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Discovery Q2 net income up 43%
MUMBAI: Infotainment broadcaster Discovery has reported net income growth of 43 per cent to $408 million (increased 26 per cent excluding currency effects) for the second quarter ended 30 June 2016.
Revenues increased marginally by three per cent to $1.7 billion (increased by six per cent excluding currency effects). Diluted EPS increased by 50 per cent to $0.66 and Adjusted EPS increased by 45 per cent to $0.71 (increased 31 per cent excluding currency effects). The company has repurchased $377 million of stock.
International Networks’ revenues for the second quarter decreased by one per cent to $790 million and Adjusted OIBDA decreased by six per cent to $249 million. Changes in foreign currency exchange rates reduced second quarter international revenues and Adjusted OIBDA growth by four per cent and 10 per cent, respectively. Excluding currency effects and the impact of SBS Radio, total revenues were up by eight per cent.
Distribution revenues, excluding the impact of currency effects, grew by 10 per cent mostly due to higher affiliate rates in Northern Europe and CEEMEA as well as increased affiliate rates and subscribers in Latin America.
Ad revenues, excluding the impact of SBS Radio and currency effects, were up by five per cent, primarily due to higher volume and ratings in Southern Europe as well as higher pricing, ratings and volume in CEEMEA, partially offset by a decline in Northern Europe due to the impact of Brexit and lower ratings.
Operating expenses increased by nine per cent excluding the impact of SBS Radio and foreign currency exchange rates, primarily due to increased sports content and production costs. Excluding the impact of SBS Radio and foreign currency exchange rates, adjusted OIBDA increased by eight per cent, reflecting revenue growth partially offset by higher operating expenses.
“Discovery posted a solid quarter of growth and financial results by investing in premium and diversified content that fuels the passion of superfans on pay-TV, free-to-air, direct-to-consumer and digital platforms. Our differentiated portfolio of nonfiction, sports and children’s content in more than 220 markets positions Discovery for continued growth and shareholder value creation in the months and years to come,” said Discovery president, CEO David Zaslav.
Second quarter revenues growth happened as seven per cent growth at US Networks and 15 per cent growth at Education and Other was partially offset by a slight decline at International Networks, primarily due to currency effects and the impact of the SBS Radio disposition. Adjusted Operating Income Before Depreciation and Amortization (OIBDA) increased by four per cent to $706 million, as 10 per cent growth at US Networks was partially offset by a six per cent decline at International Networks, primarily due to currency effects.
Excluding currency effects, total company revenues and Adjusted OIBDA grew six per cent and eight per cent respectively, as changes in foreign currency exchange rates reduced revenue and Adjusted OIBDA growth by three per cent and four per cent, respectively. Excluding currency effects and the impact of the SBS Radio disposition, total company revenues increased by eight per cent and Adjusted OIBDA increased by 10 per cent.
Second quarter net income available to Discovery increased by 43 per cent to $408 million compared to $286 million for the second quarter of 2015, primarily due to improved operating results, currency-related transactional gains, a decrease in taxes and lower equity-based compensation, partially offset by a decline in income from equity investees, higher restructuring charges and higher interest expense.
Diluted earnings per share increased by 50 per cent to $0.66 due to higher DCI net income and lower shares outstanding. Adjusted Earnings Per Diluted Share (Adjusted EPS), which excludes the impact of amortisation of acquisition-related intangible assets, was up 45 per cent to $0.71 for the second quarter 2016 compared to $0.49 for the second quarter 2015. Adjusted EPS excluding currency effects increased by 31 per cent.
The company completed its sale of SBS Radio on 30 June 2015. Free cash flow decreased by four per cent to $301 million for the second quarter of 2016 as cash flow from operations declined slightly to $329 million and capital expenditures increased 56 per cent to $28 million due to the timing of capital expenditures throughout the year. Capital expenditures for year to date 2016 decreased by 17 per cent. Cash flow from operations declined slightly primarily due to improved operating performance and lower cash taxes more than offset by the timing of working capital. Free cash flow excluding currency effects declined by six per cent for the second quarter. Free cash flow is defined as cash provided by operating activities less purchases of property and equipment.
The US: US Networks’ revenues in the second quarter of 2016 increased by seven per cent to $873 million, driven by an eight per cent distribution growth and five per cent ad growth. Distribution revenue growth was primarily driven by higher rates, partially offset by slight declines in subscribers. Ad revenues increased by five per cent primarily due to higher pricing and inventory management, partially offset by lower delivery.
Operating expenses increased by three per cent mainly due to higher content amortization. Adjusted OIBDA increased by 10 per cent to $544 million, as higher revenues were partially offset by higher operating expenses.
Education and Other: Revenues for the second quarter increased by $6 million primarily due to higher external production deliveries at the Studios production business. Adjusted OIBDA remained relatively consistent primarily due to higher external Studios production deliveries, offset by additional investments in Education Techbooks.