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“The company now expects to exceed $1.7 billion in free cash flow for the third quarter of 2023, in part due to the strong performance of ‘Barbie’ as well as incremental impact from strike-related factors,” the entertainment giant says in a regulatory filing.
By Georg Szalai
Global Business Editor
Warner Bros. Discovery has lowered its 2023 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) forecast to $10.5 billion to $11.0 billion, a hit of $300 million to $500 million, “predominantly due to the impact of the strikes,” compared with the previously targeted low end of the $11.0 billion to $11.5 billion range.
In a regulatory filing Tuesday, the company — led by CEO David Zaslav, who has been very engaged in negotiating with Hollywood unions to end the work stoppage — didn’t detail when it expects the strikes could end, but updated its guidance that had previously assumed they would be resolved by early September, as management had mentioned during its second-quarter earnings conference call.
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“Uncertainty in the studio segment has increased with the dual strikes,” WBD CFO Gunnar Wiedenfels had said back then. “This may have implications for the timing and performance of the remainder of the film slate, as well as our ability to produce and deliver content. And while we are hoping for a fast resolution, our modeling assumes a return-to-work date in early September. Should the strikes run through the end of the year, I would expect several hundred million dollars of incremental upside to our free cash flow guidance and some incremental downside for adjusted EBITDA.”
In its Tuesday filing updating its expectations for the full year, the company said, “While WBD is hopeful that these strikes will be resolved soon, it cannot predict when the strikes will ultimately end. With both guilds still on strike today, the company now assumes the financial impact to WBD of these strikes will persist through the end of 2023.”
Here is a detailed look at WBD’s revised full-year 2023 guidance:
WBD’s filing said it was now “expecting lower adjusted EBITDA” for the full year in the range of $10.5 billion to $11 billion, “reflecting the company’s assumption that adjusted EBITDA will be negatively impacted by approximately $300 million-$500 million, predominantly due to the impact of the strikes.”
The company also raised its free cash flow expectations for the full year to at least $5 billion. “Further, the company now expects to exceed $1.7 billion in free cash flow for the third quarter of 2023, in part due to the strong performance of Barbie as well as incremental impact from strike-related factors,” the filing said.
The company is maintaining its expectation of achieving net leverage below 4.0x by the end of 2023, though, as well as its target gross leverage range of 2.5x-3.0x by the end of 2024.
“The company will continue to update its assumptions based on the timing and any additional impacts of the eventual resolution of the strikes,” the filing said.
It also highlighted: “WBD continues to prioritize and work diligently with other industry leadership to resolve the current WGA and SAG-AFTRA strikes in a manner that is fair and values the important work of, and partnership with, the writers and actors.”
Zaslav will speak at a Goldman Sachs investor conference in San Francisco on Wednesday, along with other Hollywood leaders.
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