it's ultimate profitability, how should investors think about what to expect from Max in the coming quarters? Gunnar, I think you made some strong statements in your prepared remarks, but obviously a lot of investor focus on free cash flow generation and balance sheet here.

David and JB, I think most interesting, how would you define success for the launch of Max or the relaunch of Max, as you want to define it? I think there was a lot of discussion in terms of choosing Max's brand and the need to build that or rebuild that. David, you mentioned actively trying to include news and sports in the lineup, and so I'm just curious whether it's engagement, whether it's subscribers, whether it's ultimate profitability, how should investors think about what to expect from Max in the coming quarters?

David and J B I think most interesting how would you define success for the launch of Max or the relaunch of Max as you want to define it I think.

There's a lot of discussion in terms of choosing <unk> as a brand and the need to build out a rebuild that David you mentioned actively trying to include news and sports in the lineup.

So I'm just curious whether its engagement whether its subscribers whether its ultimate profitability.

How should investors think about what to expect for Max in the coming quarters and and good or.

Gunnar, I think you made some strong statements in your prepared remarks, but obviously a lot of investor focus on free cash flow generation and balance sheet here. I guess the just general question is, what's your level of confidence in the balance sheet targets over the next couple of years, and what gives you that confidence, especially with the year being back-end weighted? Thanks so much.

I think you've made some strong statements in your prepared remarks, but obviously a lot of investor focus on free cash flow generation and balance sheet here.

David Zaslav: I guess the just general question is, what's your level of confidence in the balance sheet targets over the next couple of years, and what gives you that confidence, especially with the year being back-end weighted? Thanks so much. Thanks, Doug. So we're excited about the 23rd. Look, we've turned the corner on our streaming business. We had a different view of it. We've focused on it very hard, and we built what we think will be a very strong independent business. It starts with profitability. So we made $50 million this quarter. Our US streaming business will be profitable for the year, and we have real scale. So when you run a business, you're looking for growth, which we're going to get in the streaming business, and we're driving to get throughout the company.

Yes. The general question is what's your level of confidence in our balance sheet targets over the next couple of years.

What gives you that confidence, especially with the euro being backend weighted thanks, so much.

David Zaslav: Thanks, Doug. So we're excited about the 23rd. Look, we've turned the corner on our streaming business. We had a different view of it. We've focused on it very hard, and we built what we think will be a very strong independent business. It starts with profitability. So we made $50 million this quarter. Our US streaming business will be profitable for the year, and we have real scale. So when you run a business, you're looking for growth, which we're going to get in the streaming business, and we're driving to get throughout the company.

Thanks, Doug.

So we're excited about the 20 <unk>.

Okay.

We've turned the corner on Australian business, we had a different view of it we've we've focused on it very hard and we built what we think will be a very strong independent business and it starts with profitability.

And so we made $50 million this quarter, our U S streaming business will be profitable for the year and we have real scale.

And so.

When you run a business you are looking for growth, which we're going to get in the streaming business and we're driving to get throughout the company and there are a number of areas, where we think that where.

David Zaslav: There are a number of areas where we think that we know that as the economy improves, we'll see real growth. But the key here is our US streaming business is no longer a bleeder. It's hard to run a business when you have a big bleeder. And so getting this business under control, focusing on what people love to watch, how do we create content that people love? And now, as we launch Max, we'll be able to nourish and delight subscribers with the greatness of HBO, which on Sunday nights is really a cultural moment, whether it's White Lotus, House of the Dragon, The Last of Us, Succession, and then put it together with Discovery, which has the Discovery content, which has been really strong for us. So number one, we want an easy, smooth transition. That's why we're not doing anything with pricing.

There are a number of areas where we think that we know that as the economy improves, we'll see real growth. But the key here is our US streaming business is no longer a bleeder. It's hard to run a business when you have a big bleeder. And so getting this business under control, focusing on what people love to watch, how do we create content that people love?

We know that as the economy improves we will see real growth, but the key here is.

Are you a stream business is no longer a bleeder.

It's hard to run a business when you have a big bleeder and so getting this business under control focusing on what people love to watch how do we create content that people love and now as we launch Max we'll be able to nourish and delight subscribers with the greatness of Av.

And now, as we launch Max, we'll be able to nourish and delight subscribers with the greatness of HBO, which on Sunday nights is really a cultural moment, whether it's White Lotus, House of the Dragon, The Last of Us, Succession, and then put it together with Discovery, which has the Discovery content, which has been really strong for us.

H B O, which on Sunday nights is really a cultural moment, whether it's white Lotus houses dragon the last of us succession.

And then put it together with discovery, which is the discovery the discovery content, which has been really strong for us. So.

So number one, we want an easy, smooth transition. That's why we're not doing anything with pricing. We focused very hard on letting everybody know how to make that transition. Right now, we have a really good hand. And so let's make the transition. We've got technology that's far superior in terms of delivering the platform itself and how it can work against all this great content, but let's do a smooth transition and then have people discover the quality content, the diversity of content, and the quality of the platform itself, which will only accelerate growth. JB?

Number one we want an easy smooth transition.

Why we're not doing anything with pricing, we focused very hard on letting everybody know how to make that transition. We have a right now we have a really good hand, and so let's make the transition we got technology, that's far superior in terms of delivering the platform itself and how it can work again.

David Zaslav: We focused very hard on letting everybody know how to make that transition. Right now, we have a really good hand. And so let's make the transition. We've got technology that's far superior in terms of delivering the platform itself and how it can work against all this great content, but let's do a smooth transition and then have people discover the quality content, the diversity of content, and the quality of the platform itself, which will only accelerate growth. JB? Yeah, I think, Doug, just to add on to David, I think in the very near term, migration success is sort of one key metric. Are you getting the customers who are on HBO Max today successfully migrated over to Max? And then over time, there'll be three other metrics and a fourth that will come. The three would be brand awareness.

All this great content, but let's do a smooth transition and then have people discover the quality content that diversity of content and the quality of the platform itself, which will only accelerate growth Jamie.

Jean-Briac Perrette: Yeah, I think, Doug, just to add on to David, I think in the very near term, migration success is sort of one key metric. Are you getting the customers who are on HBO Max today successfully migrated over to Max? And then over time, there'll be three other metrics and a fourth that will come. The three would be brand awareness. Obviously, we're building a brand with Max now that is new, that has a different proposition, a broader proposition for something for everybody in the family. Number two, customer satisfaction. Number three, engagement.

I think Doug just to add onto David I think in the very near term migration success as sort of one key metric are you getting the customers who are on HBO. Max today successfully migrated over to Max and then over time there'll be three other metrics and a fourth that will come the three would be brand awareness, obviously where bill.

David Zaslav: Obviously, we're building a brand with Max now that is new, that has a different proposition, a broader proposition for something for everybody in the family. Number two, customer satisfaction. Number three, engagement. As we talked about on the 12 April event, a lot of it is around seeing all this content coming together in the breadth of the proposition, driving higher utilization, and therefore helping retention. Those, I think, are the core ones in the initial few months. And then over time, obviously, as that flywheel continues, we obviously want to see subscriber growth and scale as the additional metrics. So those are the ways that we'll look at success. Right. And Doug, on the free cash flow question, as you just heard me say in the prepared remarks, I have a high level of confidence in our guidance and our ability to deliver here.

<unk> a brand with Max now that is new that is a different proposition a broader proposition for something for everybody in the family some are to customer satisfaction.

As we talked about on the 12 April event, a lot of it is around seeing all this content coming together in the breadth of the proposition, driving higher utilization, and therefore helping retention. Those, I think, are the core ones in the initial few months. And then over time, obviously, as that flywheel continues, we obviously want to see subscriber growth and scale as the additional metrics. So those are the ways that we'll look at success.

Number three engagement.

You talked about on the April 12th event, a lot of it is around seeing all of this content coming together and the breadth of the proposition driving higher utilization and therefore, helping retention. Those I think are the core ones and the initial few months and then over time, obviously as that flywheel continues.

Continues we obviously want to see subscriber growth and scale.

The additional metrics. So those are the ways that we'll look at success.

Gunnar Wiedenfels: Right. And Doug, on the free cash flow question, as you just heard me say in the prepared remarks, I have a high level of confidence in our guidance and our ability to deliver here. Taking a step back, there's no doubt the environment continues to be challenging. We're working against pretty significant reductions in ad sales. And as I laid out, we see gradual improvements for the second quarter, but it's gradual.

Alright.

Doug on the on the free cash flow question as you.

You just heard me say in the prepared remarks, I have I have a high level of confidence in our guidance and our ability to deliver here and taking a step back there is no doubt the environment continues to be challenging.

David Zaslav: Taking a step back, there's no doubt the environment continues to be challenging. We're working against pretty significant reductions in ad sales. And as I laid out, we see gradual improvements for the second quarter, but it's gradual. So there's that. But what you're also seeing in our results is what we've referred to as the built-in hitch, right? We've got a great game, Hogwarts Legacy; box office was a little weaker, but across the entire footprint of the company, managing as one integrated company, we have enormous opportunity. And so we don't want to be in the business of predicting ad market developments in the second half. As I said, I have confidence in our guidance without assuming a complete turnaround here because we're focusing on what we know.

We're working against.

Significant reductions in that sale.

As I laid out we see a gradual improvement for the second quarter, but it's gradual so so there's that.

So there's that. But what you're also seeing in our results is what we've referred to as the built-in hitch, right? We've got a great game, Hogwarts Legacy; box office was a little weaker, but across the entire footprint of the company, managing as one integrated company, we have enormous opportunity. And so we don't want to be in the business of predicting ad market developments in the second half. As I said, I have confidence in our guidance without assuming a complete turnaround here because we're focusing on what we know.

What you're also seeing in our results is what we've referred to as the built in hedge right. We've got a great game hardwoods legacy box office was a little weaker but across the entire footprint of the company managing as one integrated company, we have enormous opportunity and.

So we don't want to be in the business of predicting at market developments in the second half as I said I have confidence in our guidance without assuming a complete turnaround here because we're focusing on what we know and what we know is the control that we have over the initiatives that we've put in place over the past 12 months and they are we're knocking them out.

David Zaslav: What we know is the control that we have over the initiatives that we put in place over the past 12 months, and we're knocking them out month after month, quarter after quarter. We've got systems coming online. We've got individual workflows that are going from 10 to 12 hours a pop to three minutes. I mean, there's a lot that's happening, and we have clear milestones scheduled out for the rest of the year. Looking at that, I have great confidence that we're going to continue to deliver these improvements. As I pointed out earlier, on the cash flow side, it's even more exacerbated than on the P&L side with the seasonality of our free cash flow. The $930 million in Q1 was pretty exactly in line, actually a little bit better than what we had budgeted for.

What we know is the control that we have over the initiatives that we put in place over the past 12 months, and we're knocking them out month after month, quarter after quarter. We've got systems coming online. We've got individual workflows that are going from 10 to 12 hours a pop to three minutes. I mean, there's a lot that's happening, and we have clear milestones scheduled out for the rest of the year. Looking at that, I have great confidence that we're going to continue to deliver these improvements.

Month after month quarter after quarter, we've got systems coming online. We've got individual workflows that are going from from 10 to 12 hours of pop to three three minutes I mean, theres a lot thats happening and we have clear milestone scheduled out for the rest of the year.

And looking at that.

I have great confidence that we're going to continue to deliver these these improvements and as I pointed out earlier on the cash flow side, it's even more exacerbated.

As I pointed out earlier, on the cash flow side, it's even more exacerbated than on the P&L side with the seasonality of our free cash flow. The $930 million in Q1 was pretty exactly in line, actually a little bit better than what we had budgeted for. And with that, I have full confidence we're going to deliver for you guys.

And then on the P&L side with the seasonality of our free cash flow.

The $930 million in Q1 was pretty pretty exactly in line actually a little bit better than what we had budgeted for and.

David Zaslav: And with that, I have full confidence we're going to deliver for you guys. Thank you all. Your next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead. Hi, good morning. I have one for David and one for JB or Gunnar. First, David, can you expand on the strategy you mentioned in your prepared remarks and maybe the financial benefits of licensing your HBO and Warner Bros. library content internationally, some of the deals you discussed? And how do you balance those licensing deals with your ambitions to scale Max outside the US if and when you choose to launch in those markets? And then for JB and Gunnar on DTC, anything you can share about the DTC retail versus wholesale trends? Noticed the wholesale revenue dragged down overall DTC revenues and just whether that wholesale pressure should continue throughout the year. Thank you.

With that I have full confidence we're going to deliver for you guys.

Douglas Mitchelson: Thank you all.

Operator: Your next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead.

Thank you all.

Your next question comes from the line of Robert Fishman with Moffett Nathanson. Please go ahead.

Robert Fishman: Hi, good morning. I have one for David and one for JB or Gunnar. First, David, can you expand on the strategy you mentioned in your prepared remarks and maybe the financial benefits of licensing your HBO and Warner Bros. library content internationally, some of the deals you discussed?

Hi, Good morning, I have one for David and one for David Gunnar.

David can you expand on this strategy you mentioned in your prepared remarks, and maybe the financial benefit of licensing your HBO and Warner Brothers Library content internationally.

And how do you balance those licensing deals with your ambitions to scale Max outside the US if and when you choose to launch in those markets? And then for JB and Gunnar on DTC, anything you can share about the DTC retail versus wholesale trends? Noticed the wholesale revenue dragged down overall DTC revenues and just whether that wholesale pressure should continue throughout the year. Thank you.

Under the deal as you discussed and how do you balance those licensing deals with your ambitions to scale Max outside the U S. If and when you choose to launch in those markets.

And then for J P and good there on DTC.

Anything you can share about the DTC retail versus wholesale trends.

Noticed that wholesale revenue dragged down overall DTC revenues and just whether that wholesale Patrick should continue throughout the year. Thank you.

David Zaslav: Thanks, Robert. We're focused on taking HBO around the world. The fact that we have real scale around the world, that we have content in every language, we have channels in every country to promote, is a real advantage for us. But we're really driven by free cash flow and long-term free cash flow growth. And so if there's a market like India where we could structure a deal where we could make a lot more money by licensing our great content in that market, with an option at the end which we always have at the end of that deal to take another look at that country with our platform that's already built. We're not building a new platform for each country and see if we can go in ourselves, can we generate more long-term profit and free cash flow? And so it's really an economic analysis.

Thanks Robert.

We are we're focused on taking HBO around the world. The fact that we have.

Real scale.

Around the world that we have content in every language we have channels in every country to promote it is a real advantage for us.

Were really driven by free cash flow and long term free cash flow growth.

And so if theres a market like India, where we could we could structure a deal where we can make a lot more money.

Bye bye.

By licensing of our great content in that market.

With an option at the which we always have at the end of that deal to take another look at that country with our platform. That's already built we're not building a new platform for each country and see if we can go in ourselves can we generate more long term profit and free cash flow and so it's really an economic analysis.

We're not building a new platform for each country and see if we can go in ourselves, can we generate more long-term profit and free cash flow? And so it's really an economic analysis. You will see in most markets it will be us building asset value, owning it, driving it for long-term value and growth. You saw us do it at Discovery. We were the first outside the US. We were in 200 countries, and it generated a long tail of free cash flow and real EBITDA growth for us.

David Zaslav: You will see in most markets it will be us building asset value, owning it, driving it for long-term value and growth. You saw us do it at Discovery. We were the first outside the US. We were in 200 countries, and it generated a long tail of free cash flow and real EBITDA growth for us. So I'm very optimistic we're in less than 50% of the countries. It's very hard to have a business that's profitable just in the US. I've always thought that you really need to be above the globe, and that's the advantage. That was the value creation of the FANG companies, that they had that scale. We own all of our content. And the idea that we're starting off by having a business that's profitable this year in the US, and then we go on this journey of driving it outside the US.

You will see in most markets it will be us building asset value owning it driving it for long term.

Value and growth you saw us do it at discovery, we will the first outside the U S. We were in 200 countries and it generated a long tail of free cash flow and real.

So I'm very optimistic we're in less than 50% of the countries. It's very hard to have a business that's profitable just in the US. I've always thought that you really need to be above the globe, and that's the advantage. That was the value creation of the FANG companies, that they had that scale. We own all of our content. And the idea that we're starting off by having a business that's profitable this year in the US, and then we go on this journey of driving it outside the US with a strong platform that's already built, I think it bodes very well for us.

EBITDA growth for us so I'm very optimistic we're in less than 50% of the countries.

Very hard to have a business that's profitable just in the U S.

I've always thought that you really need to be above the globe and that's the advantage that was the value creation of the Fang companies that they had that scale, we own all of our content and the idea that we're starting off by having.

Our business is profitable this year.

In the U S. And then we go on this journey of driving it outside the U S with a strong platform that's already built.

David Zaslav: with a strong platform that's already built, I think it bodes very well for us. Yeah. And Robert, I just add to what David said. There's two filters as we look at it. There's the strategic filter, and financial filter that David just talked about, which obviously is preeminent, which is a market like India. If we don't believe we can be profitable as a streaming service within a three- to five-year time horizon, at the end of the day, right now, that's not going to be our priority focus. And so if there's opportunities to license and take a bunch of money off the table to help support our growth initiatives in other markets where we think we can scale more profitably and more effectively, we do that, number one.

Think is.

Jean-Briac Perrette: Yeah. And Robert, I just add to what David said. There's two filters as we look at it. There's the strategic filter, and financial filter that David just talked about, which obviously is preeminent, which is a market like India. If we don't believe we can be profitable as a streaming service within a three- to five-year time horizon, at the end of the day, right now, that's not going to be our priority focus.

It was very well for us.

Robert I would just add to what David said is two two filters as we look at it there is the strategic filter and financial filter that David just talked about which obviously is pretty limited which is a market like India. If we don't believe we can be profitable as a streaming service within a three to five year time horizon at the end of the day right now that's not going to be our priority focus and so if there's opportunities to license that take a bun.

And so if there's opportunities to license and take a bunch of money off the table to help support our growth initiatives in other markets where we think we can scale more profitably and more effectively, we do that, number one.

For money off the table to help support our growth initiatives in other markets, where we think we can scale more profitably and more effectively we do that number one number two there's just a practical reality that some of these licensing deals are done in markets, where we're just not going to be ready to launch from a platform perspective as you talk to as David mentioned in his prepared remarks, we've got a timetable to Roe.

David Zaslav: Number two, there's just a practical reality that some of these licensing deals are done in markets where we're just not going to be ready to launch from a platform perspective. As David mentioned in his prepared remarks, we've got a timetable to roll out our new product and convert and migrate our existing HBO Max customers over the next 12 months plus. Then some of these things are going to take into 2025 and even beyond to launch in new markets for our platform to be ready. And so in the meantime, it just makes perfect sense for us to take as much money off the table as possible. And so that's the thinking. The added advantage is in these markets, they're still seeding our brands in those markets. So we're getting value.

Number two, there's just a practical reality that some of these licensing deals are done in markets where we're just not going to be ready to launch from a platform perspective. As David mentioned in his prepared remarks, we've got a timetable to roll out our new product and convert and migrate our existing HBO Max customers over the next 12 months plus.

All out.

Our new product and convert and migrate our existing HBO Max customers over the next 12 months plus.

Then some of these things are going to take into 2025 and even beyond to launch in new markets for our platform to be ready. And so in the meantime, it just makes perfect sense for us to take as much money off the table as possible. And so that's the thinking.

And some of these things are going to take.

Into 'twenty, five and even beyond to launch in new markets for our platform to be ready and so in the meantime, it just makes perfect sense for us to take as much money off the table as possible.

And so.

David Zaslav: The added advantage is in these markets, they're still seeding our brands in those markets. So we're getting value. The brand itself is being driven as quality curated, and then we have to hand off when we think that market can be profitable.

Yes, that's the thinking.

The added advantages in these markets there is still seeding our brands in those markets. So we're getting value.

David Zaslav: The brand itself is being driven as quality curated, and then we have to hand off when we think that market can be profitable. And we have, sorry, one other thing I'd say is in all these deals, oftentimes what we've done, which is better than what we have in existing licensing deals, is ensuring that when those deals expire, we have stronger cliffs for the content to come back so we can actually, when we're ready to launch, if we assume we're going to launch in those markets at the end of those deals, we get more of our content back immediately. Robert, the only thing I would add is on your revenue growth and wholesale question, two things to keep in mind.

The brand itself is being driven as quality curated.

And then we have the handoff when we think that market can be profitable and we have I'm sorry, one other thing I'd say is in all of these deals oftentimes, what we've done which is better than what we have an existing licensing deals is ensuring that when those deals expire we have stronger cliff for the content to come back. So we can actually when we're ready to launch if we assume we're going to launch in those markets at the end.

Jean-Briac Perrette: And we have, sorry, one other thing I'd say is in all these deals, oftentimes what we've done, which is better than what we have in existing licensing deals, is ensuring that when those deals expire, we have stronger cliffs for the content to come back so we can actually, when we're ready to launch, if we assume we're going to launch in those markets at the end of those deals, we get more of our content back immediately.

Those deals we get more of our content back immediately Robert the only thing I would add is on Europe .

Gunnar Wiedenfels: Robert, the only thing I would add is on your revenue growth and wholesale question, two things to keep in mind. Number one, Q1 had a bit of an overlay with content sales revenues, and as we pointed out in the prepared remarks, obviously the ad market also on the digital side isn't the greatest right now. So I see a lot of upside opportunity here as that market comes back. And specifically for wholesale, remember that our subscriber base contains the linear HBO subscribers that are obviously showing similar trends to what we're seeing in other parts of the linear ecosystem.

Revenue growth in wholesale question too.

David Zaslav: Number one, Q1 had a bit of an overlay with content sales revenues, and as we pointed out in the prepared remarks, obviously the ad market also on the digital side isn't the greatest right now. So I see a lot of upside opportunity here as that market comes back. And specifically for wholesale, remember that our subscriber base contains the linear HBO subscribers that are obviously showing similar trends to what we're seeing in other parts of the linear ecosystem. Needless to say, we expect the total to be a growing business. We'll see how the launch goes in May. We're looking forward to getting that product out. I pointed out some of those overlapping subscribers. We'll see how those wash out, but we're definitely looking for revenue growth for the second half of the year and then many years to come. Great. Next question.

Two things to keep in mind number one Q.

Q1 had a bit of an overlay with content sales revenues and as we pointed out in the prepared remarks, obviously the AD market also on the digital side isn't the greatest right now.

See a lot of upside opportunity here as that market comes back and specifically for wholesale remember.

Remember that our subscriber base contains the linear HBO subscribers that are obviously showing similar trends to what we're seeing in other parts of the linear ecosystem Needless to say, we expect the total to be a growing business.

Needless to say, we expect the total to be a growing business. We'll see how the launch goes in May. We're looking forward to getting that product out. I pointed out some of those overlapping subscribers. We'll see how those wash out, but we're definitely looking for revenue growth for the second half of the year and then many years to come.

We'll see how the launch goes in May we're looking forward to getting that product out I pointed out some of those them.

Overlapping subscribers, we will see how those wash out, but we're definitely looking for for revenue growth for the <unk>.

Half of the year, and then and then many years to come.

David Zaslav: Great. Next question.

Great next question.

Yeah.

David Zaslav: Your next question comes from the line of Steven Kahl with Wells Fargo. Please go ahead. Good morning. Maybe first, David and JB on DTC profits that are tracking ahead. Just curious what's performing ahead of your expectations there. Is it the subscribers, and revenue? Is it more about the cost reduction? And I know you're new into the Max launch domestically, but I'm just curious if you're seeing legacy HBO subscribers, which I think, David, you were talking about on CNBC this morning. If you're seeing those folks engage with the Discovery content, it's kind of different genres, but I know that's the hope. So just wondering what kind of early trends you might be seeing there. And then Gunnar on the Adjusted EBITDA guidance for the year, I think it still implies low $11 billion.

Operator: Your next question comes from the line of Steven Kahl with Wells Fargo. Please go ahead.

Your next question comes from the line of Steven Cahall with Wells Fargo. Please go ahead.

Steven Cahall: Good morning. Maybe first, David and JB on DTC profits that are tracking ahead. Just curious what's performing ahead of your expectations there. Is it the subscribers, and revenue? Is it more about the cost reduction? And I know you're new into the Max launch domestically, but I'm just curious if you're seeing legacy HBO subscribers, which I think, David, you were talking about on CNBC this morning. If you're seeing those folks engage with the Discovery content, it's kind of different genres, but I know that's the hope.

Okay.

Good morning, maybe first David in JV on DTC profits that are tracking ahead, just curious what's performing ahead of your expectations. There is it the subscribers and revenue is it more about the cost reduction.

And I know, you're new into the Max launch domestically, but I'm just curious if youre seeing legacy HBO subscribers, which I think David you were talking about on CNBC. This morning, if youre seeing those folks engaged with the discovery content, it's kind of different genres, but I know thats. The hope so just wondering what kind of early trends you might be seeing there and then.

So just wondering what kind of early trends you might be seeing there. And then Gunnar on the Adjusted EBITDA guidance for the year, I think it still implies low $11 billion. From your comments, it sounds like the macro is still a little tough, but you're bullish with the incremental US DTC profits. So I'm just wondering, with DTC performing better and no change to that guidance, is there anything that's performing worse, or is that better just kind of in the range as we think about all those different components? Thank you.

Gunnar on the adjusted EBITDA guidance for the year I think it still implies low $11 billion from your comments it sounds like the macro is still a little tough, but youre bullish with the incremental U S. DTC profit. So I'm, just wondering with DTC performing better and no change to that guidance is there anything thats performing worse or is that better.

David Zaslav: From your comments, it sounds like the macro is still a little tough, but you're bullish with the incremental US DTC profits. So I'm just wondering, with DTC performing better and no change to that guidance, is there anything that's performing worse, or is that better just kind of in the range as we think about all those different components? Thank you. I'll start with the second. With the guidance quickly because you're right. Obviously, the DTC point is the big, big positive driver here. The most important point, as I laid out, is we have very clear visibility into our transformation initiatives and the impact that's going to have on the cost base.

Kind of in the range as we think about all those different components. Thank you.

David Zaslav: I'll start with the second.

Hi.

Gunnar Wiedenfels: With the guidance quickly because you're right. Obviously, the DTC point is the big, big positive driver here. The most important point, as I laid out, is we have very clear visibility into our transformation initiatives and the impact that's going to have on the cost base. Also, for the studio, definitely a support here for the second half of the year, very strong summer slate that we're really looking forward to launching, and the revenues of those are going to hit from Q3 onwards.

I'll start with the second with the guidance quickly because youre right, obviously, the DTC point.

The big Big positive driver here, the most important point as I laid out we have very clear visibility into our transformation initiatives.

The impact that's going to have on the cost base also for the studio definitely.

David Zaslav: Also, for the studio, definitely a support here for the second half of the year, very strong summer slate that we're really looking forward to launching, and the revenues of those are going to hit from Q3 onwards. Again, don't want to speculate about the linear business, but remember that the comp in the second half is going to be much more beneficial, because especially the fourth quarter last year was pretty anemic in the scatter market. But at the end of the day, we still have a lot of shots on goal here, and it's a hit-driven business, especially on the studio side. That's why we're giving you range, and I feel comfortable with that range with what I know today. Look, when we think about Max as we launch, we have real scale, quality content, a broader aperture. The real challenge is the churn.

A support here for the second half of the year very strong.

Summer slate that we're really looking forward to launching and the revenues of those are going to hit from from Q3 onwards, again don't want to speculate about the linear business, but remember that the comp in the second half is going to be much more beneficial because especially the fourth quarter last year was pretty anemic.

Again, don't want to speculate about the linear business, but remember that the comp in the second half is going to be much more beneficial, because especially the fourth quarter last year was pretty anemic in the scatter market. But at the end of the day, we still have a lot of shots on goal here, and it's a hit-driven business, especially on the studio side. That's why we're giving you range, and I feel comfortable with that range with what I know today.

In the scatter market.

But at the end of the day, we still have a lot of shots on goal here and it's a hit driven business, especially on the studio side. That's why we're giving you a range and I feel comfortable with that range.

David Zaslav: Look, when we think about Max as we launch, we have real scale, quality content, a broader aperture. The real challenge is the churn. Very difficult to build a strong business with churn. The churn on Discovery+ is quite low. The churn on HBO Max is high. And so driving that churn is as or maybe more important than driving the growth. If we can drive down the churn, the growth will be very substantial. And so we have a series of attacks in order to do that.

With what I know today.

Okay.

When we think about Max as we launch.

We have real scale.

Quality content.

Our broader aperture.

The real challenge.

As the chart.

David Zaslav: Very difficult to build a strong business with churn. The churn on Discovery+ is quite low. The churn on HBO Max is high. And so driving that churn is as or maybe more important than driving the growth. If we can drive down the churn, the growth will be very substantial. And so we have a series of attacks in order to do that. The primary one is how do you nourish more people in the family? And the more people use it, we've seen that we've been at this in Europe for more than eight years. The more people that use it in the family, the more engaged people are, the broader the offering, the lower the churn. We also have a technology advantage now in terms of catching people that want to buy the product that we weren't able to reach out to.

Very difficult to build a strong business with churn the churn on discovery plus is quite low.

Churn on.

On HBO Max is high.

And so driving that churn.

Is.

As or maybe more important.

And then driving the growth if we can drive down the churn the growth will be very substantial and so we have a series of attacks in order to do that the primary one is how do you nourish more people in the family and the more people use that we've seen that we've been at this in Europe for more than eight years, the more people that use it in the family good morning.

The primary one is how do you nourish more people in the family? And the more people use it, we've seen that we've been at this in Europe for more than eight years. The more people that use it in the family, the more engaged people are, the broader the offering, the lower the churn. We also have a technology advantage now in terms of catching people that want to buy the product that we weren't able to reach out to.

The more engaged people are the lower the broader of the offering.

The lower the churn we also have a technology advantage now in terms of catching people that want to buy the product that warranty that we werent able to reach out to.

David Zaslav: And this is a business of artillery. We're adding a lot of artillery here to the offering in order to get more viewers in the family engaged and excited about the amazing quality content that we have. But we have more weapons, and we have sports, and we have news. And those are on the sidelines right now. We have a great product that's now going to be profitable for the year. Let's drive that. Let's drive the brand and know that we can move to the left and to the right with sports and news, which we've done in markets in Europe, which has been additionally advantageous. JB? Yeah. Steven, to echo what David said, we've seen it across multiple metrics. We've seen it across retention. As David rightly pointed out, we've had in the first few months of this year record low churn on HBO Max.

And this is a business of artillery. We're adding a lot of artillery here to the offering in order to get more viewers in the family engaged and excited about the amazing quality content that we have. But we have more weapons, and we have sports, and we have news. And those are on the sidelines right now. We have a great product that's now going to be profitable for the year. Let's drive that. Let's drive the brand and know that we can move to the left and to the right with sports and news, which we've done in markets in Europe, which has been additionally advantageous. JB?

And this is a business of artillery, we're adding a lot of artillery here to the offering in order to get more.

To get more viewers in the family engaged and excited.

About the amazing quality content.

That we have but we have all weapons.

And we have sports and we have news and those are on the sidelines right now we have a great product we're going to.

That's now going to be profitable for the year, let's drive that.

Let's drive the brand.

And know that we have we can move to the left to the right with sports and news, which we've done in markets in Europe , which has been additionally, advantageous JV.

Jean-Briac Perrette: Yeah. Steven, to echo what David said, we've seen it across multiple metrics. We've seen it across retention. As David rightly pointed out, we've had in the first few months of this year record low churn on HBO Max.

To Echo what David said, we've seen it across multiple metrics, we've seen it across retention as David rightly pointed out we've had in the first few months of this year record low churn on HBO Max with the churn is still it's still hiring it's still high but we've been with the unacceptable range in order to build the kind of <unk>.

David Zaslav: But the churn is still. It's still high. It's still high, but it's an unacceptable range in order to build the kind of business that we will build. Yeah. And as we've talked about at the 12 April event, that was all done through a kind of what I'd call a slightly more analog attack plan. We're now getting to a tool and a platform as we launch Max that we think has a lot more ammo to be able to actually attack churn in a more aggressive fashion. So we think we're just at the beginning of that upswing. The second is we obviously had price rises in the US as well as a few of the Latin American markets.

Steven Cahall: But the churn is still. It's still high.

David Zaslav: It's still high,

but it's an unacceptable range in order to build the kind of business that we will build.

Jean-Briac Perrette: Yeah. And as we've talked about at the 12 April event, that was all done through a kind of what I'd call a slightly more analog attack plan. We're now getting to a tool and a platform as we launch Max that we think has a lot more ammo to be able to actually attack churn in a more aggressive fashion. So we think we're just at the beginning of that upswing. The second is we obviously had price rises in the US as well as a few of the Latin American markets.

<unk>.

We will build and as we've talked about at the April 12th event that was all done through a kind of what I'd call. It slightly more analog attack plan, we're now getting to a tool and a platform as we launch Max that we think has a lot more ammo to be able to actually attack churn and more aggressive fashion. So we think we're just at the beginning of that up.

Swing. The second is we obviously had price rises in the U S as well as a few of the Latin American markets and the reality is the great news. There is we've seen much better reaction and much better retention as well on <unk>.

David Zaslav: The reality is the great news there is we've seen much better reaction and much better retention as well on ARPU increases in those markets. So that's been a positive. We've seen efficiencies across the board in some of the items that Gunnar talked about. Then, obviously, over time, we've seen some scaling, but we've been measured in our scaling. So that's been great. As it relates to the content cross-pollination, the reality is we've done very little so far, but we have done stuff with Magnolia, for example. As you heard us, I think, hopefully talk about before, it was a top 10 performer on the service at launch and even a top five in the initial week of launch. So we feel very positive about what that means.

The reality is the great news there is we've seen much better reaction and much better retention as well on ARPU increases in those markets. So that's been a positive. We've seen efficiencies across the board in some of the items that Gunnar talked about. Then, obviously, over time, we've seen some scaling, but we've been measured in our scaling. So that's been great.

Increases in those markets and so that's been a positive we've seen efficiencies.

And.

Across the board.

In some of the items that <unk> talked about.

And then obviously over time, we've sort of seen some scaling but we've been measured in our scaling.

And so that's been a great and as it relates to the content.

As it relates to the content cross-pollination, the reality is we've done very little so far, but we have done stuff with Magnolia, for example. As you heard us, I think, hopefully talk about before, it was a top 10 performer on the service at launch and even a top five in the initial week of launch. So we feel very positive about what that means. And as we've cross-pollinated content outside of the US, we've seen similar trends of great reaction and reception from HBO Max consumers to the Discovery+ content. So when we go full throttle with it, when Max comes together, we feel very optimistic.

Cross pollination realities, we've done very little so far, but we have done stuff with Magnolia for example, and as you've heard US I think to hopefully talk about before it was a top 10 performer on the service at once and even a top five.

In the initial week of launch and so we feel very.

Positive about what that means and as we've cross pollinated content outside of the U S. We've seen similar trends of great reaction and reception from HBO Max consumers to the discovery plus content.

David Zaslav: And as we've cross-pollinated content outside of the US, we've seen similar trends of great reaction and reception from HBO Max consumers to the Discovery+ content. So when we go full throttle with it, when Max comes together, we feel very optimistic. Steve, if I can just add one thing from the perspective of the longer-term outlook here. Again, we gave guidance a year ago around how we see this DTC business developing. As I said earlier today, many of the operating KPIs are tracking much better than what we assumed. Again, the big thing is getting this product launched. And then we will learn so much about assumptions that are now assumptions and hypotheses. And in two, three months, those will be backed up by a lot more actual data. So this is going to be a super important period. But needless to say, with the US.

So when we go full throttle with it when the Max comes together, we feel very optimistic.

Gunnar Wiedenfels: Steve, if I can just add one thing from the perspective of the longer-term outlook here. Again, we gave guidance a year ago around how we see this DTC business developing. As I said earlier today, many of the operating KPIs are tracking much better than what we assumed. Again, the big thing is getting this product launched. And then we will learn so much about assumptions that are now assumptions and hypotheses. And in two, three months, those will be backed up by a lot more actual data. So this is going to be a super important period. But needless to say, with the US.

Steve If I can just add one thing from the perspective of a longer term outlook here again.

We gave guidance a year ago.

Around how we see this PVC business developing as I said earlier today many of the operating Kpis are tracking much better than what we assumed again the big thing is getting this product launched and then we will learn so much about.

Assumptions that are now assumptions and hypotheses.

Two or three months.

Those will be backed up by a lot more actual data. So this is going to be super important period, but needless to say with the U S breakeven.

David Zaslav: Break-even and actually hitting profitability for the full year happening this year, a full year ahead. Now, remember, as we said before, we are obviously losing money in the business internationally as we are launching markets and as we are earlier in the maturity curve in many of the international markets. That's going to continue. But as I said earlier, we've got that $1 billion-plus guidance for 2025 for the entire combined business. We'll update that on the basis of what we're learning once the product is in the market. Great. Thank you. Your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead. Hi. Good morning. And thank you.

Break-even and actually hitting profitability for the full year happening this year, a full year ahead. Now, remember, as we said before, we are obviously losing money in the business internationally as we are launching markets and as we are earlier in the maturity curve in many of the international markets. That's going to continue. But as I said earlier, we've got that $1 billion-plus guidance for 2025 for the entire combined business. We'll update that on the basis of what we're learning once the product is in the market.

And actually hitting profitability for the full year happening this year a full year ahead.

Now remember as we said before we are obviously, losing money in the business internationally as we are launching market and as we are earlier in the.

The maturity curve in many of the international markets and Thats going to continue but as I said earlier, we've got that one $1 billion plus guidance for 2025 for the entire combined the business and we'll update that.

On the basis of what we're learning.

Steven Cahall: Great. Thank you.

Once the once the product is in the market.

Operator: Your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead.

Great. Thanks for your question.

Your next question comes from the line of Peter Zaffino with Wolfe Research. Please go ahead.

Peter Supino: Hi. Good morning. And thank you. On the subject of free cash flow, adjusted for one-time charges, you mentioned that the last 12 months, the company had produced a little over $3 billion of free cash, adding that $1 billion plus of one-time charges to the $2 billion plus of underlying. If your expectation is that synergies will contribute $2 billion in 2023, it seems like your free cash flow has an easy path to $4 billion, which is within your guidance range.

Hi, good morning, and thank you.

David Zaslav: On the subject of free cash flow, adjusted for one-time charges, you mentioned that the last 12 months, the company had produced a little over $3 billion of free cash, adding that $1 billion plus of one-time charges to the $2 billion plus of underlying. If your expectation is that synergies will contribute $2 billion in 2023, it seems like your free cash flow has an easy path to $4 billion, which is within your guidance range. I'm wondering if you'd add any significant puts or takes to that analysis. Specifically, is the DTC upside that you described today, the idea that EBITDA will be $1 billion better than previously expected in 2023, incremental to the math I just laid out? Thank you.

The subject of free cash flow.

Adjusted for one time charges, you mentioned that the last 12 months. The company had produced a little over $3 billion of free cash, adding that one plus of onetime charges to the two plus of underlying.

If your expectation is that synergies will contribute $2 billion in 'twenty three.

It seems like you are.

Free cash flow it.

It has an easy path to $4 billion, which is within your guidance range I'm wondering if you'd add any significant puts or takes to that analysis and specifically is the DTC upside that you described today the idea that.

I'm wondering if you'd add any significant puts or takes to that analysis. Specifically, is the DTC upside that you described today, the idea that EBITDA will be $1 billion better than previously expected in 2023, incremental to the math I just laid out? Thank you.

EBITDA will be 1 billion better than previously expected in 'twenty three incremental to the math I just laid out thank you.

David Zaslav: Well, look, Peter, again, in the current environment, I wouldn't characterize anything as easy, but I have very, very high confidence in the range that we laid out. We have confidence in the ability to generate these synergies. You're right on the trailing 12-month number, but it's a lot of work. We have line of sight, and we'll take it from there. I don't want you to take this as an upgrade to our cash flow guidance. So we were—I think we were among the first to say that the advertising market was starting to be challenging. And so we have been pretty careful in projecting because you can't have an advertising market that is going to turn and when it's going to turn. And so for purposes of how we looked at this year, the market is quite challenging.

Gunnar Wiedenfels: Well, look, Peter, again, in the current environment, I wouldn't characterize anything as easy, but I have very, very high confidence in the range that we laid out. We have confidence in the ability to generate these synergies. You're right on the trailing 12-month number, but it's a lot of work. We have line of sight, and we'll take it from there. I don't want you to take this as an upgrade to our cash flow guidance.

Both Peter again.

In the current environment I wouldn't characterize anything as easy but.

I have very very high confidence in the range that we laid out.

We have confidence in the ability to generate these these synergies youre right on the on the trailing 12 month number but.

It's a lot of work we have we have line of sight.

And.

We'll take it from there I don't want you to take this isn't an upgrade to our cash flow guidance.

David Zaslav: So we were—I think we were among the first to say that the advertising market was starting to be challenging. And so we have been pretty careful in projecting because you can't have an advertising market that is going to turn and when it's going to turn. And so for purposes of how we looked at this year, the market is quite challenging. It's improved a little bit, but it still remains a really challenging environment. But the good news for us is we built that into our projections for the year and into how we talk to you about what we'll face this year and how we'll perform.

I think we will.

Were among the first to say that the advertising market was basic was starting to be challenging.

And so.

We have been.

Pretty careful.

In.

Projecting because you can't have an advertising market is going to turn and when it's going to turn and so for purposes of how we looked at this year the.

Market is quite challenging.

David Zaslav: It's improved a little bit, but it still remains a really challenging environment. But the good news for us is we built that into our projections for the year and into how we talk to you about what we'll face this year and how we'll perform. Great. Next question. Your next question comes from the line of Brian Kraft with Deutsche Bank. Please go ahead. Hi. Good morning. I wanted to ask you about Hogwarts Legacy. Sales have obviously been extremely strong to date. Can you talk about what you expect for sales of the PS4 and Xbox One versions, which I think become available today, maybe just relative to sales to date, how much of a lift could you get?

It's improved a little bit, but it still remains a really challenging environment.

But the good news for us as we built that.

Into our projections for the year and into how we talk to you about what this what we'll face this year and how we'll perform.

Great. Next question.

Operator: Your next question comes from the line of Brian Kraft with Deutsche Bank. Please go ahead.

Great next question.

Your next question comes from the line of Bryan Kraft with Deutsche Bank. Please go ahead.

Bryan Kraft: Hi. Good morning. I wanted to ask you about Hogwarts Legacy. Sales have obviously been extremely strong to date. Can you talk about what you expect for sales of the PS4 and Xbox One versions, which I think become available today, maybe just relative to sales to date, how much of a lift could you get?

Hi, Good morning, I wanted to ask you about Hogwarts legacy sales have obviously been extremely strong to date can you talk about what you expect for sales of the PS four and Xbox one versions, which I think become available today.

Maybe just relative to sales to date, how much of a lift could you get and also I wanted to ask.

David Zaslav: Also, I wanted to ask how the next, say, X hundreds of millions of dollars of sales would look from a margin perspective relative to that first billion because I would assume that there's a lot less marketing and amortization running through in Q2 and beyond. So just wanted to ask about that as we think about profitability for the studio going forward. Thank you. Thanks, Brian. We have a very good gaming business with 11 different studios and a real talented capability. But the real differentiator for us as a company is we own our IP. And that IP belongs to us, and we're developing it. In some cases, we may decide to develop it with a third-party game technology company.

Also, I wanted to ask how the next, say, X hundreds of millions of dollars of sales would look from a margin perspective relative to that first billion because I would assume that there's a lot less marketing and amortization running through in Q2 and beyond. So just wanted to ask about that as we think about profitability for the studio going forward. Thank you.

How the next say X hundreds of millions of dollars of sales would be would look from a margin perspective relative to that first $1 billion because I would assume that there is a lot less marketing and amortization running through in the second quarter and beyond so just wanted to ask about that as we think about profitability for the studio going forward. Thank you.

David Zaslav: Thanks, Brian. We have a very good gaming business with 11 different studios and a real talented capability. But the real differentiator for us as a company is we own our IP. And that IP belongs to us, and we're developing it. In some cases, we may decide to develop it with a third-party game technology company.

Thanks, Brian .

We have a very.

Very good.

Our gaming business with 11 different studios.

A real talented capability.

But the real differentiator for us as a company is.

We own our IP.

And that IP belongs to us and we're developing it in some cases, we may decide to develop it with a third party game.

Technology company.

David Zaslav: But we may be the only media company that owns, whether it's the DC Universe, Harry Potter, all the content that we own, Game of Thrones. That's for us to deploy. And I think that's particularly strategically important because if you look at Hogwarts Legacy, a big piece of the success of that game is you go into it. If you're a player, you go into that game, and you're in that world. That's kind of a new concept. Before, it was really. It was gaming, and it was storytelling. And now, I don't. It's very difficult to figure out what anyone's definition for the metaverse is. But when we launch a product as a motion picture or a long-form story on Max or HBO, and then we have a game, that game belongs to us.

But we may be the only media company that owns, whether it's the DC Universe, Harry Potter, all the content that we own, Game of Thrones. That's for us to deploy. And I think that's particularly strategically important because if you look at Hogwarts Legacy, a big piece of the success of that game is you go into it.

<unk>.

We may be the only media company that owns whether it's the DC universe, Harry Potter all of the content that we own game of Thrones, that's for us to deploy and I think that's particularly strategically important because if you look at Hogwarts legacy a big piece of the success of that game as you go into it if Europe .

If you're a player, you go into that game, and you're in that world. That's kind of a new concept. Before, it was really. It was gaming, and it was storytelling. And now, I don't. It's very difficult to figure out what anyone's definition for the metaverse is. But when we launch a product as a motion picture or a long-form story on Max or HBO, and then we have a game, that game belongs to us. But now there's this tweener, which is, it may be in the next couple of years that we launch our Superman movie. And then people spend more time, and there's more economics of people just hanging out in the Superman world and universe.

Player you go into that game and you're in that world.

That's kind of a new concept before it was really.

It was gaming and it was storytelling.

And now it's very difficult to figure out what anyone's definition for the meta versus but when we launch a product as a motion picture of long form story on unmatched <unk>.

And then we have a game.

David Zaslav: But now there's this tweener, which is, it may be in the next couple of years that we launch our Superman movie. And then people spend more time, and there's more economics of people just hanging out in the Superman world and universe. And the fact that we own all that is something that I think is going to be really important as we look forward, whether as technology develops and given the amount of time people spend on gaming, we don't want to be in the motion picture and long-form storytelling business and have somebody else in the business of hanging out in those worlds because those worlds, I think, are going to be quite profitable in the years ahead. And Brian, to the Hogwarts Legacy, obviously, the Gen 8 release that's going out, you're right, today is important.

Gain belongs to us, but now there's this tweener, which is it may be in the next couple of years that we launched our Superman movie and then.

People spend more time and Theres more economics.

People just hanging out in the Superman World and universe, and the fact that we own all of that.

And the fact that we own all that is something that I think is going to be really important as we look forward, whether as technology develops and given the amount of time people spend on gaming, we don't want to be in the motion picture and long-form storytelling business and have somebody else in the business of hanging out in those worlds because those worlds, I think, are going to be quite profitable in the years ahead.

Is something that I think is going to be really important as we look for is whether as technology develops and given the amount of time people spend on gaming.

We don't want to be in the motion picture and story and long form storytelling business and have somebody else in the business of hanging out in those worlds because those worlds I think theyre going to be quite profitable in the years ahead.

Jean-Briac Perrette: And Brian, to the Hogwarts Legacy, obviously, the Gen 8 release that's going out, you're right, today is important. I would say, obviously, those consoles are a much smaller base than the current generation consoles that we released back in February. So it's obviously a much smaller portion of the whole, but nonetheless important. I think the other big callout is obviously the Nintendo Switch release, which will come later this year.

And Brian to the horse legacy.

Obviously, the Gen eight releases going out and you are right today.

Is is important.

David Zaslav: I would say, obviously, those consoles are a much smaller base than the current generation consoles that we released back in February. So it's obviously a much smaller portion of the whole, but nonetheless important. I think the other big callout is obviously the Nintendo Switch release, which will come later this year. We see that as probably a much bigger install base and a fan base that, as it relates to the franchise of Harry Potter, which obviously appeals to a very big audience globally and in markets like Japan where Nintendo has a big footprint and Harry Potter skews very strongly in terms of popularity, we see a much bigger upside probably from that release, certainly than the Gen 8. So that's kind of how we see the rollout over the next few months. And the margin profile, Brian, is not going to change materially.

I would say obviously those consoles are a much smaller base than the current generation consoles that we released back in February . So, it's obviously a much smaller portion of the hole.

But nonetheless important I think the other big call out is obviously, the Nintendo switch released which will come later this year.

We see that as probably a much bigger install base and a fan base that, as it relates to the franchise of Harry Potter, which obviously appeals to a very big audience globally and in markets like Japan where Nintendo has a big footprint and Harry Potter skews very strongly in terms of popularity, we see a much bigger upside probably from that release, certainly than the Gen 8. So that's kind of how we see the rollout over the next few months.

We see that as probably a much bigger.

Install base and a fan base that is.

As it relates to the franchise of Harry Potter, which obviously appeals to a very big audience globally, and a more than in markets like Japan, where Nintendo has a big footprint in Harry Potter skews very strongly in terms of popularity, we see a much bigger upside probably from that release certainly than the gen. Eight.

So that's kind of how we see the rollout over the next few months.

Gunnar Wiedenfels: And the margin profile, Brian, is not going to change materially. We'll be a little lighter on marketing, obviously. Retail price points are a little lower. So from a gross margin perspective, a little bit of a headwind, but no material change.

Yes.

The margin profile.

Profile, Brian is not going to change materially.

David Zaslav: We'll be a little lighter on marketing, obviously. Retail price points are a little lower. So from a gross margin perspective, a little bit of a headwind, but no material change. Thanks very much. Appreciate it. Your next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please go ahead. Thanks. Two questions. So David, if you step back and think about the last year where the heavy lifting is done, integration, the restructuring, and now the focus is on operating and building your businesses, where do you see the most opportunity? And maybe you can touch on timing beyond the existing business. You touched on games, but I'm sure there's a bigger business plan. FAST, you've mentioned in the past, you're talking about driving your franchises deeper. And animation, you just mentioned you hired a head of animation. And that's a huge driver for Universal.

We'll be a little lighter on marketing, obviously retail price points are a little lower so maybe from a gross margin perspective, a little bit of a headwind, but no material change.

Bryan Kraft: Thanks very much. Appreciate it.

Operator: Your next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Thanks, very much I appreciate it.

Your next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Jessica Reif Ehrlich: Thanks. Two questions. So David, if you step back and think about the last year where the heavy lifting is done, integration, the restructuring, and now the focus is on operating and building your businesses, where do you see the most opportunity? And maybe you can touch on timing beyond the existing business. You touched on games, but I'm sure there's a bigger business plan. FAST, you've mentioned in the past, you're talking about driving your franchises deeper. And animation, you just mentioned you hired a head of animation. And that's a huge driver for Universal.

Two questions.

So David if you step back and.

Think about the last year.

Heavy lifting is done integration restructuring and now the focus is on operating and building your businesses, where do you see that.

Most opportunity and maybe you can touch on timing beyond the existing business you touched on games, but this I'm.

Sure.

Our business plan fast you've mentioned in the past you've talking about driving your franchises deeper in animation you. Just mentioned you hired ahead of animation so.

David Zaslav: So maybe if you could, maybe there's something I'm missing. And then secondly, on sports, you kind of alluded to it coming to Max. I don't know if you can say anything more about that and maybe touch on the NBA. What do you think the timing is? And are there ways to slice and dice the rates among the various players so that you ensure it's a profitable contract in the next round? Thanks, Jessica. When we look at this business, you're exactly right. We reset the business for the future by looking at each company and saying, "How should we be structured to have the best chance for sustainable growth today?" We took out a lot of layers. We built a new leadership team. But we still have a lot of the benefits that will be flowing through this year and next year.

So maybe if you could, maybe there's something I'm missing. And then secondly, on sports, you kind of alluded to it coming to Max. I don't know if you can say anything more about that and maybe touch on the NBA. What do you think the timing is? And are there ways to slice and dice the rates among the various players so that you ensure it's a profitable contract in the next round?

It's a huge driver for universal So maybe if you could maybe there's something I'm missing.

And then secondly on sports.

You've kind of alluded to it coming to Max and if you can say anything more about that and maybe touch on the NBA. What do you think the timing is and ways to slate are there ways to slice and dice the rates among the various players. So that you ensure it's a profitable contract in the next round.

David Zaslav: Thanks, Jessica. When we look at this business, you're exactly right. We reset the business for the future by looking at each company and saying, "How should we be structured to have the best chance for sustainable growth today?" We took out a lot of layers. We built a new leadership team. But we still have a lot of the benefits that will be flowing through this year and next year.

Thanks Jessica.

There is.

When we look at this business.

<unk> right, we reset the business for the future by looking at each company and saying what should this how should we be structured to have the best chance to sustainable growth in the world today.

We took out a lot of layers, we built a new leadership team, but we still have a lot of the benefits that will be flowing through this year and next year and we're still finding it we're still opening up some closets and stuff folks out there.

David Zaslav: And we're still finding opening up some closets and stuff falls out then, which I think is a good thing, more opportunity. And we got some businesses that aren't doing well. Warner Bros. turns 100. And they've had two of the worst years of, if you look back at Warner Bros., it was really just very difficult, very difficult on every level in terms of what was turned out. And so we think we've turned the corner on that. We got a very strong leadership team in place now. We got James Gunn and Peter working very hard on DC, which is going to be a very big growth driver for this company. And so we're very bullish on DC. And the Superman script first draft is done. Gunn, he's on a mission from God.

And we're still finding opening up some closets and stuff falls out then, which I think is a good thing, more opportunity. And we got some businesses that aren't doing well. Warner Bros. turns 100. And they've had two of the worst years of, if you look back at Warner Bros., it was really just very difficult, very difficult on every level in terms of what was turned out.

Which I think is a good thing more opportunity and we've got some businesses that are doing well.

Warner Brothers turns 100, and they've had two of the worst years.

If you look back at Warner Brothers.

Really just very.

Difficult.

Very difficult on every level in terms of.

What was turned out and so we think we've turned the corner on that we've got a very strong leadership team in place now we got James gone and Peter working very hard on DC, which is going to be a very big growth driver for this company.

And so we think we've turned the corner on that. We got a very strong leadership team in place now. We got James Gunn and Peter working very hard on DC, which is going to be a very big growth driver for this company. And so we're very bullish on DC. And the Superman script first draft is done. Gunn, he's on a mission from God.

So very bullish on DC.

We the Superman script first draft is done.

Is he is he is on a mission from God.

David Zaslav: I think it's a really good moment for us to prove out on DC what we got and how strong it is globally for long-term sustainable growth. We got some more movies coming up that are better. We've been working hard on fixing them, enhancing them, and investing. We said, "No movie before its time." And with Barbie and Flash, we have two very good movies. Dune 2, very strong. And so I think the slate coming up now, that'll make a big difference. We've lost a lot of money in the motion picture business. And making that turn is important. Continuing to build on Max. And we haven't done much with animation at this company. We own Hanna-Barbera, Looney Tunes. If you take a look at animation, it's critical, we have three animation studios.

I think it's a really good moment for us to prove out on DC what we got and how strong it is globally for long-term sustainable growth. We got some more movies coming up that are better. We've been working hard on fixing them, enhancing them, and investing. We said, "No movie before its time." And with Barbie and Flash, we have two very good movies.

And I think it's a really good moment for us to prove out on D. C. What we got and how strong it is globally for long term sustainable growth.

We got some more movies coming up that are better we've been working hard on fixing and enhancing them and investing we said no moving before its time.

With Barbie and flash we have two very good movies doing two very strong.

Dune 2, very strong. And so I think the slate coming up now, that'll make a big difference. We've lost a lot of money in the motion picture business. And making that turn is important. Continuing to build on Max. And we haven't done much with animation at this company. We own Hanna-Barbera, Looney Tunes. If you take a look at animation, it's critical, we have three animation studios.

And so I think the slate coming up now that will make a big difference we've lost a lot of money in the motion picture business.

<unk>.

Yeah.

And making that turn is important.

<unk> to build on.

Max.

And we haven't done much with animation at this company, we own Hanna Barbera Looney tunes.

<unk>.

If you take a look at it animation. It's a critical we have we have three animation studios.

David Zaslav: We don't have a lot of production in terms of; it's not productive in terms of free cash flow. It's not productive in terms of market share. It's not productive in terms of growth. And so, driving that, we now have a really strong leader. Our leadership team is in place. If this was Formula 1 and we're dealing with a very difficult environment and it's raining and the track is wet and it's a challenge, we got a leadership team of race car drivers here in every case. And so we got a lot of confidence in Mike and Pam on the Warner Bros. side. And the games business is just getting started, which I think is something that people didn't really pay a lot of attention to. And maybe the most important portion is the fact that we have this great diversity of assets.

We don't have a lot of production in terms of; it's not productive in terms of free cash flow. It's not productive in terms of market share. It's not productive in terms of growth. And so, driving that, we now have a really strong leader. Our leadership team is in place. If this was Formula 1 and we're dealing with a very difficult environment and it's raining and the track is wet and it's a challenge, we got a leadership team of race car drivers here in every case.

And we don't have a lot of.

Uh huh.

Production in terms of it's not productive in terms of free cash flow, it's not productive in terms of market share it's not productive.

In terms of growth and so driving that and we now have a really strong leader our leadership team is in place.

If this was a if this was formula one and we're dealing with a very difficult environment and it's.

It's raining in the track is wet and it is a challenge.

We've got a leadership team of race car drivers here.

And so we got a lot of confidence in Mike and Pam on the Warner Bros. side. And the games business is just getting started, which I think is something that people didn't really pay a lot of attention to. And maybe the most important portion is the fact that we have this great diversity of assets.

In every case.

And so we've got a lot of confidence in Mike and Pam on the Warner Brothers side and.

The games business is just getting started.

I think it's something that people didn't really pay a lot of a lot of attention to and maybe the most important portion is.

The fact that.

We have this great diversity of assets, it's hard to predict what's going to go on but we've restructured this company now we're really tight.

David Zaslav: It's hard to predict what's going to go on. But we've restructured this company now. We're really tight. We're really tight. And we're continuing to figure out how do we drive productivity so we can invest more in storytelling. That's all we do. And right now, it's sort of the environment is challenged, challenged, challenged. But as things start to pick up, and they will in different areas, and we can't predict exactly when, you're going to see a very quick turn at this company. So the idea that we can end this year to be less than four times levered with a very tight cost structure, with command and control of this business, with strong brands that people love around the world, and then all of a sudden, things improve a little bit and you'll see an acceleration. The NBA.

It's hard to predict what's going to go on. But we've restructured this company now. We're really tight. We're really tight. And we're continuing to figure out how do we drive productivity so we can invest more in storytelling. That's all we do. And right now, it's sort of the environment is challenged, challenged, challenged.

We're really tight and we're continuing to figure out how do we drive productivity. So we can invest more in storytelling. That's all we do and.

Right now it's sort of.

The environment is challenged challenge challenge, but as things start to pick up and they will go in different areas and we can't predict exactly when you're going to see a very quick turn at this company. So the idea that we can end this year drive toward.

But as things start to pick up, and they will in different areas, and we can't predict exactly when, you're going to see a very quick turn at this company. So the idea that we can end this year to be less than four times levered with a very tight cost structure, with command and control of this business, with strong brands that people love around the world, and then all of a sudden, things improve a little bit and you'll see an acceleration. The NBA.

Less than four times levered with a very tight cost structure.

With command and control of this business with strong brands that people love around the World and then.

All of a sudden thing.

Things improve a little bit and you'll see an acceleration.

David Zaslav: Look, I was just—so I had them two days ago at the Knicks game. Go Knicks, big night at the Garden. Wow. Been waiting a long time for that one. But we're doing a terrific job with the NBA. When you look at Barkley, Ernie, that team, and Shaq, the programming we're putting on, we're setting records with the NBA. We're setting records with hockey. We also have March Madness, where we did very well. We couldn't do as well with the marketplace because sports is relatively strong, but sports used to be strong enough that it was also able to help you with the rest of the business. And that was happening for a long time. And the market was just quite soft. And so we're able to take advantage of the sport, but we weren't able to take advantage of the piggyback halo.

Look, I was just—so I had them two days ago at the Knicks game. Go Knicks, big night at the Garden. Wow. Been waiting a long time for that one. But we're doing a terrific job with the NBA. When you look at Barkley, Ernie, that team, and Shaq, the programming we're putting on, we're setting records with the NBA. We're setting records with hockey.

Yes.

Look.

I was just so atom two days ago at the Knick game go next ignited the guidance.

<unk> been waiting a long time for that one.

And but.

Well.

We're doing a terrific job with the NBA when you look at Berkeley and Ernie.

That team and shaq.

Programming, we're putting on we're setting records with the NBA was setting records with.

We also have March Madness, where we did very well. We couldn't do as well with the marketplace because sports is relatively strong, but sports used to be strong enough that it was also able to help you with the rest of the business. And that was happening for a long time. And the market was just quite soft. And so we're able to take advantage of the sport, but we weren't able to take advantage of the piggyback halo.

With hockey.

We also have March madness, where we did very well, we couldnt do as well with the with the marketplace because.

Sports is relatively strong but sports used to be strong enough that it was also able to help you with the rest of the business and that was happening for a long time and the market was just quite soft and so we're able to take advantage of the sport, but we werent able to take advantage of the piggyback Halo and I think thats true in the industry. It just got.

David Zaslav: I think that's true in the industry. It just got more difficult. But between baseball playoffs, March Madness, and hockey, we have long-term deals that are quite favorable to us. We like the NBA. The deal's coming up in 2025. There's lots of ways it could be renegotiated. We did a very favorable deal in the UK with our BT Eurosport business where we ended up with 90% of the football, the soccer games, and Amazon got less than 10% of the Champions League games. We produced that content for Andy Jassy, and they promote to us. We promote to them. And the economics of that deal were very favorable for us. And so there's lots of ways to renegotiate it. We like the NBA. We hope we can get there, but we're going to be very disciplined.

I think that's true in the industry. It just got more difficult. But between baseball playoffs, March Madness, and hockey, we have long-term deals that are quite favorable to us. We like the NBA. The deal's coming up in 2025. There's lots of ways it could be renegotiated. We did a very favorable deal in the UK with our BT Eurosport business where we ended up with 90% of the football, the soccer games, and Amazon got less than 10% of the Champions League games.

More difficult but between.

Baseball playoffs March Madness hockey, we have we have long term deals that are quite favorable to us we like the NBA the deal.

Deals coming up in 'twenty five.

There's lots of lots of ways it could be re conjugated.

We did a very favorable deal in the UK with our BT Eurosport business, where we ended up with 90% of the football soccer games, and Amazon got less than 10% of the of the <unk>.

We produced that content for Andy Jassy, and they promote to us. We promote to them. And the economics of that deal were very favorable for us. And so there's lots of ways to renegotiate it. We like the NBA. We hope we can get there, but we're going to be very disciplined.

Champions League games, we produce that content for four Andy Jaffe.

And they promote the us we promote to them and the economics of that deal were.

Very favorable for us and so there is lots of ways to re conjugate it.

We like the NBA, we hope we can get there, but we're going to be very disciplined we work very hard to build this company to drive profitability to have a strong balance sheet to provide real growth and real free cash flow. That's the long term sustainable nature of this great company and we're not going to jeopardize that for any piece of IP.

David Zaslav: We work very hard to build this company to drive profitability, to have a strong balance sheet, to provide real growth and real free cash flow. That's the long-term sustainable nature of this great company. And we're not going to jeopardize that for any piece of IP. I'd like to add one slightly less strategic, more operational point that nonetheless I think is super important, Jessica. And that is, for the sake of the argument, if we're spending $20 billion of content, a lot of that still goes through siloed systems, still imperfect processes, and in many cases still through a mindset that's very business unit oriented still. I have no doubt we're in the very early innings of looking at this as one Warner Bros. Discovery content spend. We talk a lot about the stuff that we discontinued because it didn't make sense financially.

We work very hard to build this company to drive profitability, to have a strong balance sheet, to provide real growth and real free cash flow. That's the long-term sustainable nature of this great company. And we're not going to jeopardize that for any piece of IP.

Jean-Briac Perrette: I'd like to add one slightly less strategic, more operational point that nonetheless I think is super important, Jessica. And that is, for the sake of the argument, if we're spending $20 billion of content, a lot of that still goes through siloed systems, still imperfect processes, and in many cases still through a mindset that's very business unit oriented still. I have no doubt we're in the very early innings of looking at this as one Warner Bros. Discovery content spend. We talk a lot about the stuff that we discontinued because it didn't make sense financially.

I would like to add one.

Strategic.

Operational point, Nonetheless, I think it's super important Jessica and that is our.

For the sake of the argument we are spending $20 billion of content a lot of that still goes through.

Siloed systems.

Still imperfect processes and in many cases still.

Mindset Thats very business unit oriented so I have no doubt we are in the very early innings of looking at this.

As one Warner brothers discovery content that we talked a lot about the stuff that we discontinued because it didn't make sense financially I think the opposite is true as well I think the company also passed on very very interesting and attractive investment opportunities just because some of the intercompany budget wasn't in place. There. So all of that is going to change will get much better in <unk>.

David Zaslav: I think the opposite is true as well. I think the company also passed on very, very interesting and attractive investment opportunities just because some intercompany budget wasn't in place or so. All of that is going to change. We'll get much better in allocating capital as a company. We'll get much better in the day-to-day operational management of spending of that cash. We just harmonized those processes and centralized those teams that were all fragmented. Looking at that, the ROI on our capital in the ballpark of $20 billion, hopefully growing over the next few years, is set to improve. I have full conviction in that. When we talk about a marketing campaign, one of the things to bear in mind is we're using our platforms now. That wasn't happening, and we are really hyper-focused.

I think the opposite is true as well. I think the company also passed on very, very interesting and attractive investment opportunities just because some intercompany budget wasn't in place or so. All of that is going to change. We'll get much better in allocating capital as a company. We'll get much better in the day-to-day operational management of spending of that cash. We just harmonized those processes and centralized those teams that were all fragmented.

<unk> capital as a company and we will get much better.

The day to day operational management of spending of that cash.

We just harmonize those processes.

Centralize those teams that were all fragmented so looking at that the ROI on our capital in the ballpark of 2000 20 billion hopefully growing over the next.

Looking at that, the ROI on our capital in the ballpark of $20 billion, hopefully growing over the next few years, is set to improve. I have full conviction in that

Few years.

Is set to improve and I have full conviction in that.

David Zaslav: When we talk about a marketing campaign, one of the things to bear in mind is we're using our platforms now. That wasn't happening, and we are really hyper-focused.

When we talk about our marketing campaigns.

One of the things to bear in mind is.

We're using our platforms now that wasn't happening.

We are really hyper focused.

David Zaslav: As I said, on many nights now, we're getting 48%, 45%, close to 50% of all viewership, broadcast, cable. On any given night, we have 25% to 30% of viewership on the platform. And using that, using Bleacher and House of Highlights, which is a very young demo, using CNN.com. So yes, the campaigns are bigger. But we're one company. And so the ability to promote on HBO, on our own platforms, is a big savings. It's a big savings for us internationally. And we're deploying it. Great. Let's go to the last question, please. Your last question comes from the line of Matthew Thornton with Truist Securities. Please go ahead. Hey, good morning, everyone. Thanks for taking the question. Maybe a couple on Max, if I could.

As I said, on many nights now, we're getting 48%, 45%, close to 50% of all viewership, broadcast, cable. On any given night, we have 25% to 30% of viewership on the platform. And using that, using Bleacher and House of Highlights, which is a very young demo, using CNN.com. So yes, the campaigns are bigger. But we're one company. And so the ability to promote on HBO, on our own platforms, is a big savings. It's a big savings for us internationally. And we're deploying it. Great.

As I've said on many nights now we're getting $48 45 close to 50% of all viewership broadcast cable on any given night, we have 25% to 30% of viewership on the platform and using that using bleach or in house of highlights, which is a very young demo using CNN dot com.

So yes, yes were the campaigns are bigger, but we're one company and so the ability to promote on HBO on our own platforms is it big savings, it's a big savings for us internationally and we're deploying it.

Gunnar Wiedenfels: Let's go to the last question, please

Operator: Your last question comes from the line of Matthew Thornton with Truist Securities. Please go ahead.

Great. Let's go to the last question. Please.

Your last question comes from the line of Matthew Thornton with curious Securities. Please go ahead.

Matthew Thornton: Hey, good morning, everyone. Thanks for taking the question. Maybe a couple on Max, if I could

Hey, good morning, everyone. Thanks for taking the question maybe a couple on Max if I could.

David Zaslav: Could you update us just how you're thinking about migration later this month in terms of any friction as folks go from one app to the next? Just latest thoughts on any potential friction there and how you're managing that. Secondly, you talked about the overlap of Discovery+ users that also have HBO Max. What about those that don't and how you're attacking and trying to upsell those to the more higher price point Max service? Any color there? And then just a final one. I think this was mentioned on a prior question, but any thoughts around a FAST tier and just how to think about a FAST tier around Max help drive top of funnel, help drive advertising, help monetize deep library? Any incremental updated color there would be great as well. Thanks so much. Yeah. Thanks, Matthew.

Could you update us just how you're thinking about migration later this month in terms of any friction as folks go from one app to the next? Just latest thoughts on any potential friction there and how you're managing that. Secondly, you talked about the overlap of Discovery+ users that also have HBO Max. What about those that don't and how you're attacking and trying to upsell those to the more higher price point Max service?

Could you update us just how you're thinking about migration.

This market is in terms of any friction as folks go from one app to the Mac just latest thoughts on on any potential friction there and how youre managing that.

Secondly, you talked about the overlap of discovery plus users, but also have HBO Max what about those that don't and how youre attacking and trying to up sell those to the more the higher price point.

Any color there? And then just a final one. I think this was mentioned on a prior question, but any thoughts around a FAST tier and just how to think about a FAST tier around Max help drive top of funnel, help drive advertising, help monetize deep library? Any incremental updated color there would be great as well. Thanks so much.

Max service any color there and then just a final one I think this was mentioned on a prior question, but any thoughts around.

A fast here I'm just trying to think about the fact here around Max helped drive top of funnel will help drive advertising helped monetize deep library any any incremental updated color there would be great as well. Thanks so much.

Jessica Reif Ehrlich: Yeah. Thanks, Matthew.

David Zaslav: Just on the migration point first, a couple of things. Number one is, remember there has been no change in the billing process. So as it relates to revenue, there is no change and there's no migration as it relates to billing. So revenue and billing continues to be exactly the same, irrespective of whether somebody has actually "migrated," i.e., accepted the new app or downloaded the new app if they need to. Number two is, as we said at the April 12th event, there's a large portion of the base that will have to do absolutely nothing where the app will automatically convert. And upon streaming again, you will have accepted the terms of use and you'll be off and running.

Just on the migration point first, a couple of things. Number one is, remember there has been no change in the billing process. So as it relates to revenue, there is no change and there's no migration as it relates to billing.

Yes, Thanks, Matthew just on the migration 0.1st a couple of a couple of things number. One is remember there has been no change in the billing process. So as it relates to revenue. There is no change and there is no migration as it relates to billing so revenue and billing contains continues to be exactly the same irrespective of whether somebody has actually clinical migraine.

So revenue and billing continues to be exactly the same, irrespective of whether somebody has actually "migrated," i.e., accepted the new app or downloaded the new app if they need to. Number two is, as we said at the April 12th event, there's a large portion of the base that will have to do absolutely nothing where the app will automatically convert. And upon streaming again, you will have accepted the terms of use and you'll be off and running.

I accepted the new app or downloaded the new app, if they need to and number two is as we said at the April 12th event. There is a large portion of the base that will have to do absolutely nothing.

The app will automatically convert and upon streaming again, you'll have accepted the terms of use and youll be often running for the portion of the base that actually has to download redownload. We've done everything we can to make it as seamless as possible including.

David Zaslav: For the portion of the base that actually has to download, redownload, we've done everything we can to make it as seamless as possible, including not having to input. You'll basically be two clicks to get to streaming again, your video content. You have no need to, your username, password will all be migrated. Your watchlist, all your history will be migrated. And so we tried to make everything as possible. Now, inevitably in these processes, you're going to find some friction, but we think it's fairly limited in terms of the subscriber risk associated with the migration. And so we feel very good going into it. We've tested it. We're all ready for the migration. And the flip side is on then switching to the Discovery+.

For the portion of the base that actually has to download, redownload, we've done everything we can to make it as seamless as possible, including not having to input. You'll basically be two clicks to get to streaming again, your video content. You have no need to, your username, password will all be migrated. Your watchlist, all your history will be migrated. And so we tried to make everything as possible.

Not having to input youll basically two clicks to get to the streaming again your video content.

No need to your user name password will all be migrated your watch list.

All your history will be migrated and so we tried to make everything is possible now inevitably in these processes youre going to find some friction, but we think it's fairly limited in terms of the subscriber risk associated to the migration.

Now, inevitably in these processes, you're going to find some friction, but we think it's fairly limited in terms of the subscriber risk associated with the migration. And so we feel very good going into it. We've tested it. We're all ready for the migration. And the flip side is on then switching to the Discovery+.

And so we feel very good going into it we've tested it we're all ready for the migration.

And.

The flip side is on then switching to the discovery pluses as Gunnar said, we do see about 4 million subs.

David Zaslav: As Gunnar said, we do see about four million subs, largely in the US, but there's some of that internationally as well, that overlap between the two services. Obviously, we're going to be doing everything we can to upsell those that are not subscribed. As we said again, the flip side is we're not going to be too in their face about it. At the end of the day, if people want to stay subscribed to Discovery+, and that's the environment they prefer, that business by itself is profitable, and we will continue to maintain it and serve them there. We will, over time, initially through marketing efforts, try and see if we can get them to come in and sample it. We'll have offers that incentivize them to sample it for some period of time at favorable economics.

As Gunnar said, we do see about four million subs, largely in the US, but there's some of that internationally as well, that overlap between the two services. Obviously, we're going to be doing everything we can to upsell those that are not subscribed. As we said again, the flip side is we're not going to be too in their face about it.

Largely in the U S. But there is some of that internationally as well that overlap between the two services.

And obviously, we're going to be doing everything we can.

To upsell those that are not subscribers, but as we said again.

The flip side is we're not going to be.

Two in their face about it at the end of the day, if people want to stay subscribed to discovery, plus and Thats the environment they prefer.

At the end of the day, if people want to stay subscribed to Discovery+, and that's the environment they prefer, that business by itself is profitable, and we will continue to maintain it and serve them there. We will, over time, initially through marketing efforts, try and see if we can get them to come in and sample it. We'll have offers that incentivize them to sample it for some period of time at favorable economics.

That business by itself is profitable and we will continue to maintain it and serve them there, but we will over time initially through marketing efforts try and see if we can get them to come in and sample. It will have offers that incentivize them to sample. It for some period of time at favorable economics.

David Zaslav: And we'll see how successful we can be in upgrading them. Yeah. Oh, on FAST. So look, on FAST, we always believe in what we call a hybrid strategy, which is ultimately, first and foremost, kind of what we call channel syndication, which is ultimately we realize that the platforms and the distributors out there, there are many who have the scale and the size, and we want to get our channel portfolio out there and viewed. And since it's an audience aggregation and advertising business, we've already gotten out with Roku and Tubi, and we've been very pleased with the initial success with a very small, but a handful of channels that we have out there already. We will continue to look to see if we can increase that volume, to your point, for a second, third, fourth monetization windows for certain content.

And we'll see how successful we can be in upgrading them.

And we will see how successful we can be and upgrading them.

David Zaslav: Yeah. Oh, on FAST. So look, on FAST, we always believe in what we call a hybrid strategy, which is ultimately, first and foremost, kind of what we call channel syndication, which is ultimately we realize that the platforms and the distributors out there, there are many who have the scale and the size, and we want to get our channel portfolio out there and viewed.

Thanks Al.

Yes.

Oh on fast.

So look on fast we always believed in a hybrid what we call a hybrid strategy, which is ultimately first and foremost kind of what we call channel syndication, which is ultimately we realize that the platforms and the.

Distributors out there.

Many who have the scale and the size that we want to get our channel portfolio out there and viewed as an audience aggregation and advertising business, we've already gotten out with Roku and <unk> and we've been very pleased with the initial success with a very small, but a handful of channels that we have out there already we will continue to look to see if we can increase that volume.

And since it's an audience aggregation and advertising business, we've already gotten out with Roku and Tubi, and we've been very pleased with the initial success with a very small, but a handful of channels that we have out there already. We will continue to look to see if we can increase that volume, to your point, for a second, third, fourth monetization windows for certain content.

To your point for a second third fourth monetization windows for certain content.

David Zaslav: And then we will continue to explore the owned and operated strategy. And at some point in time, longer term, we do see this opportunity for this WBTV brand and platform to exist in an owned and operated environment. I think at some point, that'll be dovetailed with the state of the advertising business, and we want to make sure we come to market at the right time when the demand is sufficient. But we will continue to execute this hybrid strategy of syndicated channels initially, and then over time, at the right time, launch our own service. Great. I think that's it. Thank you very much for joining, and we will speak with you soon. Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines.

And then we will continue to explore the owned and operated strategy. And at some point in time, longer term, we do see this opportunity for this WBTV brand and platform to exist in an owned and operated environment. I think at some point, that'll be dovetailed with the state of the advertising business, and we want to make sure we come to market at the right time when the demand is sufficient. But we will continue to execute this hybrid strategy of syndicated channels initially, and then over time, at the right time, launch our own service.

And then we're continuing to explore the owned and.

Operated strategy.

And at some point in time longer term, we do see this opportunity for this WB TV.

Brand and platform to exist in an owned and operated environment I think at some point that'll be dovetailed with the state of the advertising business and we want to make sure we come to market at the right time when the demand is sufficient.

We will continue to execute this hybrid strategy of syndicated channels initially and then over time at the right time.

Gunnar Wiedenfels: Great. I think that's it. Thank you very much for joining, and we will speak with you soon.

Our own service.

Great I think that's it thank you very much for joining in.

Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines.

We will speak with you soon.

Ladies and gentlemen. This concludes today's conference call you may now disconnect your lines.

Okay.

Q1 2023 Warner Bros Discovery Inc Earnings Call

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