Time Warner Beats Q2 Estimates On Growth In Subscriptions, Strong Studio Performance

August 3rd, 2017 by Trefis Team

TWX

Time Warner

Time Warner Inc (NASDAQ: TWX) reported better-than-expected second quarter results, as both its earnings and revenue beat consensus estimates.

The company’s revenue increased 5% year-over-year (y-o-y) to $7.3 billion, which beat consensus estimates by $30 million. This increase was primarily driven by growth across divisions, particularly HBO, as well as the cable TV and film businesses.
In addition, Time Warner’s adjusted operating income came in flat at $1.8 billion, and it also posted adjusted earnings of $1.33 per share, which was a 3% y-o-y increase.
The company’s free cash flow declined 22% y-o-y to $891 million in the second quarter.

Relevant Articles

In the second quarter, Turner segment revenue grew 3% y-o-y to $3.1 billion, primarily due to growth in subscription revenues, partially offset declines in advertising and content revenues. The segment’s operating income declined 7% y-o-y in the quarter, due to significantly higher programming costs, investments in new digital initiatives and higher marketing spend.
Turner’s subscription revenue increased 13% y-o-y in the second quarter, due to higher domestic subscription revenues of $174 million. However, the segment’s overall advertising revenue was down 6% y-o-y in the quarter due to a lower audience at Turner’s entertainment networks.

CNN saw solid ratings growth in the June quarter, as it witnessed the most-watched second quarter ever among both adults 25-54 and total viewers. In addition, the network also delivered its largest average prime time audience for any second quarter since 2003, in both total viewers and among the 25-54 group.
HBO’s revenues grew 1% y-o-y in the second quarter, driven by increased subscription revenues. This growth in subscription revenues was due to higher domestic revenues, reflecting higher contractual rates and increased subscribers, as well as higher international revenues, primarily reflecting growth in Europe. The segment’s operating income was up a strong 10% in the quarter, due to lower restructuring and severance costs.

Time Warner’s studio operations are widely diversified, with TV production, movies, electronic sales, video games and licensing. Warner Bros’ revenue increased 12% y-o-y, due to higher theatrical revenues, partially offset by declining television product revenues from television licensing. In addition, the segment’s operating income declined 28% y-o-y. The film studio collected $505 million at the U.S. box office during the June quarter, primarily led by the success of Wonder Woman, which has grossed nearly $400 million at the domestic box office against a production budget of $149 million.

In Q3, the company expects Turner’s total advertising revenues to decline in the low single-digits compared to the prior year quarter, primarily due to lower audience delivery at its domestic entertainment networks. At Warner Bros, the company expects difficult comparisons from the release of Suicide Squad in Q3 2016.
For the second half of 2017, the company expects Turner’s subscription revenue growth to increase at a similar rate as in the first half of 2017. For the full year, the company continues to expect its operating income to grow in the high single-digits.

Have more questions on Time Warner? Please refer to our complete analysis for Time Warner