Warner Bros. Discovery Sees Earnings Hit From Strikes Of Up To $500 Million This Year
The financial impact of ongoing actors and writers strikes has a number on it now, or one at least, as Warner Bros. Discovery said today it’s looking at a hit of $300 million to $500 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for 2023 due to the work stoppages.
In a filing this morning with the Securities and Exchange Commission, WBD said “it is expecting lower adjusted EBITDA for the full year in the range of $10.5 to $11 billion, reflecting the company’s assumption that adjusted EBITDA will be negatively impacted by approximately $300 to $500 million, predominantly due to the impact of the strikes.”
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Free cash flow goes the other direction. The company raised its free cash flow expectations for the full year to at least $5 billion. It said it expects to exceed $1.7 billion in free cash flow for the third quarter due to Barbie as well as incremental impact from strike-related factors.
The company led by CEO David Zaslav said in the SEC filing it
WBD “will continue to update its assumptions “based on the timing and any additional impacts of the eventual resolution of the strikes,” the company led by CEO David Zaslav said in the SEC filing. “WBD continues to prioritize and work diligently with other industry leadership to resolve the current WGA and SAG-AFTRA strikes in a manner that is fair and values the important work of, and partnership with, the writers and actors.”
Writers began picketing May 2. Actors joined on July 14.
WBD execs indicated on a qarterly earnings call in August that their full-year financial guidance assumed the strikes would be resolved by early September. But with no resolution in sight, it is revisiting and quantifying that guidance now.
“The Company noted on the earnings call that if the strikes were to continue through the end of the year, it expected incremental upside to free cash flow and incremental downside to adjusted EBITDA due to the strikes’ impact on timing and performance of the remainder of the 2023 film slate, as well as the Company’s ability to produce and deliver content. While WBD is hopeful that these strikes will be resolved soon, it cannot predict when the strikes will ultimately end. With both guilds still on strike today, the Company now assumes the financial impact to WBD of these strikes will persist through the end of 2023.”
Warner recently moved sequel Dune: Part Two from Denis Villeneuve off its November 3 theatrical release to March of 2024, as dates begin to shift. The studio is a major producer of television, most of which has been shut down even as the fall season looms.
Zaslav will be speaking at a Goldman Sachs media conference this week as will heads of AMPTP companies Netflix, Comcast and Paramount. CEO public comments have generally been pretty anodyne, and Wall Street has been focusing on cost savings from shuttered production. It will be interesting to see if and how the tone starts to shift heading into the fall, and if other studios will also start to revise earnings guidance. The earnings hit that WBD announced today is already baked in for 2023 — meaning it wouldn’t really change even if the strikes resolved soon.
More to come…
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