TimeWarner Quarterly Results: August 2015
Time Warner Inc. (NYSE:TWX) today reported financial results for its second quarter ended June 30, 2015.
Chairman and Chief Executive Officer Jeff Bewkes said: “We had a very strong second quarter, with Revenues up 8% and Adjusted Operating Income growing 15% to a quarterly record of $1.9 billion. Our results were led by Turner and Warner Bros., and were achieved at a time when we’re investing aggressively to position the company for continued growth, including the successful launch of HBO NOW, our standalone domestic streaming service. HBO and its sister service Cinemax recently received a combined 131 Primetime Emmy nominations, with a record 126 for HBO - the 15th year in a row that HBO has led in nominations. In addition to being nominated for Outstanding Drama Series, Game of Thrones' fifth season set a new record for viewers of an HBO series.”
Mr. Bewkes continued: “At Turner, TNT and TBS ranked as the #1 and #2 ad-supported cable networks, respectively, in primetime among adults 18-49, and together with Adult Swim claimed the top 3 spots in primetime among adults 18-34. Cartoon Network was again the only top 3 kids network to grow its 6-11 audience during the quarter and claimed the #2 spot for the first time. And CNN grew primetime viewership in its key 25-54 demo 25% with the help of its award-winning original programming. Warner Bros. concluded a very successful upfront, with 62 programs slated for the upcoming television season, including 29 on broadcast networks. That includes a record 20 returning shows and makes Warner Bros. the top supplier of broadcast series again this year. In the quarter, Warner Bros.’ games business also shined with releases of Batman: Arkham Knight and Mortal Kombat X helping make it the top videogame publisher for the first half of the year. Reflecting our commitment to provide direct returns to shareholders, we have returned more than $2.6 billion in dividends and share repurchases year-to-date.”
Company Results
Revenues increased 8% to $7.3 billion due to growth across all operating divisions. Adjusted Operating Income grew 15% to $1.9 billion due to increases at Turner and Warner Bros., partially offset by a decline at Home Box Office. Operating Income increased 19% to $1.9 billion. Adjusted Operating Income and Operating Income margins were both 25% in the second quarter of 2015 compared to 24% and 23%, respectively, in the prior year quarter.
The Company posted Adjusted Diluted Income per Common Share from Continuing Operations (“Adjusted EPS”) of $1.25, up 28% from $0.98 for the year-ago quarter. Diluted Income per Common Share from Continuing Operations was $1.16 compared to $0.94 in the prior year quarter.
For the first six months of 2015, both Cash Provided by Operations from Continuing Operations and Free Cash Flow totaled $1.8 billion. As of June 30, 2015, Net Debt was $20.7 billion, up from $19.9 billion at the end of 2014, due to share repurchases, dividends and investments and acquisitions, partially offset by the generation of Free Cash Flow.
Refer to “Use of Non-GAAP Financial Measures” in this release for a discussion of the non-GAAP financial measures used in this release and the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Stock Repurchase Program Update
From January 1, 2015 through July 31, 2015, the Company repurchased approximately 24 million shares of common stock for approximately $2.0 billion. These amounts reflect the purchase of approximately 10 million shares of common stock for approximately $900 million since the amounts reported in the Company's first quarter earnings release on April 29, 2015. At July 31, 2015, approximately $2.5 billion remained available for repurchases under the Company’s stock repurchase program.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the three and six months ended June 30, by line of business (millions).
TURNER
Revenues increased 3% ($77 million) to $2.8 billion, benefiting from growth of 48% ($69 million) in Content and other revenues and 2% ($20 million) in Subscription revenues, partially offset by a decline of 1% ($12 million) in Advertising revenues. The increase in Content and other revenues was due to the licensing of select Turner original programming to Hulu. Subscription revenues grew due to higher domestic rates and local currency growth at Turner's international networks, partially offset by the impact of foreign exchange rates. Advertising revenues declined due to the impact of foreign exchange rates, partially offset by growth at Turner's domestic businesses and local currency growth at Turner's international networks. The increase in domestic advertising was due to growth at Turner's domestic news businesses and the 2015 NCAA Division I Men's Basketball Championship tournament, partially offset by lower delivery at certain domestic networks and the absence of NASCAR programming. Advertising revenue growth was also adversely impacted by fewer NBA playoff games in the quarter.
Adjusted Operating Income increased 20% ($190 million) to $1.1 billion, due to the increase in revenues and lower expenses, including lower programming costs. Programming costs decreased 9% primarily due to the absence of NASCAR programming as well as lower syndicated programming expenses as a result of the abandonment of certain programming in 2014.
Operating Income increased 22% ($201 million) to $1.1 billion.
TNT ranked as the #1 ad-supported cable network in primetime among total viewers and adults 18-34, 18-49 and 25-54 in the second quarter. TBS was the #2 ad-supported cable network in primetime among adults 18-49 and 25-54. For the 29th consecutive quarter, Adult Swim was ad-supported cable's #1 total day network among adults 18-34, and it was #1 among adults 18-49 in the second quarter. CNN continued to grow primetime ratings across all key demographics, up 24% and 25% for adults 18-49 and 25-54, respectively, in the second quarter. Cartoon Network was once again the only top 3 kids network to grow ratings in the quarter, and ranked #2 in total day ratings among kids 6-11 for the first time while increasing ratings in that demographic 10%. In addition, Ninjago ranked as the #1 program among all key boy demographics in the quarter.
HOME BOX OFFICE
Revenues increased 1% ($21 million) to $1.4 billion, due to an increase of 4% ($40 million) in Subscription revenues, partially offset by a decline of 7% ($19 million) in Content and other revenues. Subscription revenues grew due to higher domestic rates, partially offset by lower international revenue, which included the impact of the transfer to Turner of the operation of HBO’s basic cable network in India. The decrease in Content and other revenues reflected lower home entertainment revenues.
Adjusted Operating Income decreased 8% ($44 million) to $508 million, as the increase in revenues was more than offset by higher marketing and technology costs, primarily related to the launch of HBO NOW, HBO's stand-alone streaming service.
Operating Income decreased 7% ($40 million) to $508 million.
HBO and Cinemax received a combined 131 Primetime Emmy nominations in July. HBO received 126 nominations, the most for any network for the 15th year in a row and a record for HBO. HBO's nominations included Outstanding Comedy Series for Silicon Valley and VEEP, Outstanding Drama Series for Game of Thrones, and Outstanding Television Movie for Bessie, Hello Ladies: The Movie, and Nightingale. The fifth season of Game of Thrones averaged more than 20 million viewers, and was the most watched season of an original series in HBO's history. Through July 31, the first four episodes of the second season of True Detective averaged 11.6 million viewers and the first four episodes of Ballers averaged 8.3 million viewers, making Ballers HBO's most-watched debut of a half-hour show since 2009. HBO recently added Verizon, Amazon and Google as distributors for HBO NOW.
WARNER BROS.
Revenues increased 15% ($428 million) to $3.3 billion, reflecting higher videogames and television licensing revenues, partially offset by lower theatrical revenues and the impact of foreign exchange rates. The increase in videogames revenues was primarily due to the releases of Batman: Arkham Knight and Mortal Kombat X. Television licensing revenues benefited from the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld. Theatrical revenues decreased primarily due to lower worldwide television licensing revenues of theatrical product and a decline in home entertainment revenues due to the comparison against the release of The Hobbit: The Desolation of Smaug in the prior year quarter.
Adjusted Operating Income increased 46% ($108 million) to $344 million, due to the increase in revenues, partially offset by associated film and print and advertising costs, as well as higher theatrical valuation adjustments.
Operating Income increased 46% ($107 million) to $341 million.
For the first half of the year, Warner Bros. ranked as the top U.S. videogame publisher, and Mortal Kombat X was the #1 videogame. In July, Warner Bros. received 28 Primetime Emmy nominations across 11 series. Heading into the 2015-2016 television season, Warner Bros. is once again the #1 producer of shows for the broadcast networks, a position it has held for 12 of the past 13 seasons. Warner Bros. will have 29 shows on broadcast networks, 20 of which are returning series, the most in the company's history. In total, Warner Bros. will produce 62 shows for the 2015-2016 television season, including seven shows based on DC Entertainment intellectual property.
Continue Reading press release >>
Chairman and Chief Executive Officer Jeff Bewkes said: “We had a very strong second quarter, with Revenues up 8% and Adjusted Operating Income growing 15% to a quarterly record of $1.9 billion. Our results were led by Turner and Warner Bros., and were achieved at a time when we’re investing aggressively to position the company for continued growth, including the successful launch of HBO NOW, our standalone domestic streaming service. HBO and its sister service Cinemax recently received a combined 131 Primetime Emmy nominations, with a record 126 for HBO - the 15th year in a row that HBO has led in nominations. In addition to being nominated for Outstanding Drama Series, Game of Thrones' fifth season set a new record for viewers of an HBO series.”
Mr. Bewkes continued: “At Turner, TNT and TBS ranked as the #1 and #2 ad-supported cable networks, respectively, in primetime among adults 18-49, and together with Adult Swim claimed the top 3 spots in primetime among adults 18-34. Cartoon Network was again the only top 3 kids network to grow its 6-11 audience during the quarter and claimed the #2 spot for the first time. And CNN grew primetime viewership in its key 25-54 demo 25% with the help of its award-winning original programming. Warner Bros. concluded a very successful upfront, with 62 programs slated for the upcoming television season, including 29 on broadcast networks. That includes a record 20 returning shows and makes Warner Bros. the top supplier of broadcast series again this year. In the quarter, Warner Bros.’ games business also shined with releases of Batman: Arkham Knight and Mortal Kombat X helping make it the top videogame publisher for the first half of the year. Reflecting our commitment to provide direct returns to shareholders, we have returned more than $2.6 billion in dividends and share repurchases year-to-date.”
Company Results
Revenues increased 8% to $7.3 billion due to growth across all operating divisions. Adjusted Operating Income grew 15% to $1.9 billion due to increases at Turner and Warner Bros., partially offset by a decline at Home Box Office. Operating Income increased 19% to $1.9 billion. Adjusted Operating Income and Operating Income margins were both 25% in the second quarter of 2015 compared to 24% and 23%, respectively, in the prior year quarter.
The Company posted Adjusted Diluted Income per Common Share from Continuing Operations (“Adjusted EPS”) of $1.25, up 28% from $0.98 for the year-ago quarter. Diluted Income per Common Share from Continuing Operations was $1.16 compared to $0.94 in the prior year quarter.
For the first six months of 2015, both Cash Provided by Operations from Continuing Operations and Free Cash Flow totaled $1.8 billion. As of June 30, 2015, Net Debt was $20.7 billion, up from $19.9 billion at the end of 2014, due to share repurchases, dividends and investments and acquisitions, partially offset by the generation of Free Cash Flow.
Refer to “Use of Non-GAAP Financial Measures” in this release for a discussion of the non-GAAP financial measures used in this release and the reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Stock Repurchase Program Update
From January 1, 2015 through July 31, 2015, the Company repurchased approximately 24 million shares of common stock for approximately $2.0 billion. These amounts reflect the purchase of approximately 10 million shares of common stock for approximately $900 million since the amounts reported in the Company's first quarter earnings release on April 29, 2015. At July 31, 2015, approximately $2.5 billion remained available for repurchases under the Company’s stock repurchase program.
Segment Performance
The schedule below reflects Time Warner’s financial performance for the three and six months ended June 30, by line of business (millions).
TURNER
Revenues increased 3% ($77 million) to $2.8 billion, benefiting from growth of 48% ($69 million) in Content and other revenues and 2% ($20 million) in Subscription revenues, partially offset by a decline of 1% ($12 million) in Advertising revenues. The increase in Content and other revenues was due to the licensing of select Turner original programming to Hulu. Subscription revenues grew due to higher domestic rates and local currency growth at Turner's international networks, partially offset by the impact of foreign exchange rates. Advertising revenues declined due to the impact of foreign exchange rates, partially offset by growth at Turner's domestic businesses and local currency growth at Turner's international networks. The increase in domestic advertising was due to growth at Turner's domestic news businesses and the 2015 NCAA Division I Men's Basketball Championship tournament, partially offset by lower delivery at certain domestic networks and the absence of NASCAR programming. Advertising revenue growth was also adversely impacted by fewer NBA playoff games in the quarter.
Adjusted Operating Income increased 20% ($190 million) to $1.1 billion, due to the increase in revenues and lower expenses, including lower programming costs. Programming costs decreased 9% primarily due to the absence of NASCAR programming as well as lower syndicated programming expenses as a result of the abandonment of certain programming in 2014.
Operating Income increased 22% ($201 million) to $1.1 billion.
TNT ranked as the #1 ad-supported cable network in primetime among total viewers and adults 18-34, 18-49 and 25-54 in the second quarter. TBS was the #2 ad-supported cable network in primetime among adults 18-49 and 25-54. For the 29th consecutive quarter, Adult Swim was ad-supported cable's #1 total day network among adults 18-34, and it was #1 among adults 18-49 in the second quarter. CNN continued to grow primetime ratings across all key demographics, up 24% and 25% for adults 18-49 and 25-54, respectively, in the second quarter. Cartoon Network was once again the only top 3 kids network to grow ratings in the quarter, and ranked #2 in total day ratings among kids 6-11 for the first time while increasing ratings in that demographic 10%. In addition, Ninjago ranked as the #1 program among all key boy demographics in the quarter.
HOME BOX OFFICE
Revenues increased 1% ($21 million) to $1.4 billion, due to an increase of 4% ($40 million) in Subscription revenues, partially offset by a decline of 7% ($19 million) in Content and other revenues. Subscription revenues grew due to higher domestic rates, partially offset by lower international revenue, which included the impact of the transfer to Turner of the operation of HBO’s basic cable network in India. The decrease in Content and other revenues reflected lower home entertainment revenues.
Adjusted Operating Income decreased 8% ($44 million) to $508 million, as the increase in revenues was more than offset by higher marketing and technology costs, primarily related to the launch of HBO NOW, HBO's stand-alone streaming service.
Operating Income decreased 7% ($40 million) to $508 million.
HBO and Cinemax received a combined 131 Primetime Emmy nominations in July. HBO received 126 nominations, the most for any network for the 15th year in a row and a record for HBO. HBO's nominations included Outstanding Comedy Series for Silicon Valley and VEEP, Outstanding Drama Series for Game of Thrones, and Outstanding Television Movie for Bessie, Hello Ladies: The Movie, and Nightingale. The fifth season of Game of Thrones averaged more than 20 million viewers, and was the most watched season of an original series in HBO's history. Through July 31, the first four episodes of the second season of True Detective averaged 11.6 million viewers and the first four episodes of Ballers averaged 8.3 million viewers, making Ballers HBO's most-watched debut of a half-hour show since 2009. HBO recently added Verizon, Amazon and Google as distributors for HBO NOW.
WARNER BROS.
Revenues increased 15% ($428 million) to $3.3 billion, reflecting higher videogames and television licensing revenues, partially offset by lower theatrical revenues and the impact of foreign exchange rates. The increase in videogames revenues was primarily due to the releases of Batman: Arkham Knight and Mortal Kombat X. Television licensing revenues benefited from the second-cycle syndication of The Big Bang Theory and the subscription video-on-demand licensing of Seinfeld. Theatrical revenues decreased primarily due to lower worldwide television licensing revenues of theatrical product and a decline in home entertainment revenues due to the comparison against the release of The Hobbit: The Desolation of Smaug in the prior year quarter.
Adjusted Operating Income increased 46% ($108 million) to $344 million, due to the increase in revenues, partially offset by associated film and print and advertising costs, as well as higher theatrical valuation adjustments.
Operating Income increased 46% ($107 million) to $341 million.
For the first half of the year, Warner Bros. ranked as the top U.S. videogame publisher, and Mortal Kombat X was the #1 videogame. In July, Warner Bros. received 28 Primetime Emmy nominations across 11 series. Heading into the 2015-2016 television season, Warner Bros. is once again the #1 producer of shows for the broadcast networks, a position it has held for 12 of the past 13 seasons. Warner Bros. will have 29 shows on broadcast networks, 20 of which are returning series, the most in the company's history. In total, Warner Bros. will produce 62 shows for the 2015-2016 television season, including seven shows based on DC Entertainment intellectual property.
Continue Reading press release >>
No comments