Warner Bros. Discovery, Inc.

Ladies and gentlemen, welcome to the Warner Brothers Discovery third quarter 2025 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 now like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may now begin.

Good morning, and thank you for joining us for our Q3 earnings call. Joining me today from Warner Brothers Discoveries Management is David Zaslav, President and Chief Executive Officer, Gunnar Wiedenfels, Chief Financial Officer, and J.B. Perret, CEO and President, Global Streaming and Games. This morning, we issued our Q3 earnings release, shareholder letter, and trending schedule. And these materials can be found on our website, at www.wbd.com. Today's presentation 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 may include statements about the benefits of a separation transaction we announced in June, including future financial and operating results, the separate company's plans, objectives, expectations, and intentions, and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations from Warner Brothers Discovery's management and are subject to significant risks and uncertainties outside of our control that could cause actual results to differ materially from our current expectations. For additional information on factors that could affect these expectations, please see the company's filings with the U.S. 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. I will turn the call over to David for some brief remarks, after which we will take your questions. Though before doing so, I would kindly request that analysts limit their questions to topics related to our Q3 results in related business and financial topics. As noted in our shareholder letter, management will not be taking questions regarding our recent announcement of the board's evaluation of strategic alternatives for Warner Brothers Discovery. And with that, we'll turn it over to David.

Good morning, everyone. and thank you for joining us. When we formed Warner Brothers Discovery in April of 2022, three and a half years ago, our focus was on taking an incredible foundation of assets, world-class production capabilities, a century's worth of beloved storytelling franchises and IP, and a roster of some of the most iconic brands in media, and build them back up and transform Warner Brothers Discovery to thrive and win in the modern entertainment business. We built a creative culture that's attracting the best talent, and Warner Brothers Discovery is now where creatives want to be. Transforming and rebuilding Warner Brothers Discovery has been hard work. It has taken time and investment, and the process has not been without setbacks. But as you could see from our third quarter results, We're delivering on our promise and Warner Brothers Discovery is back global and stronger than ever. As we've said consistently, our transformation and rebuild has been guided by three principles. First, returning our studios to industry leadership. When we brought Warner Brothers Discovery together, our motion picture group had half a dozen or fewer movies on its slate. and was stuck in last place. We were determined to invest in the motion picture business and to rebuild and regain our place as the leading motion picture studio. Three and a half years later, we're there. Right now, we're leading the 2025 box office domestically, we're leading it internationally, and we're leading it globally. Not only are we in first place, but we're the only film studio to have crossed $4 billion and 2025 box office revenue thus far. And we've done it with a significant amount of original stories. That leadership was on full display in the third quarter. In Q3 alone, we successfully launched a new era for the DC Studios with Superman. We showed our exceptional horror genre expertise yet again with Weapons and The Conjuring Last Rites. which have together grossed more than $750 million in ticket sales. And we reinforced our commitment to producing great original works by great filmmakers with Paul Thomas Anderson's One Battle After Another. As we look ahead, 26 and 27 will be a robust and strong slate of motion pictures. I'm excited to announce that we are adding a new Gremlins film that will be released in theaters on November 19, 2027. Steven Spielberg returns to executive produce for Amblin Entertainment, and Chris Columbus is coming back to both direct and produce. We're also leading the industry in making television. Warner Brothers Television was recently recognized with 14 Emmy Awards, including Outstanding Drama Series for The Pit and nine Emmy wins for The Penguin. And WBTV remains Hollywood's leading supplier of television to both streaming and network platforms. Based on our results to date, we expect our studios to meaningfully exceed 2.4 billion in EBITDA this year. And we are making strong progress towards our $3 billion EBITDA goal. Our second guiding principle has been to scale HBO Max globally. Four years ago, HBO Max was a subscale streaming service that was primarily available in the US. We had a vision for HBO to be a global offering with broader and more local content, including sports in some regions, and that HBO could serve as a long-term profit engine. We are committed to that global vision. Today, HBO Max is available in more than 100 countries, We've added more than 30 million new streaming subscribers in three years. Our streaming segment will contribute more than 1.3 billion in EBITDA to our bottom line this year versus losing 2.5 billion three years ago. And we still have launches in some of the biggest markets in the world like Germany, Italy, the UK and Ireland coming in 2026. By the end of next year, we will have more than 150 million total streaming subscribers. We're delivering those results by investing hard and continuing to distinguish our offering through quality. I said in the beginning of this journey, it's not how much, it's how good. And that belief continues to guide everything we do. HBO really embodies that standard. And Casey and the team have done a superb job. Our successes earlier in the year with series like The Pit, White Lotus, and The Last of Us carried forward into Q3 with shows like Task and Gilded Age, both of which have averaged more than 10 million viewers per episode. HBO was recognized with 30 Emmy Awards this summer, tied for the most of any network or platform. Just recently, HBO debuted It, Welcome to Derry to a resounding audience response. The series premiere was the third most watched in HBO history, behind only The Last of Us and House of the Dragon, and has been watched by almost 15 million viewers in its first week. This is further evidence that in its long history, HBO has never delivered a steadier, more consistent pipeline of titles that subscribers circle in their calendars to watch. In Q3, we also saw movies like Sinners, Final Destination Bloodlines, and Superman arrive on HBO Max and drive strong engagement. With Weapons Now also available and The Conjuring Last Rites and One Battle After Another on their way in Q4, we will end 2025 with more Warner Bros. pay-one movies in HBO Max's top 20 titles than ever before after years of development the balance of content we envision for hbo max with warner brothers extensive tv library hbo original series and warner brothers pay one movies a one two three combination that's very powerful it has finally come into full form The value proposition for subscribers is only growing stronger. Having rebuilt Warner Brothers to the number one studio in the world is proving to be a big win, not just in the box office, but across HBO Max, where our great films are driving record engagement and growth globally well after its theatrical window. Finally, our third principle has been to optimize our linear networks. The headwinds facing the linear television business are well understood. But for all that's been said about the disruption confronting these businesses, not enough has been said about their resilience. Networks like TNT, TBS, CNN, Discovery, TLC, HGTV, Food Network, and many others continue to be indispensable to tens of millions of subscribers worldwide, which is why our networks remain such a powerful cash flow contributor. As our global networks investment is extending their brands digitally, we see a long and profitable runway ahead. Through it all, we've also dramatically reduced our debt, with our net leverage ratio now down to 3.3 times our EBITDA, including paying down $1 billion from our bridge loan facility in the third quarter. Thanks to the work we've done, we're on track to create two strong, well-capitalized businesses that can each create significant long-term shareholder value. The team is hard at work both on the separation transaction and on following the board's direction to evaluate strategic alternatives. You've all seen media reports as to potential interested parties, and I won't comment on anything specific, but it's fair to say that we have an active process underway. When you look at our films like Superman, Weapons, and One Battle After Another, the global reach of HBO Max, and the diversity of our network's offerings, we've managed to bring the best, most treasured traditions of Warner Brothers forward into a new era of entertainment and new media landscape. I'm thrilled with our progress in Q3 and welcome your questions.