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Time Warner Q3 rev up 5% to $6.6 billion

MUMBAI: US media conglomerate Time Warner has reported financial results for its third quarter ended 30 September 2015.

Revenues rose by five per cent to $6.6 billion. The company posted adjusted operating income of $1.8 billion and adjusted EPS of $1.25. Free cash flow totaled $2.9 billion in the first nine months of 2015. The company repurchased 41 million shares for $3.3 billion year-to-date through October 30, 2015

HBO: Revenues increased by five per cent ($63 million) to $1.4 billion, due to increases of 4 per cent ($44 million) in subscription revenues and 13 per cent ($19 million) in content and other revenues. Subscription revenues grew primarily due to higher domestic rates, partially offset by lower international revenues, which included the impact of the transfer to Turner of the operation of HBO’s basic cable network in India. The increase in content and other revenues primarily reflected higher domestic licensing revenues.

Adjusted Operating Income increased by 37 per cent ($139 million) to $519 million, reflecting higher revenues and lower expenses. The decrease in expenses was mainly due to lower restructuring and severance costs as well as decreased distribution and programming costs, partially offset by higher marketing and technology costs. Programming costs decreased by six per cent primarily reflecting lower acquired theatrical programming costs. The higher marketing and technology costs related to HBO Now, HBO’s stand-alone streaming service.

Operating income increased by 37 per cent ($139 million) to $519 million. In September, HBO received a record 43 Primetime Emmy Awards, the most of any network for the 14th consecutive year. HBO recently added Roku as a distributor for HBO Now and added support for streaming HBO Now to Google’s Chromecast and Amazon’s FireTV. In October, HBO Latin America Group announced plans to launch a new streaming version of HBO Go for broadband-only subscribers in Latin America and the Caribbean.

Time Warner chairman, CEO Jeff Bewkes said, “We had another very good quarter, with Revenues up 5% and strong growth in Adjusted Operating Income, which totaled $1.8 billion. Our revenue growth was led by Warner Bros. and Home Box Office, and illustrated how our investments in great content have been paying off in our traditional television businesses, as well as in newer areas such as videogames. In September, HBO received a record 43 Primetime Emmy Awards, the most of any network for the 14th consecutive year. That included 12 awards for Game of Thrones, setting a record for a series in a single year.

“Warner Bros. solidified its position as the leading producer of broadcast series on television with the debuts of ‘Blindspot’ and ‘Supergirl’ – the two most-watched new shows among adults 18- 49 this broadcast season. Supergirl represents one of the eight shows on television this season based on IP from DC Entertainment, which is also a driver behind the record year Warner Bros. is having in videogames. Through the first three quarters of 2015, Warner Bros. was the top videogames publisher in the U.S. At Turner, buoyed by our coverage of the Major League Baseball playoffs, TBS is the #1 ad-supported cable network in primetime among adults 18-49 year-to-date. Cartoon Network continued to gain share, ending the third quarter as the #1 ad-supported cable network in total day among kids 6-11. Adult Swim also stood out as ad-supported cable’s #1 total day network among adults 18-34 for the 30th consecutive quarter. And CNN continued to grow its primetime ratings across all key demographics in the quarter.

“Further demonstrating our continuing commitment to shareholder returns, so far this year we’ve returned $4.2 billion to our shareholders through share repurchases and dividends.”

Company revenues increased due to growth at Warner Bros. and Home Box Office, partially offset by higher inter-company eliminations and a decline at Turner. Adjusted Operating Income grew by 85 per cent to $1.8 billion due to growth across all operating divisions, reflecting the absence of programming charges incurred in 2014 at Turner and lower restructuring and severance charges across all segments, partially offset by higher inter-company eliminations. Revenues and Adjusted Operating Income included the unfavourable impact of foreign exchange rates of $290 million and $160 million, respectively, in the quarter. Operating income increased by 89 per cent to $1.8 billion.

Turner: Revenues decreased by two per cent ($48 million) to $2.4 billion, due to declines of 15 per cent ($18 million) in content and other revenues, one per cent ($17 million) in subscription revenues and one per cent ($13 million) in ad revenues. Content and other revenues decreased due to lower subscription video-on-demand revenues. The decline in subscription revenues was due to the impact of foreign exchange rates and a decline in US subscribers, partially offset by higher US rates and local currency growth at Turner’s international networks. Ad revenues decreased due to the impact of foreign exchange rates and the absence of Nascar programming, partially offset by local currency growth at Turner’s international networks. Domestic advertising was flat in the quarter.

Adjusted Operating Income increased by 206 per cent ($721 million) to $1.1 billion, as the decline in revenues was more than offset by lower expenses, including decreased programming costs and lower restructuring and severance costs. Programming costs decreased by 45 per cent primarily due to the absence of the prior year quarter’s $482 million of charges related to Turner’s decision to no longer air certain programming. Excluding these charges in the prior year, programming costs decreased in the high-single digits mainly due to the absence of Nascar programming. Operating income increased by 218 per cent ($735 million) to $1.1 billion.

Warner Bros.: Revenues increased by 15 per cent ($415 million) to $3.2 billion, reflecting higher video games and television licensing revenues, partially offset by the impact of foreign exchange rates, the absence of revenues from a patent license and settlement agreement in the prior year quarter and lower theatrical revenues. The increase in video games revenues was primarily due to the releases of Lego Dimensions and Mad Max, as well as carryover revenues from several titles, including Mortal Kombat X and Batman: Arkham Knight. Television licensing revenues benefited from the initial cable and off-network availability of ‘2 Broke Girls’ and the initial cable availability and subscription video-on-demand licensing of ‘Person of Interest’.

Adjusted Operating Income increased 61 per cent ($147 million) to $388 million, due to the increase in revenues, lower theatrical and video games valuation adjustments and decreased restructuring and severance costs, partially offset by higher print and advertising costs. Operating income increased by 62 per cent ($148 million) to $385 million.