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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-23 · 225 added, 218 removed, 438 unchanged (50% of the section changed)

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BUSINESS OVERVIEW

On April 8, 2022, Discovery, a global media company that provides content across multiple distribution platforms, including linear, free-to-air, and broadcast television, authenticated GO applications, digital distribution arrangements, content licensing arrangements, and DTC subscription products, completed its Merger with the WM Business of AT&T and changed its name from “Discovery, Inc.” to “Warner Bros.

On April 8, 2022, Discovery, a global media company that provides content across multiple distribution platforms, including linear, free-to-air, and broadcast television, authenticated GO applications, digital distribution arrangements, content licensing arrangements, and DTC subscription products, completed its Merger with the WarnerMedia Business of AT&T and changed its name from “Discovery, Inc.” to “Warner Bros.

Discovery, Inc.” On April 11, 2022, our shares started trading on Nasdaq under the trading symbol WBD.

(See Note 3 and Note 4 to the accompanying consolidated financial statements.)

Discovery is a premier global media and entertainment company that provides audiences with a differentiated portfolio of content, brands and franchises across television, film, streaming, and gaming.

Some of our iconic brands and franchises include Warner Bros.

Discovery is a leading global media and entertainment company that creates and distributes a differentiated and comprehensive portfolio of content and products across television, film, streaming, interactive gaming, publishing, themed experiences, and consumer products through brands including:

Discovery Channel, Max, CNN, DC Studios, TNT Sports, HBO, Food Network, TLC, TBS, Warner Bros.

Motion Picture Group, Warner Bros.

Television Group, DC, HBO, HBO Max, Max, discovery+, CNN, Discovery Channel, HGTV, Food Network, TNT Sports, TBS, TLC, OWN, Warner Bros.

Games, Batman, Superman, Wonder Woman, Harry Potter, Looney Tunes, Hanna-Barbera, Game of Thrones, and The Lord of the Rings.

Television Group, Warner Bros.

Games, Adult Swim, Turner Classic Movies, and others.

For a discussion of our global portfolio see our business overview set forth in Item 1, “Business” in this Annual Report on Form 10-K.

In connection with the Merger, we have announced and taken actions to implement projects to achieve cost synergies for the Company.

We finalized the framework supporting our ongoing restructuring and transformation initiatives during the year ended December 31, 2022, which includes, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs.

We expect that we will incur approximately $4.1 - $5.3 billion in pre-tax restructuring charges, of which we have incurred $4.2 billion as of December 31, 2023.

Of the total expected pre-tax restructuring charges, we expect total cash expenditures to be $1.0 - $1.5 billion.

We incurred $0.5 billion of pre-tax restructuring charges during the year ended December 31, 2023 related to this plan.

While our restructuring efforts are ongoing, the restructuring program is expected to be substantially completed by the end of 2024.

We finalized the framework supporting our ongoing restructuring and transformation initiatives during the year ended December 31, 2022, which included, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs.

At that time, we expected to incur approximately $4.1 - $5.3 billion in pre-tax restructuring charges, of which we have incurred $4.7 billion as of December 31, 2024.

Of the total expected pre-tax restructuring charges, we expected total cash expenditures to be $1.0 - $1.5 billion.

While our restructuring efforts are ongoing, the Merger-related restructuring program was substantially completed at the end of 2024.

During 2023, we initiated a strategic realignment plan associated with our Warner Bros.

Pictures Animation group and during 2024, we initiated two additional restructuring initiatives;

an organizational and personnel restructuring plan and a restructuring initiative associated with our Warner Bros.

As of December 31, 2024, we classified our operations in three reportable segments:

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RESULTS OF OPERATIONS

The discussion below compares our actual results for the year ended December 31, 2023 to our pro forma combined results for the year ended December 31, 2022, as if the Merger occurred on January 1, 2021.

Management believes reviewing our pro forma combined operating results in addition to actual operating results is useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of our businesses.

Our Studios, Networks, DTC, Corporate, and inter-segment eliminations information is based on the historical operating results of the respective segments and include, where applicable, adjustments for (i) additional costs of revenues from the fair value step-up of film and television library, (ii) additional amortization expense related to acquired intangible assets, (iii) additional depreciation expense from the fair value of property and equipment, (iv) transaction costs and other one-time non-recurring costs, (v) additional interest expense for borrowings related to the Merger and amortization associated with fair value adjustments of debt assumed, (vi) changes to align accounting policies, (vii) elimination of intercompany activity, and (viii) associated tax-related impacts of adjustments.

Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses.

Pro forma amounts are not necessarily indicative of what our results would have been had we operated the combined businesses since January 1, 2021 and should not be taken as indicative of the Company’s future consolidated results of operations.

Actual amounts for the year ended December 31, 2022 include results of operations for Discovery for the entire period and WM for the period subsequent to the completion of the Merger on April 8, 2022.

Foreign Exchange Impacting Comparability

In addition to the Merger, the impact of exchange rates on our business is an important factor in understanding period-to-period comparisons of our results.

The impact of exchange rates on our business is an important factor in understanding period-to-period comparisons of our results.

For example, our international revenues are favorably impacted as the U.S.

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Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma Combined Actual Pro Forma Combined

(Actual) Pro Forma

2024 2023 % Change % Change (ex-FX)

Distribution $ 19,701 $ 20,237 (3) % (1) %

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Restructuring and other charges 447 585 (24) % (23) %

Impairment and loss on dispositions 77 117 — 117 (34) % (34) % (37) %

Impairments and loss on dispositions 9,603 77 NM NM

Total costs and expenses 49,353 42,869 15 % 16 %

Operating loss (1,548) (7,370) 2,464 (4,906) 79 % 68 % 70 %

Operating loss (10,032) (1,548) NM NM

Interest expense, net (2,017) (2,221)

Gain on extinguishment of debt 632 17

Loss from equity investees, net (121) (82)

Other (expense) income, net (12) 347 139 486

Other income (expense), net 150 (29)

Loss before income taxes (11,388) (3,863)

Income tax benefit 784 1,663 (56) 1,607

Income tax (expense) benefit (94) 784

Net loss (11,482) (3,079)

Net income attributable to noncontrolling interests (38) (68) — (68)

Net income attributable to redeemable noncontrolling interests (9) (6) — (6)

Net loss (income) attributable to noncontrolling interests 129 (38)

Net loss (income) attributable to redeemable noncontrolling interests 42 (9)

Net loss available to Warner Bros.

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NM - Not meaningful

Unless otherwise indicated, the discussion below through operating loss reflects the results for the year ended December 31, 2022 on a pro-forma combined basis, ex-FX, since the actual increases year over year for revenues, cost of revenues, and selling, general and administrative expenses are substantially attributable to the Merger.

The percent changes of line items below operating loss in the table above are not included as the activity is principally in U.S.

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

The ex-FX percent changes of line items below operating loss in the table above are not included as the activity is principally in U.S.

Distribution revenues are generated from fees charged to network distributors, which include cable, DTH satellite, telecommunications and digital service providers, and DTC subscribers.

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Distribution revenues are largely dependent on the rates negotiated in the agreements, the number of subscribers that receive our networks, the number of platforms covered in the distribution agreement, and the market demand for the content that we provide.

From time to time, renewals of multi-year carriage agreements include significant year one market adjustments to reset subscriber rates, which then increase at rates lower than the initial increase in the following years.

From time to time, renewals of multi-year carriage agreements include significant year one market adjustments to reset subscriber rates.

In some cases, we have provided distributors launch incentives, in the form of cash payments or free periods, to carry our networks.

Distribution revenue was flat in 2023, as declines in linear subscribers and DTC wholesale in the U.S.

were offset by higher U.S.

contractual affiliate rates, new DTC partnership launches, DTC price increases in the U.S., and inflationary impact in Argentina.

Distribution revenue decreased 1% in 2024, primarily attributable to an 8% decline in Networks domestic linear subscribers and our exit from our regional sports business (“AT&T SportsNets”) in the U.S., which had an unfavorable impact of $225 million for the year, partially offset by a 5% increase in domestic contractual affiliate rates, a 20% increase in DTC subscribers, and an increase in pricing following the launch of Max in Europe in 2024.

Advertising revenues are principally generated from the sale of commercial time on linear (television networks and authenticated TVE applications) and digital platforms (DTC subscription services and websites), and sold primarily on a national basis in the U.S.

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We also generate revenue from the sale of advertising through our digital platforms on a stand-alone basis and as part of advertising packages with our television networks.

Advertising revenue decreased 13% in 2023, primarily attributable to audience declines in domestic general entertainment and news networks, soft advertising markets in the U.S., and to a lesser extent, certain international markets, and the prior year broadcast of the NCAA March Madness Final Four and Championship, partially offset by higher Max U.S.

engagement and ad-lite subscriber growth.

Content revenues are generated from the release of feature films for initial exhibition in theaters, the licensing of feature films and television programs to various television, SVOD and other digital markets, distribution of feature films and television programs in the physical and digital home entertainment market, sales of console games and mobile in-game content, sublicensing of sports rights, and licensing of intellectual property such as characters and brands.

Content revenue decreased 4% in 2023, primarily attributable to lower TV licensing revenue and the prior year broadcast of the Olympics in Europe, partially offset by higher games revenue due to the release of Hogwarts Legacy and higher theatrical film rental revenue due to the release of Barbie .

Advertising revenue decreased 7% in 2024, primarily attributable to audience declines in domestic linear networks of 18%, partially offset by an increase in domestic Max ad-lite subscribers.

Content revenues are generated from the release of feature films for initial exhibition in theaters, production of programs licensed for initial television/SVOD exhibition, the additional licensing of feature films and television programs to various television, SVOD and other digital markets, distribution of feature films and television programs in the physical and digital home entertainment market, sales of console games and mobile in-game content, sublicensing of sports rights, and licensing of intellectual property such as characters and brands.

Content revenue decreased 8% in 2024, primarily attributable to a 53% decrease in games revenue due to the strong performance of the 2023 slate, including Hogwarts Legacy , compared to the 2024 slate, and a 4% decrease in theatrical product revenue due to the strong prior year performance of Barbie , which was released in 2023, partially offset by the sublicensing of Olympic sports rights in Europe in the current year, which had a favorable impact of $576 million in 2024.

Other revenue primarily consists of studio production services and tours.

Other revenue increased 4% in 2024, primarily attributable to the opening of Warner Bros.

Studio Tour Tokyo in June 2023, continued strong attendance at Warner Bros.

Studio Tour London and Hollywood, and services provided to the unconsolidated TNT Sports joint venture.

Studio Tour Tokyo in June 2023, partially offset by the timing of services provided to the unconsolidated TNT Sports UK joint venture.

Costs of Revenues

Our principal component of costs of revenues is content expense.

Content expense includes television/digital series, specials, films, and sporting events.

Content expense includes television/digital series, specials, films, games, and sporting events.

Amortization related to both historical cost basis and any fair value adjustments to content arising from business combinations is included in costs of revenues.

The costs of producing a content asset and bringing that asset to market consist of production costs, participation costs, and exploitation costs.

Costs of revenues decreased 4% in 2023, primarily attributable to lower content expense at our Studios segment for television products and our DTC segment and lower sports networks content expense, due to the prior year broadcast of the Olympics in Europe and our exit from AT&T SportsNets, partially offset by higher games content expense.

Costs of revenues decreased 6% in 2024, primarily attributable to lower content expense related to the amortization of purchase accounting fair value step-up for content, lower content expense commensurate with lower content revenue at DTC, and our exit from the AT&T SportsNet business, partially offset by the broadcast of the Olympics in Europe in the current year.

The exit from the AT&T SportsNet business had a favorable impact to costs of revenues of $277 million for the year.

The broadcast of the Olympics in Europe in the current year had an unfavorable impact to costs of revenues of $664 million.

Selling, General and Administrative

Selling, general and administrative expenses consist principally of employee costs, marketing costs, research costs, occupancy, and back office support fees.

Selling, general and administrative expenses decreased 15% in 2023, primarily attributable to more efficient marketing-related spend and a reduction in personnel costs, partially offset by higher theatrical and games marketing expense.

Selling, general and administrative expenses decreased 3% in 2024, primarily attributable to lower marketing costs due to lower theatrical and games marketing expenses and the prior year launch of Max in the U.S., partially offset by the continuation of Max launches internationally.

Depreciation and Amortization

Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets.

Depreciation and amortization increased 10% in 2023, primarily attributable to intangible assets acquired during the Merger that are being amortized using the sum of the months’ digits method, which resulted in lower pro forma amortization in 2022.

Depreciation and amortization decreased 12% in 2024, primarily attributable to intangible assets acquired during the Merger that are being amortized on an accelerated basis, partially offset by the shortening of the useful lives of certain intangible assets.

(See Note 5 to the accompanying consolidated financial statements.)

Restructuring and Other Charges

In connection with the Merger, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company.

Restructuring and other charges decreased 84% in 2023, primarily attributable to lower content impairments and other content development costs and write-offs, contract terminations, facility consolidation activities, organizational restructuring, and other charges.

Restructuring and other charges decreased 23% in 2024.

Restructuring and other charges primarily includes contract terminations, facility consolidation activities, organizational restructuring, and other charges.

(See Note 6 to the accompanying consolidated financial statements.)

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Impairments and loss on dispositions was a $9,603 million and $77 million loss in 2024 and 2023, respectively.

The loss in 2023 was primarily attributable to lease impairments and costs associated with our exit from AT&T SportsNets.

The loss in 2022 was primarily attributable to the write-down to the estimated fair value, less costs to sell, of the Ranch Lot and Knoxville office building and land in connection with the classification as assets held for sale.

(See Note 18 to the accompanying consolidated financial statements.)

The loss in 2024 was primarily attributable to a $9.1 billion pre-tax, non-cash goodwill impairment charge related to the Networks reporting unit during the second quarter of 2024 (see Note 5 to the accompanying consolidated financial statements) and $411 million right-of-use asset (“ROU asset”) impairment charges primarily related to the Hudson Yards, New York office lease.

(See Note 12 to the accompanying consolidated financial statements.) The loss in 2023 was primarily attributable to lease ROU asset impairments and costs associated with our exit from AT&T SportsNets.

Interest Expense, net

Actual interest expense, net increased $444 million in 2023, primarily attributable to debt assumed as a result of the Merger.

Actual interest expense, net decreased $204 million in 2024, primarily attributable to lower debt during the period.

(See Note 11 and Note 13 to the accompanying consolidated financial statements.)

Gain on extinguishment of debt

During 2024, we repaid in full at maturity $40 million of aggregate principal amount outstanding of our floating rate notes due March 2024 and we repurchased or repaid $5,923 million of aggregate principal amount outstanding of our senior notes.

(See Note 11 to the accompanying consolidated financial statements.)

Loss from Equity Investees, net

Actual losses from our equity method investees were $121 million and $82 million in 2024 and 2023, respectively.

The changes are attributable to the Company’s share of earnings and losses from its equity investees.

The losses are attributable to our share of earnings and losses from our equity investees.

(See Note 10 to the accompanying consolidated financial statements.)

Other (Expense) Income, net

The table below presents the details of other (expense) income, net (in millions).

Year Ended December 31,

Foreign currency losses, net $ (173) $ (150)

Gains on derivative instruments, net 28 475

Change in the value of investments with readily determinable fair value 37 (105)

Change in the value of equity investments without readily determinable fair value (73) (142)

Gain on sale of equity method investments — 195

Gain on extinguishment of debt 17 —

Interest income 179 67

Other (expense) income, net (27) 7

Total other (expense) income, net

The following table reconciles our effective income tax rate to the U.S.

federal statutory income tax rate.

Year Ended December 31,

Pre-tax income at U.S.

federal statutory income tax rate $ (811) 21 % $ (1,881) 21 %

State and local income taxes, net of federal tax benefit (388) 10 % (218) 3 %

Effect of foreign operations 342 (9) % 246 (3) %

Preferred stock conversion premium charge — — % 166 (2) %

Noncontrolling interest adjustment (9) — % (17) — %

Other, net 82 (2) % 41 — %

Income tax benefit $ (784) 20 % $ (1,663) 19 %

Income tax benefit was $(784) million and $(1,663) million, and the Company’s effective tax rate was 20% and 19% for 2023 and 2022, respectively.

The decrease in tax benefit for the year ended December 31, 2023 was primarily attributable to a decrease in pre-tax book loss and the effect of foreign operations, including taxation and allocation of income and losses across various foreign jurisdictions.

These decreases were partially offset by a state uncertain tax benefit remeasurement following a multi-year tax audit agreement and a favorable state deferred tax adjustment recorded in the year ended December 31, 2023.

The decrease for the year ended December 31, 2023 was further offset by a one-time expense incurred in 2022 related to a preferred stock conversion transaction expense that was not deductible for tax purposes.

Other Income (Expense), net

Other income (expense), net was $150 million and $(29) million in 2024 and 2023, respectively.

The increase was primarily attributable to our gain on sale of equity method investments and an increase to the Merger related tax indemnification receivable accrual, partially offset by foreign currency losses.

(See Note 18 to the accompanying consolidated financial statements.)

Income Tax Expense (Benefit)

Income tax expense (benefit) was $94 million and $(784) million, and the Company’s effective tax rate was (1)% and 20% for 2024 and 2023, respectively.

In 2024, the Company recorded a non-cash goodwill impairment charge of $9.1 billion, the majority of which was not deductible for tax purposes.

(See Note 5 to the accompanying consolidated financial statements.) For the year ended December 31, 2024, the increase in income tax expense compared to the same period in 2023 was primarily attributable to a decrease in pre-tax book loss (excluding the non-cash goodwill impairment charge), an increase in state and local income taxes (including a state deferred tax adjustment recorded in the year ended December 31, 2024 and a one-time favorable release of an unrecognized state tax benefit in 2023 that did not recur in 2024), and a one-time favorable release of an unrecognized U.S.

tax benefit in 2023 that did not recur in 2024.

(See Note 16 to the accompanying consolidated financial statements.)

Income tax expense for 2024 reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the non-deductible goodwill impairment charge and the effect of foreign operations.

The Organisation for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million.

Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024.

As of December 31, 2024, we recognized a nominal income tax expense for Pillar Two GloBE minimum tax.

The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.

Segment Results of Operations – 2024 vs.

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• gains and losses on business and asset dispositions;

• certain inter-segment eliminations;

• third-party transaction and integration costs;

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• other items impacting comparability.

The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment.

The Company believes Adjusted EBITDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses.

The Company excludes employee share-based compensation, restructuring, certain impairment charges, gains and losses on business and asset dispositions, and transaction and integration costs from the calculation of Adjusted EBITDA due to their impact on comparability between periods.

Integration costs include transformative system implementations and integrations, such as Enterprise Resource Planning systems, and may take several years to complete.

The Company also excludes the depreciation of fixed assets and amortization of intangible assets, amortization of purchase accounting fair value step-up for content, and amortization of capitalized interest for content, as these amounts do not represent cash payments in the current reporting period.

Certain corporate expenses and inter-segment eliminations related to production studios are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives.

Adjusted EBITDA should be considered in addition to, but not a substitute for, operating income, net income, and other measures of financial performance reported in accordance with U.S.

Management believes that Adjusted EBITDA is an appropriate measure for evaluating the operating performance of the Company’s operating segments because it is the primary measure used by the Company’s chief operating decision maker to assess the operating results and performance of the segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment.

(See Note 23 to the accompanying consolidated financial statements.)

The table below presents our Adjusted EBITDA by segment (in millions).

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Studios Segment

The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (loss) (in millions).

The following table presents, for our Studios segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).

Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma

Combined Actual Pro Forma Combined

(Actual) Pro Forma

2024 2023 % Change % Change (ex-FX)

Distribution $ 8 $ 17 (53) % (53) %

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Transaction and integration costs 2 7

Amortization of fair value step-up for content 995 1,370 (785) 585

Facility consolidation costs 1 —

Impairment and amortization of fair value step-up for content 96 995

Amortization of capitalized interest for content 46 46

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Impairments and loss on dispositions 14 1

Operating income (loss) $ 211 $ (1,194) $ 1,735 $ 541

The discussion below reflects the results for the year ended December 31, 2022 on a pro forma combined basis, ex-FX, since the actual increases year over year for revenues, cost of revenue, selling, general and administrative expenses and Adjusted EBITDA are substantially attributable to the Merger.

Content revenue decreased 13% in 2023, primarily attributable to lower TV licensing revenue, partially offset by higher games revenue due to the release of Hogwarts Legacy and higher theatrical film rental revenue due to the release of Barbie .

TV licensing revenue decreased due to the timing of TV production, including the impact of the WGA and SAG-AFTRA strikes, certain large TV licensing deals in the prior year, fewer series sold to our owned platforms, and fewer CW series.

Operating income $ 529 $ 211

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

The Studios discussion below also includes intra-segment revenue and expense between product lines, which represented less than 3% of total revenues and operating expenses for this segment for the year ended December 31, 2024.

Intra-segment revenue and expense are eliminated at the Studios segment level.

Fluctuations in results for our Studios segment may occur due to various factors, including (but not limited to) the timing and number of new film releases each quarter, the timing of marketing expenses recognized relative to (i.e., prior to) a film’s release, and the mix of content distributed each period.

Content revenue decreased 5% in 2024, primarily attributable to a 53% decrease in games revenue, and a 4% decrease in theatrical product revenue, partially offset by a 9% increase in television product revenue.

• The decrease in games revenue was primarily attributable to the strong performance of the 2023 slate, including Hogwarts Legacy , compared to the 2024 slate.

• The decrease in theatrical product revenue was attributable to lower film rental revenue and intra-segment licensing revenue, partially offset by higher home entertainment revenue.

Film rental revenue decreased due to the strong prior year performance of Barbie , which was released in 2023, partially offset by higher carryover releases from 2023 compared to 2022.

Home entertainment revenue increased due to the performance of Dune:

Part Two, Godzilla x Kong:

The New Empire, Wonka, Aquaman 2, and Beetlejuice Beetlejuice and higher catalog sales.

• The increase in television product revenue was attributable to higher intercompany content sales and higher initial telecast revenue due to the impact of the WGA and SAG-AFTRA strikes in the prior year, partially offset by lower third-party content sales.

Other revenue increased 9% in 2024, primarily attributable to the opening of Warner Bros.

Studio Tour Tokyo in June 2023 and continued strong attendance at Warner Bros.

Studio Tour London and Hollywood, partially offset by lower studio production services due to the impact of the WGA and SAG-AFTRA strikes.

Studio Tour Tokyo in June 2023.

Costs of Revenues

Costs of revenues decreased 16% in 2023, primarily attributable to lower television product content expense, including the impact of the WGA and SAG-AFTRA strikes, partially offset by higher content expense for games and theatrical products commensurate with higher revenues.

Costs of revenues increased 3% in 2024, primarily attributable to a 4% increase in theatrical product content expense due to product mix and higher development costs, and a 1% increase in games content expense due to impairments of $384 million, partially offset by lower intra-segment licensing costs.

Television product content expense was flat in 2024, as higher content expense commensurate with higher revenues was offset by favorable product mix and lower development costs.

Selling, General and Administrative

Selling, general and administrative expenses increased 16% in 2023, primarily attributable to higher theatrical marketing expense due to the increased quantity of films released and higher games marketing expense to support the release of Hogwarts Legacy .

Selling, general and administrative expenses decreased 11% in 2024, primarily attributable to lower theatrical marketing expenses due to fewer new releases and lower games marketing expenses.

Adjusted EBITDA

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Networks Segment

The table below presents, for our Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating income (in millions).

The table below presents, for our Networks segment, revenues by type, certain operating expenses, Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating (loss) income (in millions).

Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma

Combined Actual Pro Forma Combined

(Actual) Pro Forma

2024 2023 % Change % Change (ex-FX)

Distribution $ 10,680 $ 11,521 (7) % (6) %

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Depreciation and amortization 4,172 4,961

Employee share-based compensation — — 9 9

Restructuring and other charges 85 201

Transaction and integration costs 2 3

Amortization of fair value step-up for content 473 73 425 498

Impairment and amortization of fair value step-up for content 495 473

Inter-segment eliminations — 90

Impairments and loss on dispositions 9,154 13

Operating income $ 3,322 $ 2,919 $ 893 $ 3,812

Distribution revenue decreased 2% in 2023, primarily attributable to a decline in linear subscribers in the U.S., and to a lesser extent, lower sports related revenue due to our exit from AT&T SportsNets and the TNT Sports Chile shift to DTC, partially offset by higher U.S.

contractual affiliate rates and inflationary impact in Argentina.

Advertising revenue decreased 13% in 2023, primarily attributable to audience declines in domestic general entertainment and news networks, soft linear advertising markets in the U.S., and to a lesser extent, certain international markets, as well as the impact of broadcast of the NCAA March Madness Final Four and Championship in 2022.

Content revenue decreased by 24% in 2023, primarily attributable to lower international sports sublicensing due to the prior year broadcast of the Olympics in Europe, and lower third-party content licensing deals in the U.S., partially offset by higher inter-segment licensing of content to DTC.

Other revenue increased 21% in 2023, primarily attributable to services provided to the unconsolidated TNT Sports UK joint venture.

Operating (loss) income $ (5,759) $ 3,322

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Distribution revenue decreased 6% in 2024, primarily attributable to an 8% decline in domestic linear subscribers for the year, partially offset by a 5% increase in domestic contractual affiliate rates.

In addition, the exit from the AT&T SportsNet business had an unfavorable impact of $225 million for the year.

Declines in linear subscribers are expected to continue.

Advertising revenue decreased 12% in 2024, primarily attributable to audience declines in domestic networks of 18% for the year, and continued softness in the U.S.

linear advertising market.

Content revenue increased by 83% in 2024, primarily attributable to the sublicensing of Olympic sports rights in Europe in the current year, which had a favorable impact of $576 million, and timing of third-party licensing deals.

Other revenue decreased 10% in 2024, primarily attributable to the timing of services provided to the unconsolidated TNT Sports UK joint venture.

Costs of Revenues

Costs of revenues decreased 7% in 2023, primarily attributable to lower sports content expense, including the prior year broadcast of the Olympics in Europe and the NCAA March Madness Final Four and Championship and our exit from AT&T SportsNets, lower domestic general entertainment and news related expense, partially offset by unfavorable expenses from inflationary impact in Argentina and costs associated with the unconsolidated TNT Sports UK joint venture.

Costs of revenues was flat in 2024.

Sports-related content expense increased in 2024 primarily due to the broadcast of the Olympics in Europe in the current year and the acquisition of new sports rights, partially offset by our exit from the AT&T SportsNet business and the allocation of U.S.

sports costs to DTC.

The increase in sports-related content expense was further offset by lower entertainment content expense in 2024.

Our exit from the AT&T SportsNet business had a favorable impact to costs of revenues of $277 million and the broadcast of the Olympics in Europe had an unfavorable impact to costs of revenues of $664 million in the current year.

Selling, General and Administrative

Selling, general and administrative expenses decreased 4% in 2023, primarily attributable to lower marketing and personnel expenses.

Selling, general and administrative expenses decreased 1% in 2024.

Adjusted EBITDA

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Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma

Combined Actual Pro Forma Combined

(Actual) Pro Forma

2024 2023 % Change % Change (ex-FX)

Distribution $ 9,022 $ 8,703 4 % 5 %

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Selling, general and administrative 2,177 2,428 (10) % (9) %

Adjusted EBITDA 103 (1,596) (467) (2,063) NM NM NM

Adjusted EBITDA 677 103 NM NM

Depreciation and amortization 1,831 2,063

Employee share-based compensation — (1) — (1)

Restructuring and other charges 3 66

Transaction and integration costs (1) 4

Amortization of fair value step-up for content 460 390 (52) 338

Impairment and amortization of fair value step-up for content 282 460

Inter-segment eliminations — 72

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Operating loss $ (1,485) $ (2,565)

As of December 31, 2023, we had 97.7 million DTC subscribers (as defined under Item 1.

Distribution revenue increased 2% in 2023, primarily attributable to new partnership launches, price increases in the U.S.

and most international markets, the launch of the Ultimate tier for Max in the U.S., and the TNT Sports Chile shift to DTC, partially offset by U.S.

wholesale declines.

Advertising revenue increased 35% in 2023, primarily attributable to higher Max U.S.

engagement and ad-lite subscriber growth.

Content revenue increased 17% in 2023, primarily attributable to a higher volume of licensing deals.

Unless otherwise indicated, the discussion of percent changes below is on an ex-FX basis.

Subscriber information (as defined under Item 1.

“Business”) consisted of the following (in millions).

December 31, 2024 December 31, 2023 % Change

Total Domestic subscribers 57.1 52.0 10 %

Total International subscribers 59.8 45.6 31 %

Total DTC subscribers 116.9 97.7 20 %

Distribution revenue increased 5% in 2024, primarily attributable to a 20% increase in subscribers and an increase in pricing following the launch of Max in Europe and Latin America in 2024, partially offset by continued domestic linear wholesale subscriber declines.

Advertising revenue increased 57% in 2024, primarily attributable to an increase in domestic ad-lite subscribers.

Global ARPU consisted of the following.

Year Ended December 31,

2024 2023 % Change (ex-FX)

Domestic ARPU $ 11.89 $ 11.20 6 %

International ARPU $ 3.85 $ 3.85 4 %

Global ARPU 1 $ 7.76 $ 7.78 1 %

Global ARPU increased 1% in 2024, primarily attributable to subscriber growth of the ad-lite tier domestically, higher pricing, and a continuing subscriber mix shift from linear wholesale, partially offset by growth in lower ARPU international markets.

Content revenue decreased 51% in 2024, primarily attributable to fewer third-party licensing deals.

Costs of Revenues

Cost of revenues decreased 7% in 2023, primarily attributable to lower content expense and the shutdown of CNN+ in the prior year, partially offset by increased content licensing costs commensurate with higher content revenue.

Cost of revenues decreased 2% in 2024, primarily attributable to lower content expense commensurate with lower content revenue, partially offset by the allocation of U.S.

sports from the Networks segment.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses decreased 32% in 2023, primarily attributable to more efficient marketing-related spend.

Selling, general and administrative expenses decreased 9% in 2024, primarily attributable to lower marketing costs due to the launch of Max in 2023 in the U.S., partially offset by higher overhead expenses and the continuation of Max launches internationally.

Adjusted EBITDA

Adjusted EBITDA increased $574 million in 2024.

The broadcast of the Olympics in Europe negatively impacted Adjusted EBITDA by $33 million.

The following table presents our Adjusted EBITDA and a reconciliation of Adjusted EBITDA to operating loss (in millions):

Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma

Combined Actual Pro Forma Combined

(Actual) Pro Forma

2024 2023 % Change % Change (ex-FX)

Adjusted EBITDA $ (1,260) $ (1,242) (1) % (3) %

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Facility consolidation costs 3 32

Amortization of fair value step-up for content (6) — — —

Impairment and amortization of fair value step-up for content 2 (6)

Inter-segment eliminations — (193)

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Corporate operations primarily consist of executive management and administrative support services, which are recorded in selling, general and administrative expense, as well as substantially all of our share-based compensation and third-party transaction and integration costs.

As reported transaction and integration costs for 2022 included the impact of the issuance of additional shares of WBD common stock to Advance/Newhouse Programming Partnership of $789 million upon the closing of the Merger.

(See Note 3 to the accompanying consolidated financial statements.)

Adjusted EBITDA improved 20% in 2023, primarily attributable to reductions to personnel costs, lower technology-related operating expenses, and lower securitization expense.

Adjusted EBITDA decreased 3% in 2024, primarily attributable to higher securitization expenses and overhead expenses, partially offset by lower facility costs due to office consolidations and closures and lower personnel costs.

The Company defines DTC Average Revenue Per User (“ARPU”) as total subscription revenue plus net advertising revenue for the period divided by the daily average number of paying subscribers for the period.

Where daily values are not available, the sum of beginning of period and end of period divided by two is used.

Excluded from the ARPU calculation are:

(i) Revenue and subscribers for DTC products, other than discovery+, HBO, HBO Max, Max, a Premium Sports Product, and independently-branded, regional products (currently consisting of TVN/Player and BluTV), that may be offered by us or by certain joint venture partners or affiliated parties from time to time;

(ii) A limited amount of international discovery+ revenue and subscribers that are part of non-strategic partnerships or short-term arrangements as may be identified by the Company from time to time;

(iii) Cinemax, Max/HBO hotel and bulk institution (i.e., subscribers billed on a bulk basis), and international basic HBO revenue and subscribers;

and (iv) Users on free trials who convert to a subscription for which we have recognized subscription revenue within the first seven days of the calendar month immediately following the month in which their free trial expires.

Inter-segment Eliminations

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Year Ended December 31,

2023 2022 % Change

Actual Actual Pro Forma

Adjustments Pro Forma

Combined Actual Pro Forma Combined

(Actual) Pro Forma

Inter-segment revenue eliminations $ (2,782) $ (2,269)

Inter-segment expense eliminations (2,596) (2,362)

Adjusted EBITDA 93 17 (27) (10) NM NM NM

Adjusted EBITDA (186) 93

Restructuring and other charges — (2)

Amortization of fair value step-up for content 451 583 — 583

Impairment and amortization of fair value step-up for content 264 451

Operating loss $ (450) $ (356)

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In our current segment structure, in certain instances, production and distribution activities are in different segments.

Inter-segment content transactions are presented “gross” (i.e.

the segment producing and/or licensing the content reports revenue and profit from inter-segment transactions in a manner similar to the reporting of third-party transactions, and the required eliminations are reported on the separate “Eliminations” line when presenting our summary of segment results).

Inter-segment content transactions are generally presented at market value (i.e., the segment producing and/or licensing the content reports revenue and profit from inter-segment transactions in a manner similar to the reporting of third-party transactions, and the required eliminations are reported on the separate “Eliminations” line when presenting our summary of segment results).

Generally, timing of revenue recognition is similar to the reporting of third-party transactions.

The segment distributing the content, e.g.

via our DTC or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use.

The segment distributing the content, e.g., via our DTC or linear services, capitalizes the cost of inter-segment content transactions, including “mark-ups” and amortizes the costs over the shorter of the license term, if applicable, or the expected period of use.

The content amortization expense related to the inter-segment profit is also eliminated on the separate “Eliminations” line when presenting our summary of segment results.

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We also participate in a revolving receivables program and an accounts receivable factoring program described below.

During the year ended December 31, 2023, we issued $1.5 billion of 6.412% fixed rate senior notes due March 2026.

After March 2024, the senior notes are redeemable at par plus accrued and unpaid interest.

During the year ended December 31, 2024, we issued €650 million of 4.302% fixed rate senior notes due January 2030 and €850 million of 4.693% fixed rate senior notes due May 2033.

After December 2029 and February 2033, respectively, the senior notes are redeemable at par plus accrued and unpaid interest.

Revolving Credit Facility and Commercial Paper

We have a multicurrency revolving credit agreement (the “Revolving Credit Agreement”) and have the capacity to borrow up to $6.0 billion under the Revolving Credit Agreement (the “Credit Facility”).

We have a multicurrency revolving credit agreement (the “Credit Agreement”) and have the capacity to borrow up to $6.0 billion under the Credit Agreement (the “Credit Facility”).

We may also request additional commitments up to $1.0 billion from the lenders upon the satisfaction of certain conditions.

The Revolving Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants.

As of December 31, 2023, we were in compliance with all covenants and there were no events of default under the Revolving Credit Agreement.

The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants.

As of December 31, 2024, we were in compliance with all covenants and there were no events of default under the Credit Agreement.

Additionally, our commercial paper program is supported by the Credit Facility.

Under the commercial paper program, we may issue up to $1.5 billion, including up to $500 million of euro-denominated borrowings.

Under the commercial paper program, we may issue up to $1.0 billion.

Borrowing capacity under the Credit Facility is effectively reduced by any outstanding borrowings under the commercial paper program.

During the year ended December 31, 2023, we borrowed and repaid $5,207 million and $5,214 million, respectively, under our Credit Facility and commercial paper program.

As of December 31, 2023 and 2022, the Company had no outstanding borrowings under the Credit Facility or the commercial paper program.

During the year ended December 31, 2024, we borrowed and repaid $14,203 million under our Credit Facility and commercial paper program.

As of December 31, 2024 and 2023, we had no outstanding borrowings under the Credit Facility or the commercial paper program.

In January 2025, we entered into a new $1,500 million 364-day senior unsecured term loan credit facility.

The proceeds were used to the fund the redemption of $1,500 million aggregate principal amount of our 6.412% senior notes due 2026.

• Revolving Receivables Program

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For the year ended December 31, 2024, total trade accounts receivable sold under our factoring arrangement was $313 million.

• Investments

In May 2024, we sold our 50% interest in All3Media, an equity method investment, for proceeds of $324 million.

In October 2024, we sold our minority interests in Formula E, which were recorded as an equity method investment and an investment without readily determinable fair value, to Liberty Global, a related party, for total proceeds of $217 million.

• Derivatives

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(See Note 13 to the accompanying consolidated financial statements.)

Our primary uses of cash include the creation and acquisition of new content, business acquisitions, income taxes, personnel costs, costs to develop and market our streaming service Max, principal and interest payments on our outstanding senior notes and term loan, funding for various equity method and other investments, and repurchases of our capital stock.

Our primary uses of cash include the creation and acquisition of new content, business acquisitions, income taxes, personnel costs, costs to develop and market our enhanced streaming service Max, principal and interest payments on our outstanding senior notes, funding for various equity method and other investments, and repurchases of our capital stock.

• Content Acquisition

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Additional information regarding contractual commitments to acquire content is set forth in “Material Cash Requirements from Known Contractual and Other Obligations” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

During the year ended December 31, 2023, we repaid $4.0 billion of aggregate principal amount outstanding of our term loan prior to the due date of April 2025.

Floating Rate Notes

During the year ended December 31, 2023, we completed a tender offer and purchased $460 million of aggregate principal amount of our floating rate notes prior to the due date of March 2024.

During the year ended December 31, 2023, we purchased or repaid $2,420 million of aggregate principal amount outstanding of our senior notes due in 2023 and 2024.

During the year ended December 31, 2024, we repaid $40 million of aggregate principal amount of our floating rate notes due March 2024.

During the year ended December 31, 2024, we repurchased or repaid $5,923 million of aggregate principal amount outstanding of our senior notes.

In addition, we have $2,748 million of senior notes coming due in 2025.

In February 2025, we redeemed in full $1,500 million aggregate principal amount of our 6.412% senior notes due 2026.

The redemption was funded with the proceeds of borrowings pursuant to the new $1,500 million 364-day senior unsecured term loan credit facility entered into in January 2025.

We may from time to time seek to prepay, retire or purchase our other outstanding indebtedness through prepayments, redemptions, open market purchases, privately negotiated transactions, tender offers or otherwise.

Any such purchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, and general market conditions, as well as applicable regulatory, legal and accounting factors.

Whether or not we purchase or exchange any of our debt and the size and timing of any such purchases or exchanges will be determined at our discretion.

Any such repurchases or exchanges will be dependent upon several factors, including our liquidity requirements, contractual restrictions, general market conditions, as well as applicable regulatory, legal and accounting factors.

Whether or not we repurchase or exchange any debt and the size and timing of any such repurchases or exchanges will be determined at our discretion.

• Capital Expenditures

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We contributed $109 million and $112 million in 2024 and 2023, respectively, for investments in and advances to our investees.

We previously held a 35% interest in BluTV, an SVOD platform entity and content distributor in Turkey that was accounted for as an equity method investment.

In December 2023, we acquired the remaining 65% of BluTV for $50 million.

• Redeemable Noncontrolling Interest and Noncontrolling Interest

Due to business combinations, we also had redeemable equity balances of $165 million at December 31, 2023, which may require the use of cash in the event holders of noncontrolling interests put their interests to us.

In 2022, GoldenTree exercised its put right requiring us to purchase GoldenTree’s noncontrolling interest.

In 2023, we paid GoldenTree $49 million for the redemption of their noncontrolling interest.

(See Note 19 to the accompanying consolidated financial statements.) Distributions to noncontrolling interests and redeemable noncontrolling interests totaled $301 million and $300 million in 2023 and 2022, respectively.

We had redeemable equity balances of $109 million at December 31, 2024, which may require the use of cash in the event holders of noncontrolling interests put their interests to us.

Distributions to noncontrolling interests and redeemable noncontrolling interests totaled $193 million and $301 million in 2024 and 2023, respectively.

• Common Stock Repurchases

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Cash provided by operating activities 5,375 7,477

Cash (used in) provided by investing activities (1,259) 3,524

Cash used in investing activities (349) (1,259)

Cash used in financing activities (3,749) (5,837)

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Cash provided by operating activities was $5,375 million and $7,477 million in 2024 and 2023, respectively.

The increase in cash provided by operating activities was primarily attributable to an increase in net income, excluding non-cash items, partially offset by a negative fluctuation in working capital activity.

The decrease in cash provided by operating activities was primarily attributable to a decrease in net income excluding non-cash items.

Cash flow for the year ended December 31, 2023 was also positively impacted by the WGA and SAG-AFTRA strikes.

Investing Activities

Cash (used in) provided by investing activities was $(1,259) million and $3,524 million in 2023 and 2022, respectively.

The decrease in cash provided by investing activities was primarily attributable to cash acquired from the Merger in the prior year, less proceeds received from the unwind and settlement of derivative instruments and sale of investments, and increased purchases of property and equipment during the year ended December 31, 2023.

Cash used in investing activities was $349 million and $1,259 million in 2024 and 2023, respectively.

The decrease in cash used in investing activities was primarily attributable to higher proceeds from the sale of investments and fewer purchases of property and equipment during the year ended December 31, 2024.

Financing Activities

Cash used in financing activities was $3,749 million and $5,837 million in 2024 and 2023, respectively.

The decrease in cash used in financing activities was primarily attributable to less net debt activity during the year ended December 31, 2023.

The decrease in cash used in financing activities was primarily attributable to lower net debt activity and lower distributions to noncontrolling interests and redeemable noncontrolling interests during the year ended December 31, 2024.

Capital Resources

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Our borrowing costs and access to capital markets can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in part, on our performance as measured by credit metrics such as interest coverage and leverage ratios.

The 2017 Tax Act features a participation exemption regime with current taxation of certain foreign income and imposes a mandatory repatriation toll tax on unremitted foreign earnings.

Credit rating agencies may continue to review and adjust our ratings or outlook.

For example, in 2024, S&P and Moody’s revised our ratings outlook from stable to negative in part due to declines in our linear business, including as a result of the weak operating environment for linear networks, and our leverage ratio.

The 2017 Tax Cuts and Jobs Act features a participation exemption regime with current taxation of certain foreign income and imposed a mandatory repatriation toll tax on unremitted foreign earnings.

Notwithstanding the U.S.

taxation of these amounts, we intend to continue to reinvest these funds outside of the U.S.

taxation of these amounts, we intend to continue to reinvest some of these funds outside of the U.S.

Our current plans do not demonstrate a need to repatriate them to the U.S.

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Additionally, our commercial paper program is supported by the Credit Facility.

Under the commercial paper program, we may issue up to $1.5 billion, including up to $500 million of euro-denominated borrowings.

Under the commercial paper program, we may issue up to $1.0 billion.

Borrowing capacity under the Credit Facility is effectively reduced by any outstanding borrowings under the commercial paper program.

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We obtain office space and equipment under multi-year lease arrangements.

Most operating leases are not cancellable prior to their expiration.

Most operating leases are not cancelable prior to their expiration.

Payments for operating leases represent the amounts due under the agreements assuming the agreements are not canceled prior to their expiration.

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While benefit payments under the Pension Plans are expected to continue beyond 2034, we believe it is not practicable to estimate payments beyond this period.

Other employee obligations are primarily related to employment agreements with creative talent for certain broadcast networks.

We are unable to reasonably predict the ultimate amount of any payments due to cash-settled share-based compensation awards.

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Unrecognized Tax Benefits

We are unable to reasonably predict the ultimate amount or timing of settlement of our unrecognized tax benefits because, until formal resolutions are reached, reasonable estimates of the amount and timing of cash settlements with the respective taxing authorities are not practicable.

Our unrecognized tax benefits totaled $2,147 million as of December 31, 2023.

Although we can reasonably estimate the total amount of unrecognized tax benefits related to certain of the Company’s uncertain tax positions that may decrease over the next twelve months, we are unable to reasonably predict the ultimate amount and timing of cash settlement with the respective taxing authorities.

Six Flags Guarantee

In connection with WM’s former investment in the Six Flags (as defined below) theme parks located in Georgia and Texas (collectively, the “Parks”), in 1997, certain subsidiaries of the Company agreed to guarantee (the “Six Flags Guarantee”) certain obligations of the partnerships that hold the Parks (the “Partnerships”) for the benefit of the limited partners in such Partnerships, including, annual payments made to the Parks or to the limited partners and additional obligations at the end of the respective terms for the Partnerships in 2027 and 2028 (the “Guaranteed Obligations”).

The aggregate gross undiscounted estimated future cash flow requirements covered by the Six Flags Guarantee over the remaining term (through 2028) are $521 million.

To date, no payments have been made by us pursuant to the Six Flags Guarantee.

In connection with the WarnerMedia Business’ former investment in the Six Flags (as defined below) theme parks located in Georgia and Texas (collectively, the “Parks”), in 1997, certain subsidiaries of the Company agreed to guarantee (the “Six Flags Guarantee”) certain obligations of the partnerships that hold the Parks (the “Partnerships”) for the benefit of the limited partners in such Partnerships, including annual payments made to the Parks or to the limited partners and additional obligations at the end of the respective terms for the Partnerships in 2027 and 2028 (the “Guaranteed Obligations”).

Six Flags Entertainment Corporation (formerly known as Six Flags, Inc.

and Premier Parks Inc.) (“Six Flags”), which has the controlling interest in the Parks, has agreed, pursuant to a subordinated indemnity agreement (the “Subordinated Indemnity Agreement”), to guarantee the performance of the Guaranteed Obligations when due and to indemnify the Company, among others, if the Six Flags Guarantee is called upon.

If Six Flags defaults on its indemnification obligations, we have the right to acquire control of the managing partner of the Parks.

Six Flags’ obligations to us are further secured by its interest in all limited partnership units held by Six Flags.

Based on our evaluation of the current facts and circumstances surrounding the Guaranteed Obligations and the Subordinated Indemnity Agreement, we are unable to predict the loss, if any, that may be incurred under the Guaranteed Obligations, and no liability for the arrangements has been recognized as of December 31, 2023.

Because of the specific circumstances surrounding the arrangements and the fact that no active or observable market exists for this type of financial guarantee, we are unable to determine a current fair value for the Guaranteed Obligations and related Subordinated Indemnity Agreement.

If Six Flags defaults on its indemnification obligations, the Company has the right to acquire control of the managing partner of the Parks.

Six Flags’ obligations to the Company are further secured by its interest in all limited partnership units held by Six Flags.

In December 2024, Six Flags provided notice of its exercise of the option related to the theme parks located in Georgia that requires the redemption of all the limited partnership units that Six Flags does not then own in the Georgia Partnership in January 2027.

Pursuant to the exercise of the option, all of such outstanding limited partnership interests will be redeemed, and Six Flags will also acquire certain related entity general partnership and managing member interests.

Based on the Company’s evaluation of the current facts and circumstances surrounding the Guaranteed Obligations and the Subordinated Indemnity Agreement, it is unable to predict the loss, if any, that may be incurred under the Guaranteed Obligations, and no liability for the arrangements has been recognized as of December 31, 2024.

Because of the specific circumstances surrounding the arrangements and the fact that no active or observable market exists for this type of financial guarantee, the Company is unable to determine a current fair value for the Guaranteed Obligations and related Subordinated Indemnity Agreement.

The aggregate gross undiscounted estimated future cash flow requirements covered by the Six Flags Guarantee over the remaining term (through 2028) are $589 million.

To date, no payments have been made by the Company pursuant to the Six Flags Guarantee.

Other Contingent Commitments

Other contingent commitments primarily include contingent payments for post-production term advance obligations on a certain co-financing arrangement, as well as operating lease commitment guarantees, letters of credit, bank guarantees, and surety bonds, which generally support performance and payments for a wide range of global contingent and firm obligations, including insurance, litigation appeals, real estate leases, and other operational needs.

The Company’s other contingent commitments at December 31, 2023 were $395 million, with $367 million estimated to be due in 2024.

For other contingent commitments where payment obligations are outside our control, the timing of amounts represents the earliest period in which the payment could be requested.

For the remaining other contingent commitments, the timing of the amounts presented represents when the maximum contingent commitment will expire but does not mean that we expect to incur an obligation to make any payments within that time period.

In addition, these amounts do not reflect the effects of any indemnification rights we might possess.

Our other contingent commitments at December 31, 2024 were immaterial.

We have granted put rights to certain consolidated subsidiaries, but we are unable to reasonably predict the ultimate amount or timing of any payment.

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Basis of Presentation

As of December 31, 2023, the Company has outstanding senior notes issued by DCL, a wholly owned subsidiary of the Company, and guaranteed by the Company, Scripps Networks Interactive, Inc.

(“Scripps Networks”), and WMH;

senior notes issued by WMH and guaranteed by the Company, Scripps Networks, and DCL;

As of December 31, 2024, the Company has outstanding senior notes issued by Discovery Communications, LLC (“DCL”), which are guaranteed by the Company, Scripps Networks Interactive, Inc.

(“Scripps Networks”), and WarnerMedia Holdings, Inc.

senior notes issued by WMH, which are guaranteed by the Company, Scripps Networks, and DCL;

senior notes issued by the legacy WarnerMedia Business (not guaranteed);

and senior notes issued by Scripps Networks (not guaranteed).

(See Note 11 to the accompanying consolidated financial statements.) DCL primarily includes the Discovery Channel and TLC networks in the U.S.

DCL is a wholly owned subsidiary of the Company.

Scripps Networks is also wholly owned by the Company.

(See Note 11 to the accompanying consolidated financial statements.) DCL, Scripps Networks, and WMH are wholly owned by the Company.

The tables below present the summarized financial information as combined for Warner Bros.

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Revenues $ 1,916

Operating income 307

Operating loss (245)

Net loss (1,080)

Net loss available to Discovery, Inc.

Net loss available to Warner Bros.

Discovery, Inc.

Additional information regarding the changes in our outstanding indebtedness and the significant terms and provisions of our revolving credit facility and outstanding indebtedness is discussed in Note 11 to the accompanying consolidated financial statements included in Item 8, “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

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GAAP, which requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to uncertain tax positions, goodwill and intangible assets, content rights, consolidation and revenue recognition.

On an ongoing basis, we evaluate our estimates and assumptions, including those related to unrecognized tax benefits, goodwill and intangible assets, content rights, consolidation and revenue recognition.

We base our estimates on historical experience, current developments and on various other assumptions that we believe to be reasonable under these circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that cannot readily be determined from other sources.

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From time to time, we engage in transactions or take filing positions in which the tax consequences may be uncertain and may recognize tax liabilities based on estimates of whether additional taxes and interest will be due.

We establish a reserve for uncertain tax positions unless we determine that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes.

We include interest and where appropriate, potential penalties, as a component of income tax expense on the consolidated statement of operations.

We establish a reserve for unrecognized tax benefits unless we determine that such positions are more likely than not to be sustained upon examination based on their technical merits, including the resolution of any appeals or litigation processes.

We include interest and where appropriate, potential penalties, as a component of income tax expense on the consolidated statements of operations.

This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events including the status and results of income tax audits with the relevant tax authorities.

Significant judgment is exercised in evaluating all relevant information, the technical merits of the tax positions, and the accurate measurement of uncertain tax positions when determining the amount of reserve and whether positions taken on our tax returns are more likely than not to be sustained.

Significant judgment is exercised in evaluating all relevant information, the technical merits of the tax positions, and the accurate measurement of unrecognized tax benefits when determining the amount of reserve and whether positions taken on our tax returns are more likely than not to be sustained.

This also involves the use of significant estimates and assumptions with respect to the potential outcome of positions taken on tax returns that may be reviewed by tax authorities.

At December 31, 2023, the reserve for uncertain tax positions was $2,147 million, and it is reasonably possible that the total amount of unrecognized tax benefits related to certain of our uncertain tax positions could decrease by as much as $84 million within the next twelve months as a result of ongoing audits, foreign judicial proceedings, lapses of statutes of limitations or regulatory developments.

Goodwill and Intangible Assets

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2024 Impairment Analysis

As of October 1, 2023, the Company performed a quantitative goodwill impairment assessment for all reporting units.

During the second quarter 2024, we performed goodwill and intangible assets impairment monitoring procedures for all of our reporting units and concluded the delta between market capitalization and book value, continued softness in the U.S.

linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA, represented a triggering event for the Networks reporting unit.

As a result, we elected to perform a quantitative impairment assessment for all of our reporting units in the second quarter of 2024.

For the Networks reporting unit, fair value was determined using a DCF method.

The key judgments and assumptions used in the DCF method to determine the fair value of the Networks reporting unit were as follows:

• The expected future cash flows in terms of their amount and timing.

These cash flows, utilized in the DCF analysis, are derived from the reporting unit’s budget and its strategic long-term plan, which reflect expectations based upon operating performance and assumptions consistent with those of a market participant with regards to affiliate revenue, sports rights, and continued softness in the U.S.

linear advertising market.

• Long-term growth rate of negative 3%.

• A discount rate of 10.5%.

This is reflective of the risks inherent in the future cash flows of the reporting unit and market conditions.

Given the inherent uncertainty in determining the assumptions underlying a DCF analysis, actual results may differ from those used in the valuations.

The carrying value of the Networks reporting unit exceeded its fair value and we recorded a pre-tax, non-cash goodwill impairment charge of $9.1 billion during the second quarter of 2024 in impairments and loss on dispositions in the consolidated statements of operations.

The goodwill impairment charge does not have an impact on the calculation of our financial covenants under our debt arrangements.

As of October 1, 2024, we performed a quantitative goodwill impairment assessment for all of our reporting units.

The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no impairment was recorded.

The Studios reporting unit, which had headroom of 15%, and the Networks reporting unit, which had headroom of 5%, both had fair value in excess of carrying value of less than 20%.

During our annual impairment testing, we evaluated the sensitivity of our most critical assumption, the discount rate, and determined that a 50 basis point increase in the discount rate selected would not have impacted the test results.

Additionally, the Company could reduce the terminal growth rate by 100 basis points, and the fair value of the reporting units would still exceed their carrying value.

The DTC reporting unit had headroom of 20%.

The Studios reporting unit, which had headroom of 16%, and the Networks reporting unit, which had headroom of 12%, both had fair values in excess of carrying value of less than 20%.

The fair values of the reporting units were determined using a combination of DCF and market valuation methodologies.

Due to declining levels of global GDP growth, soft advertising markets in the U.S.

associated with the Company’s Networks reporting unit, content licensing trends in our Studios reporting unit, and execution risk associated with anticipated growth in the Company’s DTC reporting unit, the Company will continue to monitor its reporting units for changes that could impact recoverability.

A 0.5% increase in the discount rate and a 1% decrease in the long-term growth rate would not result in an impairment loss across the reporting units.

We continue to monitor our reporting units for triggers that could impact the recoverability of goodwill.

Long-term trends and risks we are monitoring in our ongoing assessment include, but are not limited to, the following:

• the delta between market capitalization and book value;

• uncertainty related to affiliate rights renewals associated with our Networks and DTC reporting units;

• declining levels of global GDP growth and continued softness in the U.S.

linear advertising market associated with our Networks reporting unit;

• content licensing trends and volatility related to the performance of theatrical film and game slates in our Studios reporting unit;

• risks in executing the projected growth strategies of our DTC reporting unit.

Content Rights

12 unchanged sentences

Streaming and premium pay-TV content amortization is based on estimated viewing patterns, as there are generally limited to no direct revenues to associate to the individual content assets for premium pay-TV.

As such, number of views is most representative of the use of the title.

As such, viewership is most representative of the use of the title.

Judgment is required to determine the useful lives and amortization patterns of our content assets that are predominantly monetized as a group.

18 unchanged sentences

As described in Note 2, revenue is recognized upon transfer of control of promised services or goods to customers in an amount that reflects the consideration that we expect to receive in exchange for those services or goods.

Significant estimates and judgements are applied in determining the timing of revenue recognition for certain types of transactions, such as bundled arrangements for advertising sales and content licensing arrangements.

Significant estimates and judgments are applied in determining the timing of revenue recognition for certain types of transactions, such as bundled arrangements for advertising sales and content licensing arrangements.

A substantial portion of the advertising contracts in the U.S.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis