Discovery Tops Q1 Profit Estimates On Advertising, Distribution Revenue Uptick

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Discovery, reporting financial results on a pro forma basis for the last time after closing the Scripps Networks Interactive deal, posted first-quarter numbers that met Wall Street expectations for revenue and beat them for earnings.

Revenue rose 17% (or 21% excluding the impact of foreign currency fluctuations) from the same period a year ago, reaching $2.7 billion.

Net income of $384 million swung into the black after a loss a year ago. On a per-share basis, income netted out at 53 cents a share, though after adjusting for non-recurring costs and restructuring costs, it came in at 87 cents per share. Wall Street analysts had forecast 79 cents.

Revenue at U.S. Networks increased 3%, with pro forma advertising revenues up 4%. The company said the uptick in ad sales was “primarily due to an increase in pricing and continued monetization of digital content offerings, partially offset by the impact of audience declines on our linear networks, in part driven by universe declines.” On the distribution side, revenue increased 4%, which Discovery chalked up to higher contract rates and additional carriage on streaming platforms toward the end of 2018. The company secured carriage on YouTube TV, which gives it access to customers of all major “skinny bundle” services.

As was the case for Comcast’s first-quarter results, the Winter Olympics had an impact on the quarter for Discovery, whose Eurosport division carries the Games in many European territories. On a pro forma, combined basis, international networks revenue declined 15%, in part because of comparisons with the Olympics-fortified year-earlier frame but also the sale of the company’s education business.

While the company’s networks are now carried by all “skinny bundle” services, with YouTube TV reaching a deal with Discovery in February, total subscribers to the entire Discovery portfolio slipped in the quarter. On a pro forma combined basis, total portfolio subscribers for March 2019 were 4% lower than March 2018, the company said. The number of subscribers to fully distributed networks dipped 1%.

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