Silver Spring, MD – November 8, 2018: Discovery, Inc. (“Discovery” or the “Company”) (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the third quarter ended September 30, 2018.
“Our solid third quarter results demonstrate the strength of our brands and unmatched multi-platform distribution network, as we continue to position our broad suite of IP to maximize value and extend our global presence,” said David Zaslav, President and Chief Executive Officer for Discovery. “We are very pleased with how far we’ve come in the eight months since we closed our merger with Scripps Networks, highlighted by the acceleration of synergy generation and strong Adjusted OIBDA growth in the third quarter. Additionally, we continue to drive organic growth opportunities across our diverse portfolio, further positioning us for continued cash flow generation and additional value creation. We remain increasingly optimistic about the roadmap ahead of us as we drive forward with our plan to transform our Company.”
Third Quarter 2018 Results
Third quarter revenues of $2,592 million increased 57% on a reported basis compared with the prior year quarter. Excluding the impact of foreign currency fluctuations and the Scripps Networks Interactive (“Scripps Networks”), Motor Trend Group, LLC (“MTG”) and the Oprah Winfrey Network (“OWN”) transactions (collectively, “the Transactions”), revenues increased 1%, as a 3% increase in International Networks and a 2% increase in U.S. Networks were partially offset by a significant decrease in Education and Other revenues due to the sale of the education business on April 30, 2018. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, total company third quarter revenues increased 2%, as International Networks revenues increased 2% and U.S. Networks revenues increased 4%, partially offset by the significant decrease in Education and Other revenues.
Third quarter Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”) increased 82% to $1,044 million on a reported basis compared with the prior year quarter. Excluding the impact of the Transactions and foreign currency fluctuations, Adjusted OIBDA increased 9% compared with the prior year quarter, as International Networks increased 21% and U.S. Networks increased 6%. On a pro forma combined basis, excluding the impact of foreign currency fluctuations, third quarter Adjusted OIBDA increased 18%, as International Networks’ Adjusted OIBDA increased 27% and U.S. Networks Adjusted OIBDA increased 13%.
Third quarter net income available to Discovery (“DCI Net Income”) was $117 million, compared with $218 million in the prior year quarter, as improved operating results were more than offset by higher restructuring and other charges associated with the integration of Scripps Networks, higher tax expenses and higher interest expense. Diluted earnings per share decreased to $0.16 due to lower DCI Net Income. Adjusted Earnings Per Diluted Share (“Adjusted EPS”), which excludes the impact of amortization of acquisition-related intangible assets, net of tax was $0.52. Adjusted EPS excluding restructuring and other charges was $0.79, and included $190 million (or $0.27 per share) of after-tax restructuring and other charges.
Free cash flow increased to $907 million for the third quarter of 2018 as cash flow from operations increased to $931 million while capital expenditures of $24 million were consistent with the prior year quarter. Third quarter cash flow from operations increased primarily due to higher operating results due to the Transactions offset by higher content costs, restructuring costs and interest expense.
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