Warner Bros. Discovery 2023 Earnings Impacted by Hollywood Strikes, Free Cash Flow Hits $5 Billion

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Highlights

• Warner Bros. Discovery increases 2023 free cash flow projection to $5 billion while cautioning about strike-related earnings setbacks.
• Ongoing Writers Guild of America and SAG-AFTRA strikes expected to reduce full-year EBITDA by $300-$500 million.
• Strong performance of the blockbuster Barbie film contributes positively to quarterly cash flow.

Warner Bros. Discovery (WBD) shares climbed following an optimistic update on free cash flow and debt reduction plans, which helped balance concerns over the financial impact of Hollywood labor strikes.

The entertainment powerhouse raised its 2023 free cash flow forecast to a minimum of $5 billion, anticipating over $1.7 billion in the current quarter, largely driven by the blockbuster success of Barbie.

WBD reaffirmed its commitment to reducing net leverage below four times by year-end 2023 and maintaining a gross leverage target between 2.5 and 3 times by the close of 2024.

Despite these positive indicators, the company disclosed in regulatory filings that the ongoing strikes by the Writers Guild of America (WGA) and the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) are projected to decrease full-year EBITDA by $300 million to $500 million. This adjustment lowers EBITDA expectations to a range of $10.5 billion to $11 billion, revising earlier assumptions that strikes would conclude by early September.

While the exact timeline for the strike resolution remains uncertain, Warner Bros. Discovery remains optimistic about a prompt end.

WBD shares have appreciated approximately 25% year-to-date, reflecting investor confidence amid challenges.

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