Discovery, Inc.

Welcome and thank you for standing by. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed and hold. Thank you for your patience. Once again, today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed and hold. Thank you and please continue to stand by. Music THE END Thank you. Thank you. Oh, my God. THE END THE END THE END THE END Ladies and gentlemen, thank you for standing by and welcome to the Discovery Incorporated Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of the speaker's presentation, there will be a question-and-answer session. Also, please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Andrew Slavin, Executive Vice President, Global Investor Strategy. Sir, you may begin.

Good morning, everyone. Thank you for joining us for Discovery's Q2 earnings call. Joining me today are David Zaslav, President and Chief Executive Officer, Gunnar Wiedenfels, Chief Financial Officer, and J.B. Perret, President and CEO, Discovery Networks International. You should have received our earnings release, but if not, feel free to access it on our website at www.corporate.discovery.com. On today's call, we will begin with some opening comments from David and Gunnar, and then we will open the call to take questions. 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, as well as statements concerning the expected timing, completion, and effects of a previously announced transaction between the company and AT&T relating to the WarnerMedia business. These statements are made based on management's current knowledge and assumptions about future events and about 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 important factors that could affect these expectations, please see our Form 10-K for the year ended December 31, 2020, and our subsequent findings made with the U.S. Securities and Exchange Commission. And with that, I'd like to turn the call over to David.

Good morning, everyone. And thank you for joining us for our second quarter earnings call. Discovery continues to deliver strong operating and financial performance, driven by healthy momentum across all our key segments, beginning with our core linear business, which continues to accelerate sequentially, underscoring the durability of our content categories and the overall strength of our brands. while simultaneously scaling our global streaming offerings, most importantly, Discovery+, which continues to have strong traction, underpinning total next-generation revenue growth of 130% year-over-year and $17 million total global paying direct-to-consumer subscribers at the end of the second quarter, and $18 million as of today. With momentum around the globe, most notably behind the strength of the Olympics, which we've launched on Discovery Plus in Europe in a number of markets. Or the Eurosport player with Discovery Plus has yet to launch. And we've had some fantastic traction thus far. We are excited about prospects for the second half of the year, as well as for the Beijing Olympics. More on all of that in a moment. The combination of continued strong execution across our core business while scaling our streaming platforms drove healthy top line growth and strong and free cash flow conversion supported by vigilance on costs. Gunnar and his team continue to do a terrific job leading transformation across the organization with an eye toward continued efficiency, particularly as we absorb investment spend to support the growth and rollout of Discovery+. and we delivered a meaningful sequential improvement in our investment losses as we lean into monetization and begin to see the benefits of scale from an expense base. In fact, this quarter, annualized next-generation revenue is $1.6 billion, and we see additional revenue growth ahead. In terms of the core, as you've heard from our peers, the industry just wrapped an incredibly healthy upfront, providing us with a level of visibility we have not seen in quite some time. John Steinloff and his team delivered top of peer performance and a record for our company, a testament to the programming and brand that viewers love, and that our advertising partners value, as well as our differentiated suite of products and platforms available to reach consumers in an otherwise increasingly fragmented marketplace. We achieved rates of change, inclusive of the stepped-up performance at Discovery Premier, that were well ahead of the peer group. Premier has proved to be a great success, a unique vehicle that packages first-run episodes from our most popular series and networks, in which sales more than doubled. Over 200 clients are now buying Premier. They enjoy ratings and reach that is equivalent or greater than broadcast prime, at a significant cpm discount you've heard me tout this as a true win-win and we keep driving this forward and clients love it moreover demand for our bouquet of digital properties across discovery plus our go apps vod and sites and social was robust advertisers continue to look for incremental reach beyond linear And with roughly half of the audience base for Discovery Plus being non-tabled households, the platform is hugely attractive to buyers. We look forward to additional product features and offerings to roll out throughout the year to drive further monetization. But what we are currently seeing is noteworthy. Advertisers are buying the targeting capabilities of our platform with innovative and intelligent solutions and healthy premiums to traditional linears. Internationally, advertising has also come back in a big way, driven by a number of key markets such as the UK, Italy, Germany, Poland, as well as a number of LATAM and APAC markets that resulted in all regions around the globe turning in an acceleration in traction throughout the quarter. Turning to Discovery+, we are really pleased with the cadence and monetization of the service. Supported by continued subscriber traction, and healthy ARPU, notwithstanding the seasonally slower summer period, only exacerbated by the post-COVID reopening. That said, we had healthy sequential improvement in paid subs quarter over quarter, with most of Discovery Plus' international runway still ahead. Here in the U.S., we continue to add to our distribution and platform footprint. Following last quarter's launch with Comcast, In the coming months, Discovery Plus will also be available to COPS subscribers across their Contour TV and Contour screen player platforms. Discovery Plus will also shortly be available on Vizio SmartCast, advancing our rollout to all major consumer platforms. As we've noted previously, the bulk of the 2021 Discovery Plus international market launches would be in the second half of this year, with key market launches such as Brazil, Canada, and the Philippines to come in the second half of the year. Vodafone successfully launched in July in the U.K. market for mobile customers, and we expect additional markets such as Spain, the Netherlands, and Italy to launch as planned following the migration of our front-end technology to our common global platform this fall. JB and his team have been deliberate and methodical in managing our international rollout to ensure the best consumer experience. This includes ensuring we have strong integrations with local partners and completing a major replatforming to get both our front-end and back-end technologies on one common platform. It is a complicated roadmap of engineering and commercial logistics, not to mention COVID challenges around the globe and some of our tech hubs. at the same time that we have been planning, producing, and delivering the Olympic Games from Tokyo. We continue to learn a lot as we go, in terms of what's working and what's not, with respect to marketing, branding, tech product and features, as well as distribution partners and platforms. We are very pleased with the metrics we look at to evaluate our position within the marketplace, consumer acceptance, role to pay, viewing time per active subscriber, churn, monetization, and so on. We provided an early glimpse across these metrics last quarter, and I'm pleased that we continue to track well against our internal plans and the momentum we are building as we look ahead to our exciting plans post-merger with WarnerMedia and HBO. Taken together, we could not be more excited about the possibilities ahead to serve consumers with the deepest and most compelling content offering in the world. Consumers want choice and simplicity. We believe that the combined company will be able to offer more of both. In a video market that could see more consumer selectivity as the market restores, we believe the combined company will be well positioned to compete in the global streaming marketplace. The regulatory process continues to move forward as planned, giving us confidence in our previously stated timeframe of mid-next year to close. And lastly, the Olympic Games in Tokyo, which, as I noted earlier, has been a very pleasant surprise during what can only be described as challenging circumstances. At this point, about halfway through, we've already doubled our total sub-games from the last Olympic Games in Pyeongchang, with nearly three-quarter of a billion minutes of Olympic content streamed, up over 18 times versus the last games. Like with the Winter Games, we've enjoyed some truly remarkable viewing shares in key markets, like the Nordics, in which our share of television viewing for certain sports has been upwards of 60% to 80%. And with outstanding traction with streaming across all markets, notably in the UK and Italy, which are newly launched markets for Discovery+. We are very excited about the upcoming Olympic Games in Beijing in early 2022. And then, of course, Paris in 2024, right in our backyard. These are truly hallmark, high-value branding events and are super funnels that drive awareness, viewing, and subscribers to our platforms. With that, I'd like to turn it over to Gunnar to take you through our financials, after which Gunnar, KB, and I look forward to taking your questions.