Warner Bros. Discovery, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Warner Brothers Discovery second quarter 2022 earnings conference call. At this time, all 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.

Good afternoon and welcome to Warner Brothers Discovery's Q2 earnings call. With me today is David Zaslav, President and CEO, Gunnar Wiedenfels, our CFO, and JB Perret, 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 important factors that could affect these expectations, please see our Form 10-K for the year ended December 31st, 2021. Our quarterly report on Form 10-Q for the quarter ended March 31st, 2022, filed with the U.S. Securities and Exchange Commission on April 26th, 2022. and our quarterly report on Form 10-Q for the quarter ended June 30, 2022, which is expected to be filed with the SEC on or about August 4, 2022, as well as our subsequent filings made with the SEC. A copy of our Q2 earnings release is available on our website at ir.wbd.com. We released a trending schedule with pro forma results and additional financial information, which also can be found on our website. And lastly, our discussion today will include an accompanying slide presentation, which following the call will be available on our website. And with that, let me turn the call over to David.

Hello, everyone, and thank you for joining us. We've had a very busy and productive four months since launching Warner Brothers Discovery, and today we want to provide you with an update on where we are and where we're headed. Among our top priorities have been combining the rich legacies of these two great organizations, building out our senior management team, and beginning to integrate the cultures into one global operating company. We've made significant progress on all fronts. Nearly our entire senior leadership team is in place. And I could not be more excited to continue locking arms with the exceptionally talented group of individuals that we've assembled from both legacy companies. Plus more recent additions like esteemed filmmakers Mike DeLuca and Pam Abdi, now at the helm of Warner Brothers Pictures Group, and a uniquely talented media operator, Luis Silberwasser, driving our leading global sports strategy. And just last week, we announced our new Chief of Diversity, Equity, and Inclusion, Asif Sadiq. Asaph previously served as head of diversity, equity, and inclusion international for WarnerMedia and is one of the most dynamic leaders in the diversity space. Since the close of the deal, the entire leadership team has been moving as quickly as possible to integrate key elements of our business, assess growth opportunities, and make important progress in our synergy capture and strategic planning. We've been able to dig deeper into the financials and have gained a much better, more complete picture of where we are and the path forward, including identifying some additional and unexpected challenges that have and will continue to require our focus and attention. The upside is that there is even more room for improvement and cost savings. At the same time, we're keeping a close eye on the many cross currents and headwinds at play in the macro economic environment, both here in the US and globally, including inflation, the threat of recession, and the complexities of today's geopolitical environment. In light of all these factors, we've had to make some additional adjustments, which we'll talk about. Gunnar will walk you through our financials and the path forward in a few moments. Suffice to say, we are more confident than ever in the strength of our position and believe we are on the right path to meet our strategic goals and really excel, both creatively and financially. Our long-term investment thesis is truly compelling, and we have great conviction in the opportunity ahead. Warner Brothers Discovery has the most powerful creative engine and bouquet of owned content in the world. as highlighted by our recent 193 Emmy nominations, more than any other media company. The fact is, there are only a handful of companies globally that can do what we do. And putting it all together, we believe no one does it better than us. Spanning HBO, Warner Brothers Film and Television Studios, CNN, our world-class sports business, and category-defining lifestyle and nonfiction content engines. Our asset mix, one of the most complete and diversified in the industry, uniquely positions us to drive a balanced approach to creating long-term value for shareholders. It represents the full entertainment ecosystem and an ability to serve consumers across the entire spectrum of offerings, from premium pay to linear and free-to-air, theatrical to streaming. This was the driving force to create this company over a year ago, Our objective was not only to be one of the top global streaming companies, but also a media company able to drive financial returns by distributing our content on every platform. And our conviction has not changed. While we're still in the very early stages and helped by the first wave of our Synergy initiatives, we will have repaid $6 billion in debt by the end of August. And we have implemented initiatives leading to $1 billion in run rate synergy over the next 12 months with at least an additional $2 billion in the works as part of our cost synergy plan. We did very well at the upfront and believe we have meaningfully outperformed our peers. As I said at our presentation, we see ourselves as essentially the fifth broadcast network due to our unparalleled portfolio. and our low to mid-teen CPM increases are nearly 6 billion in commitments, clearly demonstrates that advertisers now view us exactly that way. We offer our partners the most complete portfolio of live sports and news, lifestyle and entertainment, and our average share of viewership outside of the football season exceeds 25%. On some nights, we're bigger than NBC, ABC, CBS, and Fox combined. Well, there's a lot of uncertainty in the economic backdrop. This is a strong proof point for the value we bring to the table and our ability to improve monetization over time. In many ways, we're just getting started and have really only begun to scratch the surface with respect to the potential upside and believe we'll make even more headway in the next two to three years. At every stage of this endeavor, as we pursue opportunities and tackle challenges, build and grow our business, we will be guided by three strategic priorities that will inform all of our planning and decision making. First, we will seek to attract the best storytellers and use our unparalleled creative engine, franchises, and brands to produce the most compelling and diverse content offering in the world. We are home to many of the most iconic brands and franchises in the history of entertainment. Batman, Superman, Wonder Woman, Harry Potter, Looney Tunes, Hanna-Barbera, Game of Thrones, CNN, HBO, HGTV, Discovery, Warner Brothers Pictures, Warner Brothers Television, and many, many more. The opportunity this presents is truly unmatched. We're also the preeminent maker and seller of content in the world. And going forward, we will continue to invest smartly in content. in ways that will help us to grow, achieve greater market share, and have a bigger impact. Some of the content we create will be distributed on our platforms, like the highly anticipated House of the Dragon, premiering on HBO Max later this month. And some will air on other platforms, such as Ted Lasso and Abbott Elementary. Our focus is on making great content, content that people want to watch and will pay for. As I've said, it's not about how much, it's about how good. Owning the content that really resonates with people is much more important than just having lots of content. In other words, at a time when almost every piece of content ever made is available to consumers across any number of free and paid services, curation, quality, and brands have never been more important. And that is what we do best. When the measure is who's got the best stuff, no one has a better hand than we do. Second, we will maximize the reach, engagement and overall value of our content to a broad distribution and monetization strategy. Our job is to tell great stories and to bring them to as wide ranging an audience as possible in as many ways as possible. and to deliver the greatest viewing experience possible. Certainly, technology plays a big role in this, and we still have a lot to learn, but it's equally important that we be flexible and agile, able to respond to ever-changing consumer preferences. As the maker and owner of the largest and most complete library of content in the world, we cover more surface area than almost any other media company, theatrical, streaming, Linear, cable, free-to-air, gaming, consumer products and experiences, our own platforms, others' platforms. And we have no intention of being beholden to any one in particular or to a specific business model. Simply put, we are open for business. There's been a lot of experimentation in our industry, and we are all smarter for it. At Warner Brothers Discovery, we believe strongly in the importance of preserving optionality and driving returns through a strategic mix of distribution and windowing options. For example, we will fully embrace theatrical, as we believe it creates interest and demand, provides a great marketing tailwind, and generates word of mouth buzz as films transition to streaming and beyond. When you're in theaters, the value of the content and the overall viewing experience is elevated. Then when the same content moves to PVOD and then streaming, it is elevated again. As films move from one window to the next, their overall value is elevated, elevated, elevated. We saw this clearly demonstrated with The Batman and Elvis. We have a different view on the wisdom of releasing direct-to-streaming films, and we have taken some aggressive steps to course-correct the previous strategy. With respect to streaming, our main priority right now is launching an integrated SVOD service. And in a few moments, JB will talk more about the strategy and some of the key building blocks and milestones as we bring HBO Max and Discovery Plus together under one offering. Our streaming strategy has evolved over the past year and really reflects the importance of, rather than the dependence on, this segment of our global content monetization plans. I am pleased with the work to date and the progress we continue to make on this front. And in the spirit of optimization, once our SVOD service is firmly established in the market, we see real potential and are exploring the opportunity for a fast or free ad-supported streaming offering that would give consumers who do not want to pay a subscription fee access to great library content, while at the same time serving as an entry point to our premium service. We will talk to you more about our potential plans at our Investor Day, which is planned for the end of the year. I'm also pleased to announce today that we have extended our relationship with AT&T making them a trusted partner in the distribution of HBO Max as part of their service offerings. This is great news for our business as it ensures that even more people will have access to our world-class and award-winning content. This leads to our third strategic priority, and that is to operate as one company with one mission, to be the premier media and entertainment leader globally. We believe the best way to maximize the value of our company is by operating our businesses as a combined enterprise rather than as a series of separate, siloed, and unconnected business units. HBO, Warner Brothers Pictures, Warner Brothers Television, CNN, our U.S. networks, sports, we are stronger together and we're making meaningful progress in operating our businesses as one team. We also have a great ability to promote, advertise and introduce new products and services enterprise wide. And we intend to take full advantage of these capabilities. You saw this with the successful rollout of Elvis across all of our platforms, and you're seeing it now ahead of the launch of House of the Dragon. We're employing every capability at our disposal. It is the biggest campaign in HBO's history, and it's already paying dividends. Rewatching of the original Game of Thrones is up dramatically on HBO Max. We're also going to be opportunistic about the way we grow our business in the future, whether by improving existing products or services to enhance and personalize the consumer experience, introducing new ones, or expanding into new markets globally with particular focus on how to scale smartly with an eye on sustainable free cash flow. even during periods of incremental reinvestment. We see ample opportunity to drive significant efficiencies from further integration and transformation, which Gurner will take you through. It's a foundational tenant of how we will operate and manage, the byproduct of which will be significant free cash flow generation and growth. So, our three strategic priorities are to create the most compelling and diverse content offering in the world, maximize its reach, engagement, and value through a broad distribution and monetization strategy, and operate as one company with one mission, to be the premier media and entertainment leader globally. In an industry as dynamic as ours, we are best positioned for success. We have everything we need to thrive, creatively and financially, including the greatest and most popular franchises and IP, the most diverse collection of global media brands and assets, the ability to generate awareness and excitement for our products across our own various platforms, a strong leadership team, and the most talented creatives. While we're still in the early innings, I couldn't be more excited about where we're headed as a company. As I said, we're open for business. And if you're in this business, this is the place to be. We look forward to sharing lots more with you at our investor day at the end of the year. And with that, I'll turn it over to JB, and he'll walk you through the details of our SVOD strategy.