Sep 7, 2023

Warner Bros. Discovery lowers 2023 earnings forecast by up to $500 million due to ongoing strike

Citing the ongoing writers' and actors' strike, Warner Bros. Discovery has lowered its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) forecast for 2023 to $10.5 billion to $11 billion, down $300 million to $500 million from its previous forecast.

The company's updated forecast was included in a regulatory filing with the Securities and Exchange Commission on Tuesday.

WBD had expected the WGA and SAG-AFTRA strikes to end in early September and based its earlier forecast on that date. This week's revised forecast was submitted without any indication of an end date, as the early September forecast turned out to be inaccurate.

According to the report,

WBD hopes these strikes will be resolved soon, but cannot predict when the strikes will ultimately end. With both guilds still on strike, the company currently assumes that the financial impact of these strikes on WBD will last until the end of 2023.

WBD has not indicated a new end date for the strikes, but claims that the company is working with other parties to end the strikes as soon as possible:

WBD has called the current WGA and SAG-AFTRA strikes fair and in a way that respects the important scriptwriters and actors' priorities and continues to work diligently with other industry leaders to resolve it in a way that respects their work and partnerships.

The WGA began picketing on May 2, and SAG-AFTRA joined on July 14. The studio last met with the Screenwriters Guild on August 22 and has yet to meet with SAG-AFTRA since the strike began.

In addition to updating its annual earnings forecast, WBD raised its full-year cash flow forecast to at least $5 billion, according to documents filed Tuesday. The company now expects free cash flow to exceed $1.7 billion in the third quarter of this year based on Barbie's strong box office performance and "increased impact from strike-related factors."

WBD has had to recalibrate many of its financial projections, but maintains its goal of net leverage below 4.0x by the end of 2023 and gross leverage in the 2.5x to 3.0x range by the end of 2024.

Given the uncertain nature of dual strike, other adjustments could be made. According to the filing, "the Company will continue to update its assumptions based on the timing of the final resolution of the strike and any additional impacts."