UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-34177

Warner Bros. Discovery, Inc.

(Exact name of registrant as specified in its charter)

Delaware	35-2333914
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
230 Park Avenue South	10003
New York, New York	(Zip Code)
(Address of principal executive offices)

(212) 548-5555

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbols	Name of Each Exchange on Which Registered
Series A Common Stock	WBD	The Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  o

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  ý    No  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ý

Total number of shares outstanding of each class of the Registrant’s common stock as of October 21, 2022:

Series A Common Stock, par value $0.01 per share 2,428,396,015 

WARNER BROS. DISCOVERY, INC.

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION.
ITEM 1. Unaudited Financial Statements.
Consolidated Statements of Operations.	4
Consolidated Statements of Comprehensive (Loss) Income.	5
Consolidated Balance Sheets.	6
Consolidated Statements of Cash Flows.	7
Consolidated Statements of Equity.	8
Notes to Consolidated Financial Statements.	10
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	46
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	69
ITEM 4. Controls and Procedures.	69
PART II. OTHER INFORMATION.
ITEM 1. Legal Proceedings.	70
ITEM 1A. Risk Factors.	70
ITEM 6. Exhibits.	71
SIGNATURES.	73

3

PART I. FINANCIAL INFORMATION

ITEM 1. Unaudited Financial Statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in millions, except per share amounts)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenues:
Advertising	$	2,042	$	1,453	$	6,239	$	4,496
Distribution	4,990		1,328		11,180		3,898
Content	2,531		352		4,918		564
Other	260		17		472		46
Total revenues	9,823		3,150		22,809		9,004
Costs and expenses:
Costs of revenues, excluding depreciation and amortization	5,627		1,529		13,488		3,553
Selling, general and administrative	2,589		944		7,167		2,947
Depreciation and amortization	2,233		341		5,024		1,043
Restructuring and other charges	1,521		7		2,559		29
Asset impairment and loss (gain) on disposition and disposal groups	43		—		47		(72)
Total costs and expenses	12,013		2,821		28,285		7,500
Operating (loss) income	(2,190)		329		(5,476)		1,504
Interest expense, net	(555)		(159)		(1,219)		(479)
Loss from equity investees, net	(78)		(9)		(135)		(20)
Other (expense) income, net	(28)		72		411		245
(Loss) income before income taxes	(2,851)		233		(6,419)		1,250
Income tax benefit (expense)	566		(36)		1,201		(144)
Net (loss) income	(2,285)		197		(5,218)		1,106
Net income attributable to noncontrolling interests	(21)		(32)		(44)		(116)
Net income attributable to redeemable noncontrolling interests	(2)		(9)		(8)		(22)
Net (loss) income available to Warner Bros. Discovery, Inc.	$	(2,308)	$	156	$	(5,270)	$	968
Net (loss) income per share allocated to Warner Bros. Discovery, Inc. Series A common stockholders:
Basic	$	(0.95)	$	0.24	$	(3.00)	$	1.47
Diluted	$	(0.95)	$	0.24	$	(3.00)	$	1.46
Weighted average shares outstanding:
Basic	2,428		589		1,775		588
Diluted	2,428		663		1,775		665
The accompanying notes are an integral part of these consolidated financial statements.

4

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited; in millions)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Net (loss) income	$	(2,285)	$	197	$	(5,218)	$	1,106
Other comprehensive (loss) income adjustments, net of tax:
Currency translation	(690)		(144)		(1,277)		(203)
Derivatives	24		12		(12)		137
Comprehensive (loss) income	(2,951)		65		(6,507)		1,040
Comprehensive income attributable to noncontrolling interests	(21)		(32)		(44)		(116)
Comprehensive income attributable to redeemable noncontrolling interests	(2)		(9)		(8)		(22)
Comprehensive (loss) income attributable to Warner Bros. Discovery, Inc.	$	(2,974)	$	24	$	(6,559)	$	902
The accompanying notes are an integral part of these consolidated financial statements.

5

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except par value)

	September 30, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	2,422	$	3,905
Receivables, net	6,669		2,446
Prepaid expenses and other current assets	3,581		913
Total current assets	12,672		7,264
Film and television content rights and games, net	28,288		3,832
Property and equipment, net	5,143		1,336
Goodwill	34,450		12,912
Intangible assets, net	46,744		6,317
Other noncurrent assets	8,752		2,766
Total assets	$	136,049	$	34,427
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,534	$	412
Accrued liabilities	10,197		2,230
Deferred revenues	1,688		478
Current portion of debt	1,257		339
Total current liabilities	14,676		3,459
Noncurrent portion of debt, net	48,612		14,420
Deferred income taxes	12,317		1,225
Other noncurrent liabilities	10,364		1,927
Total liabilities	85,969		21,031
Commitments and contingencies (See Note 19)
Redeemable noncontrolling interests	318		363
Warner Bros. Discovery, Inc. stockholders’ equity:
Series A common stock: $0.01 par value; 10,800 and 0 shares authorized; 2,658 and 0 shares issued; and 2,428 and 0 shares outstanding	27		—
Preferred stock: $0.01 par value; 1,200 and 0 shares authorized, 0 shares issued and outstanding	—		—
Discovery Series A-1 convertible preferred stock: $0.01 par value; 0 and 8 shares authorized, issued and outstanding	—		—
Discovery Series C-1 convertible preferred stock: $0.01 par value; 0 and 6 shares authorized; 0 and 4 shares issued and outstanding	—		—
Discovery Series A common stock: $0.01 par value; 0 and 1,700 shares authorized; 0 and 170 shares issued; and 0 and 169 shares outstanding	—		2
Discovery Series B convertible common stock: $0.01 par value; 0 and 100 shares authorized; 0 and 7 shares issued and outstanding	—		—
Discovery Series C common stock: $0.01 par value; 0 and 2,000 shares authorized; 0 and 559 shares issued; and 0 and 330 shares outstanding	—		5
Additional paid-in capital	54,547		11,086
Treasury stock, at cost: 230 and 230 shares	(8,244)		(8,244)
Retained earnings	4,306		9,580
Accumulated other comprehensive loss	(2,119)		(830)
Total Warner Bros. Discovery, Inc. stockholders’ equity	48,517		11,599
Noncontrolling interests	1,245		1,434
Total equity	49,762		13,033
Total liabilities and equity	$	136,049	$	34,427
The accompanying notes are an integral part of these consolidated financial statements.

6

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)

	Nine Months Ended September 30,
	2022		2021
Operating Activities
Net (loss) income	$	(5,218)	$	1,106
Adjustments to reconcile net income to cash provided by operating activities:
Content rights amortization and impairment	11,441		2,735
Depreciation and amortization	5,024		1,043
Deferred income taxes	(2,105)		(502)
Preferred stock conversion premium	789		—
Share-based compensation expense	317		134
Gain on disposition	45		(72)
Equity in losses of equity method investee companies and cash distributions	178		57
Gain on sale of investments	(144)		(20)
Gain from derivative instruments, net	(479)		—
Other, net	142		(137)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables, net	(139)		44
Film and television content rights, games and payables, net	(8,612)		(2,578)
Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities	(182)		124
Foreign currency, prepaid expenses and other assets, net	401		(20)
Cash provided by operating activities	1,458		1,914
Investing Activities
Purchases of property and equipment	(623)		(273)
Cash acquired from business acquisition and working capital settlement	3,609		—
Proceeds from sales and maturities of investments	162		498
Investments in and advances to equity investments	(137)		(137)
Proceeds from derivative instruments, net	722		(102)
Purchases of investments	—		(103)
Other investing activities, net	9		87
Cash provided by (used in) investing activities	3,742		(30)
Financing Activities
Principal repayments of term loans	(6,000)		—
Principal repayments of debt, including premiums to par value	(327)		(574)
Distributions to noncontrolling interests and redeemable noncontrolling interests	(286)		(231)
Purchase of redeemable noncontrolling interests	—		(31)
Securitization receivables collected but not remitted	236		—
Borrowings under commercial paper program	885		—
Repayments under commercial paper program	(885)		—
Other financing activities, net	(93)		25
Cash used in financing activities	(6,470)		(811)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(122)		(69)
Net change in cash, cash equivalents, and restricted cash	(1,392)		1,004
Cash, cash equivalents, and restricted cash, beginning of period	3,905		2,122
Cash, cash equivalents, and restricted cash, end of period	$	2,513	$	3,126
The accompanying notes are an integral part of these consolidated financial statements.

7

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENT OF EQUITY

(unaudited; in millions)

	Discovery, Inc. Preferred Stock			Discovery, Inc. Common Stock			Warner Bros. Discovery, Inc. Common Stock			Additional Paid-In Capital		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Loss		Warner Bros. Discovery, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Par Value		Shares	Par Value		Shares	Par Value
December 31, 2021	12	$	—	736	$	7	—	$	—	$	11,086	$	(8,244)	$	9,580	$	(830)	$	11,599	$	1,434	$	13,033
Net income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests	—	—		—	—		—	—		—		—		456		—		456		16		472
Other comprehensive loss	—	—		—	—		—	—		—		—		—		(117)		(117)		—		(117)
Share-based compensation	—	—		—	—		—	—		53		—		—		—		53		—		53
Tax settlements associated with share-based plans	—	—		—	—		—	—		(38)		—		—		—		(38)		—		(38)
Dividends paid to noncontrolling interests	—	—		—	—		—	—		—		—		—		—		—		(192)		(192)
Issuance of stock in connection with share-based plans	—	—		3	—		—	—		19		—		—		—		19		—		19
Redeemable noncontrolling interest adjustments to redemption value	—	—		—	—		—	—		—		—		(3)		—		(3)		—		(3)
March 31, 2022	12	$	—	739	$	7	—	$	—	$	11,120	$	(8,244)	$	10,033	$	(947)	$	11,969	$	1,258	$	13,227
Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests	—	—		—	—		—	—		—		—		(3,418)		—		(3,418)		7		(3,411)
Other comprehensive loss	—	—		—	—		—	—		—		—		—		(506)		(506)		—		(506)
Share-based compensation	—	—		—	—		—	—		143		—		—		—		143		—		143
Conversion and issuance of common stock and noncontrolling interest in connection with the acquisition of the WarnerMedia Business	(12)	—		(739)	(7)		2,658	27		43,173		—		—		—		43,193		2		43,195
Dividends paid to noncontrolling interests	—	—		—	—		—	—		—		—		—		—		—		(31)		(31)
Issuance of stock in connection with share-based plans	—	—		—	—		—	—		3		—		—		—		3		—		3
Redeemable noncontrolling interest adjustments to redemption value	—	—		—	—		—	—		—		—		(1)		—		(1)		—		(1)
June 30, 2022	—	$	—	—	$	—	2,658	$	27	$	54,439	$	(8,244)	$	6,614	$	(1,453)	$	51,383	$	1,236	$	52,619
Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests	—	—		—	—		—	—		—		—		(2,308)		—		(2,308)		21		(2,287)
Other comprehensive loss	—	—		—	—		—	—		—		—		—		(666)		(666)		—		(666)
Share-based compensation	—	—		—	—		—	—		111		—		—		—		111		—		111
Tax settlements associated with share-based plans	—	—		—	—		—	—		(5)		—		—		—		(5)		—		(5)
Dividends paid to noncontrolling interests	—	—		—	—