Warner Bros. Discovery, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Discovery, Inc. First Quarter 2020 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker today, Mr. Andrew Slavin, Executive Vice President, Global Investor Strategy. Sir, you may begin.

Good morning, everyone, and thank you for joining us for Discovery's first quarter 2020 earnings call. Joining me today are David Zaslav, our President and Chief Executive Officer, and Gunnar Wiedenfels, our Chief Financial Officer. You should have received our earnings release, but if not, feel free to access it on our website. On today's call, we will begin with some opening comments from David and Gunnar, and then we will open the call for questions. Before I start, I would like to remind you that comments today regarding the company's future business plans, prospects, and financial performance are forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are made based on management's current knowledge and assumptions about future events. and they involve risks and uncertainties that could cause actual results to differ materially from 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, 2019, and our subsequent filings made with the U.S. Securities and Exchange Commission. And with that, I'd like to turn the call over to David.

Good morning and welcome everyone to our Q1 earnings conference call. These are clearly unprecedented times as we confront the challenge unlike anything in recent history. I want to start by thanking frontline heroes everywhere for the life-saving work, especially here in New York, which has had a big battle on its hands. The doctors, nurses, EMTs, and all of the first responders. And on behalf of all of us at Discovery, We thank you. I am enormously proud of how our leadership team and employees have stepped up and pulled together during this time. They have done so with resilience, heart, and creativity. Their health and safety is everything to us at Discovery and to me. With meaningful populations across Asia, Latin America, and Europe, we have been at this for about three months. starting with office closures across Asia in January. I'm proud to say that our business has not missed a beat. Our early and continued investment in technology and automation and moving our broadcast and global infrastructure into the cloud is serving us very well at this time. We are extremely pleased with the level of productivity, the morale of our employee base, and how well we are able to serve viewers, advertisers, and our key partners, even as we work remotely. We continue to have great command and control across our businesses everywhere in the world. With so much macro uncertainty, there are obviously a lot of questions at this time about impacts on our business, the direction of the economy and markets, and the broader video ecosystem. All well-founded, and we are left with a number of unknowns ourselves. These uncertain times highlight the distinct characteristics of Discovery's business and the strategic advantages that set us apart. We have content leadership in core genres that are durable, popular, and differentiated. We have an efficient, low-cost content production model with global appeal that offers viewers and partners safe and positive brand environments. We have short production cycles that provide us with the ability to refresh our deep library quickly and efficiently. And we have demonstrated this with more than 50 self-shot shows turned around in weeks, sometimes days, including the extension of our TLC Jorgenot 90-Day Fiance self-quarantined. We have a deep and broad library that we can reach into to nourish and entertain a wide range of consumers globally. And we have revenues that are 40% long cycle. They're contracted affiliate fees and an asset mix largely insulated from some of the most near-term challenge segments, namely theme parks, cruise ships, scripted production, film studios, among others. Our core programming genres, trusted brands, and authentic real-life talent offer comfort, familiarity, and consistency to families and viewers around the world, something that is very relevant during this cultural moment. Our talent is enthusiastically creating new content at a time when most others can't. They are proudly taking us into their homes their kitchens, garages, gardens, or basement science labs. And this is truly what we and what our personalities are all about. We're about authentic, real-life storytellers. As I've always said, we are strongest when we are closest to real and in the moment with our viewers. We've never been so much so as we are right now. As an example, look at Reed Drummond, the pioneer woman from Food Network. Along with her band of kids that are filming her in her home, she is producing fresh episodes that audiences love. And she is having fun and relaxed around her family in her home. And it shows and resonates. She is nourishing viewers in a truly authentic way. A few weeks ago, Joanna Gaines took viewers into their home kitchen with a special in-the-kitchen quarantine episode on Food Network, which was mostly filmed by the Gaines kids. Close to 3 million viewers tuned in, the network's highest rated in-the-kitchen ever. And a little over a week ago, we leveraged DIY's newly expanded reach for a four-hour block to preview Magnolia Presents, a look back and look ahead. The special drew over two and a half million viewers, DIY's highest ever. But more tellingly, the 7 p.m. episode on DIY with Chip and Joanna was second only to CBS's 60 minutes in the time slot. It also helped to drive a meaningful uptick on go for DIY. We believe there is a huge and special appetite for Chip and Joe. two strong and authentic voices, and they are curators across television and streaming, supported by their combined almost 20 million followers on Instagram alone. Their inspiring focus on home, family, food, faith, and community has never been more resonant than now. We're seeing that with everything they come in contact with, including Joe's cookbooks, which were number one and two on the New York bestseller list last week. The audience reaction and viewership we have already seen for Chip and Joe, as well as their programming, gives us a real sense of confidence that we will be able to successfully launch Magnolia Network to a very large audience, both on cable and online. Viewers in general who are home around the world are indeed finding us. In April, our portfolio continued to outperform the marketplace with significant ratings growth, led in prime time in the U.S. by TLC, the number one cable network among women. And the function and utility of networks like the Food Network, HGTV, DIY, and the Cooking Channel has driven meaningful viewership gains. And we are proud to have supported the many global distribution partners that have asked to include a number of our channels in their free previews. for broader availability to their viewers around the world during this time. While this incremental distribution will mostly be temporary, viewership across networks like DIY are up over 100%, and many of our networks are reaching all-time highs. We believe that some of these viewers who have re-engaged or discovered our networks for the first time will continue to make us a part of their everyday viewing even after this moment passes. Internationally, our portfolio has enjoyed a strong uptick, both in linear and in our DTC NextGen initiatives. In Q1, we delivered the highest ever average audience for our total international portfolio, which was up 4% in overall share. Additionally, we saw best-ever viewership for a number of key brands in the quarter, including TLC, D-Max, HGTV, and Food Network, the latter driven by impressive growth in Italy and new network launches in Colombia, Peru, and Ireland. In terms of our streaming portfolio, D-Play, Motor Trend, TDN's Player, Go, and Food Network Kitchen are all seeing strong upticks. And Food Network Kitchen also took a meaningful step forward last week with a strong and expanded Amazon partnership, which is offering this first-of-its-kind food and cooking product to tens of millions of their Fire TV users, free for a year, courtesy of Amazon, along with marketing by Amazon on Fire TV. And it's off to a great start. Gruden will take you through the quarter and provide some color on the current state of play. though I'd like to offer some high-level thoughts on the industry and our place within it. Clearly, these are challenging times, and while there is significant uncertainty from a cyclical perspective, I don't subscribe to the view that consumption and behavioral patterns being shaped by the coronavirus will be permanently disrupted. The nearer term question is, of course, what is the magnitude and duration of this quarantine moment? And what will an eventual recovery look like? In many countries, operating trends may worsen before they get better. But given our unique reach and coveted demos, we like our portfolio, and we really like our hand. Anchored by strong verticals and endemic advertisers, we have a differentiated offering when the marketplace resumes to more normalized operating conditions. And the idea that we will emerge with significantly more share and having had for weeks or months people spending a lot more time with our channels, our characters, and our brands, we think will provide nothing but value. As for distribution, we naturally won't be immune from subscriber churn from pay TV, particularly in cases where it is driven by economic pressures. though we are as well represented as anyone across the OTT and Skinny Bundle landscape in the U.S. and around the world. And we continue to enhance our portfolio of global AVOD and SVOD content and lifestyle platforms. We've recently completed distribution renewals with some key partners in the U.S. for carriage of all of our channels. There was a time when many questioned whether in our renewals, we would be able to include all of our channels. We have, which underscores the value of our characters, our programming, and most importantly, our brands. We remain confident in both our financial and operational model, which is one of the most efficient in the industry. We drive an unparalleled conversion of Aorbita to free cash flow. And though there remain a number of moving pieces, We would expect this to continue. Gunnar and his team have been opportunistic and have done a great job managing our leveraged portfolio and maturities, which he will touch on shortly. Lastly, we've adopted and evolved as a leadership team. And I am proud of our performance. And I'm confident that we will emerge a stronger and more focused company when we resume business as usual. Before I turn the call over to Gunnar, I'd like to once again thank our hardworking employees for their dedication and resiliency in this most uncertain time to deliver an outstanding product on a global scale. And now I'd like to turn the call over to Gunnar.