What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-27 compared with 2024-02-23 · 498 added, 412 removed, 1674 unchanged (35% of the section changed)

57 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments - Networks and DTC Reporting Units

Interim and Annual Goodwill Impairment Assessments – Networks and DTC Reporting Units

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $25.7 billion as of December 31, 2024, and the goodwill associated with the Networks and DTC reporting units was $8.4 billion and $8.1 billion, respectively.

2 unchanged sentences

If the carrying amount of the reporting unit exceeds the fair value of the reporting unit, an impairment charge is recorded for the amount by which the carrying amount exceeds the fair value, not to exceed the amount of goodwill recorded for that reporting unit.

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

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

Management determines the fair value of the reporting units by using a combination of discounted cash flow and market valuation methodologies.

Significant judgments and assumptions for the quantitative goodwill tests performed include discount rates, control premiums, terminal growth rates, relevant comparable company earnings multiples, and the amount and timing of expected future cash flows, including the revenue projections and profit margins.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessments of the Networks and DTC reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Networks and DTC reporting units, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions used in the discounted cash flow method related to revenue projections for the Networks and DTC reporting units and discount rate for the Networks reporting unit, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

During the second quarter of 2024, management concluded that 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.

The carrying value of the Networks reporting unit exceeded its fair value and the Company recorded a goodwill impairment charge of $9.1 billion.

Fair value was determined using a discounted cash flow method.

Significant judgments and assumptions for the quantitative goodwill assessments performed include discount rates, control premiums, terminal growth rates, relevant comparable company earnings multiples, and the amount and timing of expected future cash flows, including the revenue projections and profit margins.

The principal considerations for our determination that performing procedures relating to the interim and annual goodwill impairment assessments of the Networks reporting unit and the annual goodwill impairment assessment of the DTC reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Networks and DTC reporting units;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue projections for both the Networks and DTC reporting units, as well as discount rates for the Networks reporting unit;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessments, including controls over the valuation of the Networks and DTC reporting units.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimate of the Networks and DTC reporting units, (ii) evaluating the appropriateness of the discounted cash flow method used by management, (iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method, and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue projections and discount rate.

Evaluating management’s assumptions related to revenue projections involved evaluating whether the assumptions are reasonable considering (i) the current and past performance of the Networks and DTC reporting units, (ii) the consistency with external market and industry data, and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow method and (ii) the reasonableness of the discount rate assumption.

These procedures also included, among others, (i) testing management’s process for developing the fair value estimates of the Networks and DTC reporting units, (ii) evaluating the appropriateness of the discounted cash flow method used by management;

(iii) testing the completeness and accuracy of underlying data used in the discounted cash flow method;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue projections for both the Networks and DTC reporting units, as well as discount rates for the Networks reporting unit.

Evaluating management’s assumptions related to revenue projections involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the Networks and DTC reporting units;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

17 unchanged sentences

Restructuring and other charges 447 585 3,757

Impairments and loss (gain) on dispositions 77 117 ( 71 )

Impairments and loss on dispositions 9,603 77 117

Total costs and expenses 49,353 42,869 41,187

Operating (loss) income ( 1,548 ) ( 7,370 ) 2,012

Operating loss ( 10,032 ) ( 1,548 ) ( 7,370 )

Interest expense, net ( 2,017 ) ( 2,221 ) ( 1,777 )

Gain on extinguishment of debt 632 17 —

Loss from equity investees, net ( 121 ) ( 82 ) ( 160 )

Other (expense) income, net ( 12 ) 347 72

(Loss) income before income taxes ( 3,863 ) ( 8,960 ) 1,433

Income tax benefit (expense) 784 1,663 ( 236 )

Net (loss) income ( 3,079 ) ( 7,297 ) 1,197

Net income attributable to noncontrolling interests ( 38 ) ( 68 ) ( 138 )

Net income attributable to redeemable noncontrolling interests ( 9 ) ( 6 ) ( 53 )

Net (loss) income available to Warner Bros.

Other income (expense), net 150 ( 29 ) 347

Loss before income taxes ( 11,388 ) ( 3,863 ) ( 8,960 )

Income tax (expense) benefit ( 94 ) 784 1,663

Net loss ( 11,482 ) ( 3,079 ) ( 7,297 )

Net loss (income) attributable to noncontrolling interests 129 ( 38 ) ( 68 )

Net loss (income) attributable to redeemable noncontrolling interests 42 ( 9 ) ( 6 )

Net loss available to Warner Bros.

Discovery, Inc.

$ ( 11,311 ) $ ( 3,126 ) $ ( 7,371 )

Net (loss) income per share available to Warner Bros.

Net loss per share available to Warner Bros.

Discovery, Inc.

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2024 2023 2022

Net (loss) income $ ( 3,079 ) $ ( 7,297 ) $ 1,197

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Other comprehensive income (loss):

Currency translation

Change in net unrealized gains (losses) 799 ( 651 ) ( 290 )

Reclassification adjustment for net (gains) losses included in net income — ( 2 ) —

Change in net unrealized (losses) gains ( 358 ) 799 ( 651 )

Reclassification adjustment for net losses (gains) included in net income 49 — ( 2 )

Net change, net of income tax benefit (expense) of $ 3 , $ 30 and $( 53 )

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( 14 ) ( 21 ) ( 26 )

Change in net unrealized gains (losses) 16 4 134

Reclassification adjustment for net (gains) losses included in net income ( 12 ) ( 18 ) ( 25 )

Change in net unrealized gains 32 16 4

Reclassification adjustment for net gains included in net income ( 35 ) ( 12 ) ( 18 )

Net change, net of income tax benefit (expense) of $ 2 , $( 2 ) and $ 2

Comprehensive (loss) income ( 2,297 ) ( 7,990 ) 1,018

Comprehensive income attributable to noncontrolling interests ( 38 ) ( 68 ) ( 138 )

Comprehensive income attributable to redeemable noncontrolling interests ( 9 ) ( 6 ) ( 53 )

Comprehensive (loss) income attributable to Warner Bros.

( 3 ) 4 ( 14 )

Comprehensive loss ( 11,808 ) ( 2,297 ) ( 7,990 )

Comprehensive loss (income) attributable to noncontrolling interests 132 ( 38 ) ( 68 )

Comprehensive loss (income) attributable to redeemable noncontrolling interests 42 ( 9 ) ( 6 )

Comprehensive loss attributable to Warner Bros.

Discovery, Inc.

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( 8,244 ) ( 8,244 )

(Accumulated deficit) retained earnings ( 928 ) 2,205

Accumulated deficit ( 12,239 ) ( 928 )

Accumulated other comprehensive loss ( 1,067 ) ( 741 )

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Operating Activities

Net (loss) income $ ( 3,079 ) $ ( 7,297 ) $ 1,197

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Adjustments to reconcile net income to cash provided by operating activities:

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Equity in losses of equity method investee companies and cash distributions 167 157 211

Gain on extinguishment of debt ( 632 ) ( 17 ) —

Share-based compensation expense 557 500 412

Impairments and loss (gain) on dispositions — 116 ( 71 )

(Gain) loss from derivative instruments, net ( 151 ) ( 501 ) 49

Impairments and loss on dispositions 9,603 77 116

Gain from derivative instruments, net ( 16 ) ( 151 ) ( 501 )

Gain on sale of investments ( 227 ) — ( 199 )

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Receivables, net 1,012 312 181

Film and television content rights, games and payables, net ( 12,305 ) ( 12,562 ) ( 3,381 )

Film and television content rights, games and production payables, net ( 12,349 ) ( 12,305 ) ( 12,562 )

Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities ( 529 ) ( 820 ) 1,529

4 unchanged sentences

Cash (used for) acquired from business acquisitions and working capital settlement — ( 50 ) 3,612

Purchases of investments — — ( 103 )

Investments in and advances to equity investments ( 109 ) ( 112 ) ( 168 )

Proceeds from sales and maturities of investments 541 — 306

Proceeds from (payments for) derivative instruments, net 121 752 ( 86 )

Proceeds from derivative instruments, net 136 121 752

Other investing activities, net 31 98 9

2 unchanged sentences

Principal repayments of term loans — ( 4,000 ) ( 6,000 )

Principal repayments of debt, including premiums to par value and discount payment ( 2,860 ) ( 1,315 ) ( 574 )

Principal repayments of debt, including premiums and discounts to par value ( 5,043 ) ( 2,860 ) ( 1,315 )

Borrowings from debt, net of discount and issuance costs 1,617 1,496 —

Repayments under revolving credit facility ( 1,350 ) ( 125 ) —

Borrowings under revolving credit facility 1,350 125 —

Distributions to noncontrolling interests and redeemable noncontrolling interests ( 193 ) ( 301 ) ( 300 )

Purchase of redeemable noncontrolling interest — ( 49 ) —

Borrowings under commercial paper program 3,857 2,268 —

Repayments under commercial paper program ( 3,864 ) ( 2,270 ) —

Borrowings under commercial paper program and revolving credit facility 14,203 5,207 2,393

Repayments under commercial paper program and revolving credit facility ( 14,203 ) ( 5,214 ) ( 2,395 )

Other financing activities, net ( 130 ) ( 116 ) ( 125 )

15 unchanged sentences

Stock Retained

Earnings Accumulated

(Accumulated Deficit) Accumulated

Comprehensive

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December 31, 2021 12 $ — 736 $ 7 — $ — $ 11,086 $ ( 8,244 ) $ 9,580 $ ( 830 ) $ 11,599 $ 1,434 $ 13,033

Net income available to Warner Bros.

Net (loss) income available to Warner Bros.

Discovery, Inc.

2 unchanged sentences

Share-based compensation — — — — — — 399 — — — 399 — 399

Preferred stock conversion ( 1 ) — 11 — — — — — — — — — —

Conversion and issuance of common stock and noncontrolling interest in connection with the acquisition of the WarnerMedia Business ( 12 ) — ( 739 ) ( 7 ) 2,658 27 43,173 — — — 43,193 2 43,195

Tax settlements associated with share-based plans — — — — — — ( 54 ) — — — ( 54 ) — ( 54 )

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and attributable to noncontrolling interests — — — — — — — — ( 3,126 ) — ( 3,126 ) 38 ( 3,088 )

Other comprehensive loss — — — — — — — — — ( 693 ) ( 693 ) — ( 693 )

Other comprehensive income — — — — — — — — — 782 782 — 782

Share-based compensation — — — — — — 452 — — — 452 — 452

Conversion and issuance of common stock and noncontrolling interest in connection with the acquisition of the WarnerMedia Business ( 12 ) — ( 739 ) ( 7 ) 2,658 27 43,173 — — — 43,193 2 43,195

Reclassification of redeemable noncontrolling interest to noncontrolling interest and change in noncontrolling interest ownership (See Note 19) — — — — — — 2 — — — 2 60 62

Tax settlements associated with share-based plans — — — — — — ( 70 ) — — — ( 70 ) — ( 70 )

Redemption of redeemable noncontrolling interest — — — — — — 73 — — — 73 — 73

Dividends paid to noncontrolling interests — — — — — — — — — — — ( 271 ) ( 271 )

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Redeemable noncontrolling interest adjustments to redemption value — — — — — — 1 — ( 5 ) — ( 4 ) — ( 4 )

Other adjustments to stockholders' equity — — — — — — ( 2 ) — ( 2 ) — ( 4 ) — ( 4 )

December 31, 2023 — — — — 2,669 27 55,112 ( 8,244 ) ( 928 ) ( 741 ) 45,226 1,081 46,307

Net (loss) income available to Warner Bros.

Net loss available to Warner Bros.

Discovery, Inc.

and attributable to noncontrolling interests — — — — — — — — ( 11,311 ) — ( 11,311 ) ( 129 ) ( 11,440 )

Other comprehensive income — — — — — — — — — 782 782 — 782

Other comprehensive loss — — — — — — — — — ( 326 ) ( 326 ) ( 3 ) ( 329 )

Share-based compensation — — — — — — 497 — — — 497 — 497

Reclassification of redeemable noncontrolling interest to noncontrolling interest and change in noncontrolling interest ownership (See Note 19) — — — — — — 2 — — — 2 60 62

Tax settlements associated with share-based plans — — — — — — ( 71 ) — — — ( 71 ) — ( 71 )

Redemption of redeemable noncontrolling interest — — — — — — 73 — — — 73 — 73

DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions)

Dividends paid to noncontrolling interests — — — — — — — — — — — ( 157 ) ( 157 )

1 unchanged sentence

Redeemable noncontrolling interest adjustments to redemption value — — — — — — ( 21 ) — — — ( 21 ) — ( 21 )

Other adjustments to stockholders' equity — — — — — — ( 2 ) — ( 2 ) — ( 4 ) — ( 4 )

December 31, 2024 — $ — — $ — 2,684 $ 27 $ 55,560 $ ( 8,244 ) $ ( 12,239 ) $ ( 1,067 ) $ 34,037 $ 792 $ 34,829

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Description of Business

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.

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

2 unchanged sentences

• DTC - Our DTC segment primarily consists of our premium pay-TV and streaming services.

In December 2024, the Company announced that its board of directors had authorized the Company to implement a new corporate structure.

There were no changes to the Company’s reportable segments as a result of this announcement.

Merger with the WarnerMedia Business of AT&T

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(See Note 3 and Note 4).

Prior to the Merger, WarnerMedia Holdings, Inc.

(“WMH”) distributed $ 40.5 billion to AT&T (subject to working capital and other adjustments) in a combination of cash, debt securities, and WM’s retention of certain debt.

Prior to the Merger, WMH distributed $ 40.5 billion to AT&T (subject to working capital and other adjustments) in a combination of cash, debt securities, and WM’s retention of certain debt.

Discovery transferred purchase consideration of $ 42.4 billion in equity to AT&T shareholders in the Merger.

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Discovery was deemed to be the accounting acquirer of the WM Business for accounting purposes under U.S.

generally accepted accounting principles (“U.S.

therefore, Discovery is considered the Company’s predecessor and the historical financial statements of Discovery prior to April 8, 2022, are reflected in this Annual Report on Form 10-K as the Company’s historical financial statements.

1 unchanged sentence

Labor Disruption

The Writers Guild of America (“WGA”) and Screen Actors Guild-American Federation of Television and Radio Artists (“SAG-AFTRA”) went on strike in May and July 2023, respectively, following the expiration of their respective collective bargaining agreements with the AMPTP.

The WGA and SAG-AFTRA went on strike in May and July 2023, respectively, following the expiration of their respective collective bargaining agreements with the AMPTP.

The WGA strike ended on September 27, 2023, and a new collective bargaining agreement was ratified on October 9, 2023.

1 unchanged sentence

As a result of the strikes, we paused certain theatrical and television productions, which resulted in delayed production spending amongst other impacts.

The strikes had a material impact on the operations and results of the Company.

The strikes had a material impact on the operations and results of the Company in 2023.

This included a positive impact on cash flow from operations attributed to delayed production spend, and a negative impact on the results of operations attributed to timing and performance of the 2023 film slate, as well as the Company’s ability to produce, license, and deliver content.

The Company experienced content completion and delivery delays in the first quarter of 2024 due to the pause in television and theatrical productions in 2023, but did not experience any material impacts for the remainder of 2024.

DISCOVERY, INC.

26 unchanged sentences

The Company also records realized foreign currency transaction gains and losses upon settlement of the transactions.

Foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency are included in other (expense) income, net.

Foreign currency transaction gains and losses resulting from the conversion of the transaction currency to functional currency are included in other income (expense), net.

Cash and Cash Equivalents

53 unchanged sentences

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

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

Licensed rights to film and television programming are typically amortized over the useful life of the program’s license period on a straight-line basis (or per-play basis, if greater, for certain programming on the Company’s ad-supported networks), or accelerated basis for licensed original programs.

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

Licensed rights to film and television programming are typically amortized over the useful life of the program’s license period on a straight-line or accelerated basis.

The Company allocates the cost of multi-year sports programming arrangements over the contract period to each event or season based on its projected advertising revenue and an allocation of distribution revenue (estimated relative value).

13 unchanged sentences

For content that is predominantly monetized individually, the Company utilizes estimates including ultimate revenues and additional costs to be incurred (including exploitation and participation costs), in order to determine whether the carrying value of a film or television program is impaired.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Game Development Costs

2 unchanged sentences

Unamortized capitalized game production and development costs are stated at the lower of cost, less accumulated amortization, or net realizable value and reported in “Film and television content rights and games” on the consolidated balance sheets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company holds investments in equity method investees and equity investments with and without readily determinable fair values.

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The investments are measured at fair value based on a quoted market price per unit in active markets multiplied by the number of units held without consideration of transaction costs (Level 1).

Gains and losses are recorded in other (expense) income, net on the consolidated statements of operations.

Gains and losses are recorded in other income (expense), net on the consolidated statements of operations.

(See Note 10 and Note 18.)

2 unchanged sentences

Equity investments without readily determinable fair values are recorded at cost and adjusted for subsequent observable price changes as of the date that an observable transaction takes place.

Adjustments for observable price changes are recorded in other (expense) income, net.

Adjustments for observable price changes are recorded in other income (expense), net.

(See Note 10 and Note 18.)

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The Company elected the short-term lease recognition exemption and leases with initial terms of one year or less are not recorded in the consolidated balance sheets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A rate implicit in the lease when readily determinable is used in arriving at the present value of lease payments.

As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on information available at lease commencement date for most of its leases.

As most of the Company’s leases do not provide sufficient information to determine an implicit rate, the Company uses an incremental borrowing rate based on information available at lease commencement date for most of its leases.

The incremental borrowing rate is based on the Company's U.S.

dollar denominated senior unsecured borrowing curves using public credit ratings adjusted down to a collateralized basis using a combination of recovery rate and credit notching approaches and translated into major contract currencies as applicable.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option.

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Defined Benefit Plans

The Company maintains defined benefit pension plans covering certain U.S.

employees and several non-U.S.

pension plans.

The Company participates in and/or sponsors a qualified defined benefit pension plan that covers certain U.S.

based employees and several U.S.

nonqualified defined benefit pension plans that are noncontributory.

Defined benefit plan obligations are based on various assumptions used by the Company’s actuaries in calculating these amounts.

5 unchanged sentences

If the Company believes that, as a result of its qualitative assessment, it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, a quantitative impairment test is not required.

If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit goodwill exceeds its fair value, a quantitative impairment test is performed.

The Company typically performs a quantitative impairment test every three years, irrespective of the outcome of the Company’s qualitative assessment.

If a qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its fair value, a quantitative impairment test is performed.

If the carrying amount of the reporting unit exceeds its fair value, an impairment charge is recorded for the amount by which the carrying amount exceeds the fair value, not to exceed the amount of goodwill recorded for that reporting unit.

The Company typically performs a quantitative impairment test at least every three years, irrespective of the outcome of the Company’s qualitative assessment.

Long-lived Assets

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franchises and other intangible assets;

lease ROU assets;

and property and equipment are not required to be tested for impairment annually, but rather whenever circumstances indicate that the carrying amount of the asset may not be recoverable.

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Significant judgments used for long-lived asset impairment assessments include identifying the appropriate asset groupings that represent the lowest level for which cash flows are largely independent and primary assets within those groupings, determining whether events or circumstances indicate that the carrying amount of the asset may not be recoverable, determining the future cash flows for the assets involved and assumptions applied in determining fair value, which include reasonable discount rates, growth rates, market risk premiums and other assumptions about the economic environment.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Method Investments and Equity Investments Without Readily Determinable Fair Value

Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis.

Equity method investments are written down to fair value if there is evidence of a loss in value that is other-than-temporary.

The Company may estimate the fair value of its equity method investments by considering recent investee equity transactions, DCF analysis, recent operating results, comparable public company operating cash flow multiples and, in certain situations, balance sheet liquidation values.

If the fair value of the investment has dropped below its carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value, and general market conditions.

Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis and are written down to fair value if there is evidence of a loss in value that is other-than-temporary.

The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions.

If declines in the value of the equity method investments are determined to be other-than-temporary, a loss is recorded in earnings in the current period as a component of loss from equity investees, net on the consolidated statements of operations.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For equity investments without readily determinable fair value, investments are recorded at cost and adjusted for subsequent observable price changes as of the date that an observable transaction takes place.

The Company performs a qualitative assessment on a quarterly basis to determine if any observable price changes have occurred.

If the qualitative assessment indicates that an observable price change has occurred, a gain or loss is recorded equal to the difference between the fair value and carrying value in the current period as a component of other (expense) income, net.

(See Note 10.)

2 unchanged sentences

At the inception of a derivative contract, the Company designates the derivative based on the Company’s intentions and expectations as to the likely effectiveness as a hedge (see Note 13), as follows:

• a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”);

• a hedge of net investments in foreign operations (“net investment hedge”);

• a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”);

• a hedge of a forecasted transaction or the exposure to variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow hedge”);

• a hedge of the foreign currency exposure from net investments in foreign operations (“net investment hedge”);

• a hedge of the exposure to changes in fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”);

• an instrument with no hedging designation.

10 unchanged sentences

For those derivative instruments designated as fair value hedges, the changes in fair value of the derivative instruments, including offsetting changes in fair value of the hedged items are recorded in the statements of operations in the same line item where the hedged risk occurs.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

No Hedging Designation

7 unchanged sentences

Cash flows from periodic settlement of interest on cross currency swaps and derivative contracts not designated as hedges are reported as investing activities in the consolidated statements of cash flows.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Treasury Stock

24 unchanged sentences

Actual audience and delivery information is published by independent ratings services.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Digital advertising contracts typically contain promises to deliver guaranteed impressions in specific markets against a targeted demographic during a stipulated period of time.

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The Company allocates the consideration to each spot based on its relative standalone selling price.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Distribution revenues are generated from fees charged to network distributors, which include cable, direct-to-home (“DTH”) satellite, telecommunications and digital service providers, and DTC subscribers.

11 unchanged sentences

For DTC subscription services, the Company recognizes revenue as the service fee is earned over the subscription period.

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.

When linear and DTC distribution arrangements are offered in a bundle deal, consideration is allocated to each deliverable based on its relative standalone selling price, and revenue is recognized as described above.

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.

In general, fixed payments for the licensing of intellectual property are recognized as revenue at either the inception of the license term or as sales-based royalties as underlying sales occur if the intellectual property has significant standalone functionality (“functional IP,” such as a produced film or television series), or over the corresponding license term if the licensee’s ability to derive utility is dependent upon our continued support of the intellectual property throughout the license term (“symbolic IP,” such as a character or a brand).

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Fixed license fee revenues from the subsequent licensing of feature films and television programs in the off-network cable, premium pay, syndication, streaming and international television and streaming markets are also recognized upon availability of the content for use by the licensee.

For television/streaming service licenses that include multiple titles with a fixed license fee across all titles, the availability of each title is considered a separate performance obligation, and the fixed fee is allocated to each title and recognized as revenue when the title is available for use by the licensee.

For television/streaming service licenses that include multiple titles with a fixed license fee across all titles, the availability of each title is considered a separate performance obligation, and the fixed fee is allocated to each title based on its estimated relative standalone selling price and recognized as revenue when the title is available for use by the licensee.

When the term of an existing agreement is renewed or extended, revenues are recognized when the licensed content becomes available under the renewal or extension.

1 unchanged sentence

these are recognized as revenue as the applicable underlying sales occur.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from home entertainment sales of feature films and television programs in physical format are generally recognized at the later of the delivery date or the date when made widely available for sale or rental by retailers (“street date”) based on gross sales less a provision for estimated returns, rebates and pricing allowances.

1 unchanged sentence

Revenues from the licensing of television programs and films for electronic sell-through or video-on-demand are recognized when the product has been purchased by and made available to the consumer to either download or stream.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from sales of console games generally follow the same recognition methods as film and television programs in the home entertainment market.

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Excess tax benefits realized from the exercise of stock options and vested RSUs, PRSUs and the ESPP are reported as cash inflows from operating activities on the consolidated statements of cash flows.

PRSUs represent the contingent right to receive shares of WBD common stock, and vest over one year based on continuous service and the attainment of qualitative and quantitative performance targets.

The number of PRSUs that vest typically ranges from 0 % to 100 % based on a sliding scale where achieving or exceeding the performance target will result in 100 % of the PRSUs vesting and achieving 70 % or less of the target will result in no portion of the PRSUs vesting.

PRSUs represent the contingent right to receive shares of WBD common stock, and typically vest over one to three years based on continuous service and the attainment of qualitative and quantitative performance targets.

The number of PRSUs that vest typically ranges from 0 % to 300 % based on a sliding scale where achieving or exceeding the performance target will result in 100 % to 300 % of the PRSUs vesting and achieving 70 % or less of the target will result in no portion of the PRSUs vesting.

Additionally, for certain PRSUs, the Company’s Compensation Committee has discretion in determining the final number of units that vest, but may not increase the amount of any PRSU award above 100 %.

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Compensation expense for PRSUs is based on the fair value of WBD common stock on the date of grant.

Compensation expense for PRSUs that vest based on achieving subjective operating performance conditions or in situations where the executive may withhold taxes in excess of the maximum statutory requirement, is remeasured at fair value each reporting period until the award is settled.

Compensation expense for PRSUs that vest based on achieving subjective operating performance conditions or in situations where the employee may withhold taxes in excess of the maximum statutory requirement, is remeasured at fair value each reporting period until the award is settled.

Compensation expense for all PRSUs is recognized ratably over the vesting period only when it is probable that the operating performance conditions will be achieved.

The Company records a cumulative adjustment to compensation expense for PRSUs if there is a change in the determination of the probability that the operating performance conditions will be achieved.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

RSUs represent the contingent right to receive shares of WBD common stock, substantially all of which vest ratably each year over periods of three to five years based on continuous service.

Compensation expense for RSUs is based on the fair value of the award on the date of grant and is recognized ratably during the vesting period.

RSU awards generally provide for accelerated vesting upon retirement or after reaching a specified age and years of service.

RSU awards generally provide for accelerated vesting upon termination from the Company if the employee has reached a specified age and years of service and if the grant has been held at least six months from the grant date.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

Stock options are granted with an exercise price equal to or in excess of the closing market price of WBD common stock on the date of grant.

Stock options vest ratably over four years from the grant date based on continuous service and expire seven years from the date of grant.

Stock option awards generally provide for accelerated vesting upon retirement or after reaching a specified age and years of service.

Stock options are granted with an exercise price equal to or in excess of the closing market price of WBD common stock on the date of grant and vest ratably over three or four years from the grant date based on continuous service and expire seven years from the date of grant.

Compensation expense for stock options is based on the fair value of the award on the date of grant and is recognized ratably during the vesting period.

Stock options generally provide for accelerated vesting upon termination from the Company if the employee has reached a specified age and years of service and if the grant has been held at least six months from the grant date.

The fair values of stock options are estimated using the Black-Scholes option-pricing model.

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Advertising costs are expensed as incurred and are presented in selling, general and administrative expenses.

Advertising costs paid to third parties totaled $ 2,428 million, $ 2,519 million and $ 1,247 million for years ended December 31, 2023, 2022 and 2021, respectively.

Third-party advertising costs were $ 2,152 million, $ 2,428 million and $ 2,519 million for years ended December 31, 2024, 2023 and 2022, respectively.

Collaborative Arrangements

The Company’s collaborative arrangements primarily relate to arrangements entered into with third parties to jointly finance and distribute certain theatrical and television productions and an arrangement entered into with CBS Broadcasting, Inc.

The Company’s collaborative arrangements primarily relate to arrangements entered into with third parties to jointly finance and distribute certain theatrical and television productions, arrangements entered into with third parties to bundle streaming services, and an arrangement entered into with CBS Broadcasting, Inc.

(“CBS”) surrounding The National Collegiate Athletic Association (the “NCAA”).

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The substance of these arrangements is that the third-party partner owns an interest in the film or series;

therefore, in each period, the Company reflects in the consolidated statements of operations either a charge or benefit to cost of revenues, excluding depreciation and amortization to reflect the estimate of the third-party partner’s interest in the profits or losses incurred on the film or series using the individual film forecast method, based on the terms of the arrangement.

therefore, in each period, based on the terms of the arrangement, the Company reflects the estimate of the third-party partner’s interest in the profits or losses incurred on the film or series, using the individual film forecast method, in cost of revenues, excluding depreciation and amortization in the consolidated statements of operations.

On occasion, the Company acquires the economic interest in a film from a producing partner;

in this case, the Company capitalizes the acquisition cost as a content asset in film and television content rights and games and accounts for the third-party partner’s share in applicable distribution results as described above.

Bundled streaming service arrangements are evaluated at inception to determine whether it is a collaborative agreement based on the facts and circumstances.

In the cases of bundled collaborative agreements, the partners share the expenses incurred and revenues generated.

In each period, the Company reflects its share of expenses and revenues in the consolidated statements of operations.

The arrangement among Turner, CBS and the NCAA provides Turner and CBS with rights to the NCAA Division I Men’s Basketball Championship Tournament (the “NCAA Tournament”) in the U.S.

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However, if the amount paid for the programming rights fee and production costs in any given year exceeds advertising and sponsorship revenues for that year, CBS’ share of such shortfall is limited to specified annual caps.

The amounts recorded pursuant to the loss cap were not material during the year ended December 31, 2023.

No amounts were recorded pursuant to the loss cap during the year ended December 31, 2022 since the 2022 cap was finalized prior to the Merger.

The amounts recorded pursuant to the loss cap were not material during the years ended December 31, 2024 and 2023.

In accounting for this arrangement, the Company records advertising revenue for the advertisements aired on its networks and amortizes its share of the programming rights fee based on the estimated relative value of each season over the term of the arrangement.

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Such examinations may result in future tax and interest assessments by these taxing authorities.

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for uncertain tax positions unless the Company determines 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.

In determining the Company’s tax provision for financial reporting purposes, the Company establishes a reserve for unrecognized tax benefits unless the Company determines 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.

The Company includes interest and where appropriate, penalties, as a component of income tax expense on the consolidated statements of operations.

There is significant judgment involved in determining the amount of reserve and whether positions taken on the Company’s tax returns are more likely than not to be sustained, which involve 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.

The Company adjusts its tax reserve estimates periodically because of ongoing examinations by, and settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations.

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 the Company’s 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.

The Company adjusts its unrecognized tax benefits periodically because of ongoing examinations by, and settlements with, various taxing authorities, as well as changes in tax laws, regulations and interpretations.

In connection with the Merger, the Company entered into a tax matters agreement (“TMA”) with AT&T.

Pursuant to the TMA, the Company is responsible for tax liabilities of the WM Business related to the periods prior to AT&T’s ownership of the WM Business (June 14, 2018), and AT&T is responsible for tax liabilities of the WM Business related to the period for which they owned the WM Business (June 15, 2018 through April 8, 2022).

With respect to uncertain tax positions related to jurisdictions that have joint and several liability among members of the AT&T tax filing group during the AT&T ownership period, the Company has not recorded any liabilities for uncertain tax positions or indemnification receivables related to matters that were attributable to jurisdictions that have joint and several liability among members of the AT&T filing group since AT&T was determined to be the primary obligor.

With respect to unrecognized tax benefits related to jurisdictions that have joint and several liability among members of the AT&T tax filing group during the AT&T ownership period, the Company has not recorded any liabilities for unrecognized tax benefits or indemnification receivables related to matters that were attributable to jurisdictions that have joint and several liability among members of the AT&T filing group since AT&T was determined to be the primary obligor.

Concentrations Risk

No individual customer accounted for more than 10% of total consolidated revenues for 2024, 2023 or 2022.

The Company had two customers that represented more than 10% of distribution revenue in 2023, which in aggregate totaled 24 %.

The Company had one customer that represented more than 10% of distribution revenue in 2024, which totaled 13 %.

As of December 31, 2024 and 2023, the Company’s trade receivables do not represent a significant concentration of credit risk as the customers and markets in which the Company operates are varied and dispersed across many geographic areas.

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The Company also has a limited number of arrangements where collateral is required to be posted in the instance that certain fair value thresholds are exceeded.

The Company also has cash posted as collateral related to the Company’s revolving receivables program.

Additionally, the Company may be required to post collateral related to its revolving receivables program.

As of December 31, 2024, the Company had posted $ 105 million of collateral under these arrangements.

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Accounting and Reporting Pronouncements Adopted

Supplier Finance Programs

In September 2022, the Financial Accounting Standards Board (“FASB”) issued guidance updating the disclosure requirements for supplier finance program obligations.

This guidance provides specific authoritative guidance for disclosure of supplier finance programs, including key terms of such programs, amounts outstanding, and where the obligations are presented in the statement of financial position.

The Company adopted the guidance effective January 1, 2023 and has provided the required disclosures in Note 18.

Accounting and Reporting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued guidance updating the disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact this guidance will have on its disclosures.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively to all prior periods presented in the financial statements.

The Company adopted the guidance effective January 1, 2024 and has provided the required annual disclosures in Note 23.

Accounting and Reporting Pronouncements Not Yet Adopted

In December 2023, the FASB issued guidance updating the disclosure requirements for income taxes, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

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however, retrospective application is permitted.

The Company did not early adopt the amendments as of December 31, 2024.

The Company is currently evaluating the impact of this guidance and will update its tax disclosures upon adoption.

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued guidance updating the disclosure requirements for income statement expenses, primarily through disaggregation of certain types of expenses presented on the income statement.

The amendments are effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either:

(1) prospectively to financial statements issued for reporting periods after the effective date, or (2) retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact this guidance will have on its disclosures.

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2024 2023 2022

Net (loss) income $ ( 3,079 ) $ ( 7,297 ) $ 1,197

Net loss $ ( 11,482 ) $ ( 3,079 ) $ ( 7,297 )

Allocation of undistributed income to Series A-1 convertible preferred stock — — ( 49 )

Net income attributable to noncontrolling interests ( 38 ) ( 68 ) ( 138 )

Net income attributable to redeemable noncontrolling interests ( 9 ) ( 6 ) ( 53 )

Net loss (income) attributable to noncontrolling interests 129 ( 38 ) ( 68 )

Net loss (income) attributable to redeemable noncontrolling interests 42 ( 9 ) ( 6 )

Redeemable noncontrolling interest adjustments of carrying value to redemption value (redemption value does not equal fair value) ( 3 ) — —

Net (loss) income allocated to Warner Bros.

Discovery, Inc.

Series A common stockholders for basic and diluted net (loss) income per share $ ( 3,126 ) $ ( 7,420 ) $ 912

Allocation of undistributed income to Series A-1 convertible preferred stockholders — — 110

Net (loss) income allocated to Warner Bros.

Net loss available to Warner Bros.

Discovery, Inc.

Series A common stockholders for diluted net (loss) income per share $ ( 3,126 ) $ ( 7,420 ) $ 1,022

Series A common stockholders for basic and diluted earnings per share $ ( 11,314 ) $ ( 3,126 ) $ ( 7,420 )

Denominator — weighted average:

Common shares outstanding — basic 2,436 1,940 588

Impact of assumed preferred stock conversion — — 71

Dilutive effect of share-based awards — — 5

Common shares outstanding — diluted 2,436 1,940 664

Basic net (loss) income per share allocated to common stockholders $ ( 1.28 ) $ ( 3.82 ) $ 1.55

Diluted net (loss) income per share allocated to common stockholders $ ( 1.28 ) $ ( 3.82 ) $ 1.54

Common shares outstanding — basic and diluted 2,450 2,436 1,940

Basic net loss per share allocated to common stockholders $ ( 4.62 ) $ ( 1.28 ) $ ( 3.82 )

Diluted net loss per share allocated to common stockholders $ ( 4.62 ) $ ( 1.28 ) $ ( 3.82 )

The table below presents the details of share-based awards that were excluded from the calculation of diluted earnings per share (in millions).

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Anti-dilutive share-based awards

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACQUISITIONS AND DISPOSITIONS

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The Merger is also expected to create significant cost synergies for the Company.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Purchase Price

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AT&T has raised certain claims associated with the Merger that the Company believes are without merit.

In connection with the dispute, the Company established an immaterial accrual in the first quarter of 2024.

Purchase Price Allocation

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Goodwill reflects the assembled workforce of WM as well as revenue enhancements, cost savings and operating synergies that are expected to result from the Merger.

The goodwill recorded as part of the Merger has been allocated to the Studios, Networks and DTC reportable segments in the amounts of $ 9,308 million, $ 7,074 million and $ 5,727 million, respectively, and is not deductible for tax purposes.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The goodwill recorded as part of the Merger was allocated to the Studios, Networks and DTC reportable segments in the amounts of $ 9,308 million, $ 7,074 million and $ 5,727 million, respectively, and is not deductible for tax purposes.

During 2023, the Company finalized the fair value of assets acquired and liabilities assumed.

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Total consideration paid $ 42,376 $ — $ 42,376

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The fair values of the assets acquired and liabilities assumed were determined using several valuation approaches including, but not limited to, various cost approaches and income approaches, such as relief from royalty, multi-period excess earnings, and with-or-without methods.

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The Company incurred acquisition-related costs of $ 162 million and $ 406 million for the years ended December 31, 2023 and 2022, respectively.

These costs were associated with legal and professional services and integration activities and were recognized as operating expenses on the consolidated statement of operations.

These costs were associated with legal and professional services and integration activities and were recognized as operating expenses on the consolidated statements of operations.

Additionally, the expense related to the issuance of additional shares of common stock in connection with the conversion of Advance/Newhouse Programming’s Series A-1 Preferred Stock was $ 789 million and was recorded as a transaction expense in selling, general and administrative expense upon the closing of the Merger.

(See Note 3.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result of the Merger, WM’s assets, liabilities, and operations were included in the Company’s consolidated financial statements from the Closing Date.

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Discovery, Inc.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma combined financial information includes, 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.

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

In May 2024, the Company sold its 50 % interest in All3Media, an equity method investment, for proceeds of $ 324 million and recorded a gain of $ 203 million in other income (expense), net in the consolidated statements of operations.

In October 2024, the Company sold its 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 and recorded a gain of $ 61 million in other income (expense), net in the consolidated statements of operations.

During 2023, the Company sold or exited all of the AT&T SportsNets.

In October 2022, the Company sold its 49 % stake in Golden Maple Limited (known as Tencent Video VIP) for proceeds of $ 143 million and recorded a gain of $ 55 million, and in April 2022 completed the sale of its minority interest in Discovery Education for proceeds of $ 138 million and recorded a gain of $ 133 million.

Also, in September 2022, the Company sold 75 % of its interest in The CW Network to Nexstar Media Inc.

In September 2022, the Company sold 75 % of its interest in The CW Network to Nexstar Media Inc.

(“Nexstar”), in exchange for Nexstar agreeing to fund a majority of The CW Network’s expenses and the retention of the Company’s share of certain receivables that existed prior to the transaction.

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The Company recorded an immaterial gain and retained a 12.5 % ownership interest in The CW Network, which is accounted for as an equity method investment.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In June 2021, the Company completed the sale of its Great American Country network to Hicks Equity Partners for a sale price of $ 90 million and recorded a gain of $ 76 million.

GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying value of goodwill attributable to each business unit were as follows (in millions).

Networks International

Networks Studios Networks DTC Total

Studios Networks DTC Total

December 31, 2022 $ 8,963 $ 17,557 $ 7,918 $ 34,438

Segment recast ( 10,813 ) ( 2,059 ) — 10,555 2,317 —

Acquisitions (See Note 4)

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December 31, 2023 $ 9,272 $ 17,630 $ 8,067 $ 34,969

Acquisitions (See Note 4)

— — 245 ( 24 ) 127 348

Impairment of goodwill — ( 9,147 ) — ( 9,147 )

Foreign currency translation and other adjustments ( 75 ) ( 64 ) ( 16 ) ( 155 )

December 31, 2024 $ 9,197 $ 8,419 $ 8,051 $ 25,667

The carrying amount of goodwill at the Networks segment included accumulated impairments of $ 1.6 billion as of December 31, 2023 and 2022.

The carrying amount of goodwill at the Networks segment included accumulated impairments of $ 10.8 billion and $ 1.6 billion as of December 31, 2024 and 2023, respectively.

The Studios and DTC segments did not include any accumulated impairments as of December 31, 2024 and 2023.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets

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For assets in which the economic benefits are expected to be recognized unevenly over the useful life of the asset, an accelerated method such as the sum-of-the-months’ digits method is utilized.

Amortization expense related to finite-lived intangible assets was $ 6.9 billion, $ 6.2 billion and $ 1.3 billion for the years ended December 31, 2023, 2022 and 2021, respectively.

Amortization expense related to finite-lived intangible assets was $ 5,935 million, $ 6,854 million and $ 6,237 million for the years ended December 31, 2024, 2023 and 2022, respectively.

During 2024, as a result of the goodwill impairment charge discussed below and recorded in the second quarter of 2024, and the long-term trends and risks associated with the Company’s Networks reporting unit, the Company reassessed and shortened the useful lives for certain of its linear networks trade names.

This change was considered a change in estimate, was accounted for prospectively, and resulted in incremental amortization expense of $ 184 million for the year ended December 31, 2024.

During 2023, the Company reassessed the useful lives and amortization methods for its linear networks and HBO trademarks and trade names, and its DC franchise, and concluded the pattern of amortization should be accelerated.

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Impairment Analysis

We perform fair value-based impairment tests of goodwill and intangible assets with indefinite lives on an annual basis, and between annual tests if an event occurs or if circumstances change that would more likely than not reduce the fair value of a reporting unit or an indefinite-lived intangible asset below its carrying value.

Significant judgments and assumptions for all quantitative goodwill tests performed include discount rates, control premiums, terminal growth rates, relevant comparable company earnings multiples and the amount and timing of expected future cash flows, including revenue growth rates and profit margins.

2024 Impairment Analysis

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

During the second quarter of 2024, the Company performed goodwill and intangible assets impairment monitoring procedures for all of its 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.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As a result, the Company elected to perform a quantitative impairment assessment for all of its 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 the Company 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 the Company’s financial covenants under the Company’s debt arrangements.

As of October 1, 2024, the Company performed a quantitative goodwill impairment assessment for all of its 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%.

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.

2022 Impairment Analysis

For the 2022 annual impairment test, the Company performed a quantitative goodwill impairment assessment for all reporting units consistent with the Company’s accounting policy.

The Company continues to monitor its reporting units for triggers that could impact the recoverability of goodwill.

Long-term trends and risks the Company is monitoring in its 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 the Company’s Networks and DTC reporting units;

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

linear advertising market associated with the Company’s Networks reporting unit;

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

• risks in executing the projected growth strategies of the Company’s DTC reporting unit.

2023 and 2022 Impairment Analysis

For the 2023 and 2022 annual impairment tests, the Company performed a quantitative goodwill impairment assessment for all reporting units.

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

2021 Impairment Analysis

For the 2021 annual impairment test, the Company performed a qualitative goodwill impairment assessment for all reporting units and determined that it was more likely than not that the fair value of those reporting units exceeded their carrying values, therefore, no quantitative goodwill impairment analysis was performed.

Fair Value Measurements

The determination of fair value of the Company’s reporting units represents a Level 3 fair value measurement in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

Changes in significant judgments and estimates could significantly impact the determined fair value of the reporting unit or the valuation of intangible assets.

Changes to assumptions that would decrease the fair value of the reporting unit may result in corresponding increases to the impairment of goodwill at the reporting unit.

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.

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

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

The Company also initiated a strategic realignment plan associated with its Warner Bros.

Pictures Animation group during the year ended December 31, 2023.

In connection with the completion of its Merger with the WarnerMedia Business of AT&T on April 8, 2022, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company, which include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities, and other contract termination costs.

While the Company’s restructuring efforts are ongoing, the merger-related restructuring program was considered to be substantially completed as of December 31, 2024.

During 2023, the Company initiated a strategic realignment plan associated with its Warner Bros.

Pictures Animation group.

During 2024, the Company initiated two additional restructuring initiatives;

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

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Restructuring and other charges by reportable segment and corporate and inter-segment eliminations were as follows (in millions).

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Total restructuring and other charges $ 447 $ 585 $ 3,757

During the year ended December 31, 2024, restructuring and other charges primarily included organization restructuring costs of $ 246 million, content impairments and other content development costs and write-offs of $ 165 million, and contract terminations and other restructuring costs of $ 36 million.

Facility consolidation impairment charges of $ 411 million were recorded in impairment and loss on dispositions in the consolidated statements of operations during the year ended December 31, 2024.

During the year ended December 31, 2023, restructuring and other charges primarily included content impairments and other content development costs and write-offs of $ 115 million, contract terminations and facility consolidation activities of $ 111 million, and organization restructuring costs of $ 359 million.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2022, restructuring and other charges primarily included charges related to strategic content programming initiatives, inclusive of content impairments, content development costs and write-offs, content contract terminations, and other content related charges of $ 3,133 million.

In addition, there were restructuring charges related to organization restructuring of $ 607 million and facility consolidation activities and other contract terminations of $ 17 million.

Changes in restructuring liabilities recorded in accrued liabilities and other noncurrent liabilities by major category and by reportable segment and corporate and inter-segment eliminations were as follows (in millions).

Studios Networks DTC Corporate and Inter-Segment Eliminations Total

December 31, 2021 (a)

$ — $ 15 $ — $ 4 $ 19

Acquisitions (See Note 4 )

Changes in restructuring liabilities recorded in accrued liabilities and other noncurrent liabilities by major category and by reportable segment and corporate were as follows (in millions).

Studios Networks DTC Corporate Total

December 31, 2022

$ 156 $ 361 $ 188 $ 159 $ 864

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Employee termination accruals, net 47 175 60 78 360

Other accruals — 2 — — 2

Cash paid ( 153 ) ( 352 ) ( 176 ) ( 172 ) ( 853 )

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December 31, 2024 $ 95 $ 105 $ 31 $ 58 $ 289

(a) Prior period balances have been recast to conform to the current period presentation as a result of the Merger and segment recast.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregated Revenue

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Totals $ 12,192 $ 21,244 $ 10,154 $ ( 2,269 ) $ 41,321

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2022

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Contract assets were not material as of December 31, 2024 and 2023.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transaction Price Allocated to Remaining Performance Obligations

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However, there are certain other distribution arrangements that are fixed price or contain minimum guarantees that extend beyond one year.

The Company recognizes revenue for fixed fee distribution contracts on a monthly basis based on minimum monthly fees by calculating one twelfth of annual license fees specified in its distribution contracts, or based on the pro-rata fees earned calculated on the license fees specified in the distribution contract.

The Company recognizes revenue for fixed fee distribution contracts monthly based on minimum monthly fees by calculating one twelfth of annual license fees specified in its distribution contracts, or based on the pro-rata fees earned calculated on the license fees specified in the distribution contract.

The Company’s content licensing contracts and sports sublicensing deals are licenses of functional intellectual property.

9 unchanged sentences

Advertising 757 Through 2030

Other 133 Through 2029

Total $ 10,719

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The value of unsatisfied performance obligations disclosed above does not include:

(i) contracts involving variable consideration for which revenues are recognized in accordance with the sales or usage-based royalty exception, and (ii) contracts with an original expected length of one year or less, such as most advertising contracts;

(i) contracts involving variable consideration for which revenues are recognized in accordance with the sales or usage-based royalty exception, which typically have a similar duration as the contracts disclosed above, and (ii) contracts with an original expected length of one year or less, such as most advertising contracts;

however for content licensing revenues, including revenues associated with the licensing of theatrical and television product for television and streaming services, the Company has included all contracts regardless of duration.

1 unchanged sentence

Revolving Receivables Program

During 2023, the Company amended its revolving receivables program to reduce the facility limit to $ 5,500 million and extend the program to August 2024.

The Company’s bankruptcy-remote consolidated subsidiary held $ 3,088 million of pledged receivables as of December 31, 2023 in connection with the Company’s revolving receivables program.

For the years ended December 31, 2023 and 2022, the Company recognized $ 79 million and $ 256 million, respectively, in selling, general and administrative expenses from the revolving receivables program in the consolidated statements of operations (net of non-designated derivatives in 2023).

(See Note 13.) The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $ 5,200 million and $ 5,366 million as of December 31, 2023 and 2022, respectively.

During 2024, the Company amended its revolving receivables program to reduce the facility limit to $ 5,200 million and extend the program to June 2025.

The outstanding portfolio of receivables derecognized from our consolidated balance sheets was $ 4,637 million and $ 5,200 million as of December 31, 2024 and 2023, respectively.

For the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 116 million, $ 79 million, and $ 256 million, respectively, in selling, general and administrative expenses from the revolving receivables program in the consolidated statements of operations (net of non-designated derivatives in 2024 and 2023).

(See Note 13.)

The following table presents a summary of receivables sold (in millions).

1 unchanged sentence

Gross receivables sold/cash proceeds received $ 15,254 $ 13,340

Collections reinvested under revolving agreement ( 13,506 ) ( 10,491 )

Collections reinvested under revolving receivables program ( 15,818 ) ( 13,506 )

Net cash proceeds remitted $ ( 564 ) $ ( 166 )

Net receivables sold $ 15,153 $ 13,178

Obligations recorded $ 405 $ 377

Obligations recorded (Level 3) $ 361 $ 405

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents a summary of the amounts transferred or pledged (in millions).

10 unchanged sentences

This accounts receivable factoring agreement is separate and distinct from the revolving receivables program.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENT RIGHTS

4 unchanged sentences

Live programming includes licensed sports rights and related advances.

The prior year presentation has been recast to conform to the current period’s presentation.

The table below presents the components of content rights (in millions).

17 unchanged sentences

Total noncurrent film and television content rights and games $ 19,102

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

16 unchanged sentences

Total noncurrent film and television content rights and games $ 21,229

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Content amortization consisted of the following (in millions).

5 unchanged sentences

Content expense includes amortization, impairments, and development expense and is generally a component of costs of revenues on the consolidated statements of operations.

For the year ended December 31, 2024, total content impairments were $ 558 million, of which content impairments and other content development costs and write-offs of $165 million were primarily due to the abandonment of certain titles in connection with the fourth quarter 2024 restructuring initiative associated with the Warner Bros.

Games group and are reflected in restructuring and other charges in the Studios segment.

For the year ended December 31, 2023, total content impairments were $ 326 million, of which content impairments and other content development costs and write-offs of $115 million were primarily due to the abandonment of certain films in connection with the third quarter 2023 strategic realignment plan associated with the Warner Bros.

2 unchanged sentences

Content impairments of $ 2,756 million and content development write-offs of $ 377 million were due to the abandonment of certain content categories in connection with the strategic realignment of content following the Merger and are reflected in restructuring and other charges in the Studios, Networks and DTC segments.

(See Note 6.) No content impairments were recorded as a component of restructuring for the year ended December 31, 2021.

(See Note 6.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents the expected future amortization expense of the Company’s film and television content rights, licensed content and advances, live programming rights and advances, and games as of December 31, 2024 (in millions).

6 unchanged sentences

Live programming and advances 1,136 33 25

Games 87 16 —

Completed and not released investment in films and television content:

2 unchanged sentences

At December 31, 2024, acquired film and television libraries are being amortized using straight-line or other accelerated amortization methods through 2033.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s equity investments consisted of the following, net of investments recorded in other noncurrent liabilities (in millions).

9 unchanged sentences

Total investments $ 1,115 $ 1,487

(a) Investments without readily determinable fair values included $ 17 million as of December 31, 2023 and $ 10 million as of December 31, 2022 that were included in prepaid expenses and other current assets.

(a) Investments without readily determinable fair values included $ 17 million as of December 31, 2024 and December 31, 2023 that were included in prepaid expenses and other current assets.

Equity Method Investments

During the year ended December 31, 2022, the Company entered into an agreement with British Telecommunications Plc (“BT”) to form a 50:50 joint venture to create a new premium sports offering for the United Kingdom and Ireland.

The Company has determined the joint venture is a VIE and accounts for its investment in the joint venture as an equity method investment.

Additionally, the Company has a call option to obtain the remaining 50 % equity interest in September 2024 and September 2026, at the then fair market value plus the expected earnings that BT would have received in the two years following the call option.

As of December 31, 2023, the carrying value of the joint venture was $ 102 million.

Certain of the Company’s other equity method investments are VIEs, for which the Company is not the primary beneficiary.

As of December 31, 2024, the Company’s maximum exposure for all its unconsolidated VIEs, including the investment carrying values and unfunded contractual commitments made on behalf of VIEs, was approximately $ 569 million.

2 unchanged sentences

The Company recognized its portion of VIE operating results with losses of $ 24 million, $ 75 million, and $ 87 million for the years ended December 31, 2024, 2023 and 2022, respectively, in loss from equity investees, net, on the consolidated statements of operations.

Equity Investments Without Readily Determinable Fair Values Assessed Under the Measurement Alternative

During 2023, the Company concluded that its other equity method investments without readily determinable fair values had decreased $ 73 million in fair value as a result of observable price changes in orderly transactions for the identical or similar investment of the same issuer.

The decrease in fair value as a result of observable price change is recorded in other (expense) income, net on the consolidated statements of operations.

(See Note 18.) As of December 31, 2023, the Company had recorded cumulative impairments of $ 238 million for its equity method investments without readily determinable fair values.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Equity Investments Without Readily Determinable Fair Values Assessed Under the Measurement Alternative

The Company recorded impairments and upward adjustments for its other equity investments without readily determinable fair values of $ 27 million and $ 16 million during the year ended December 31, 2024, respectively, as a result of observable price changes in orderly transactions for the identical or similar investment of the same issuer.

The changes in fair value as a result of observable price changes is recorded in other income (expense), net on the consolidated statements of operations.

(See Note 18.) As of December 31, 2024, the Company had recorded cumulative impairments of $ 260 million and cumulative upward adjustments of $ 25 million for its equity method investments without readily determinable fair values.

The table below presents the components of outstanding debt (in millions).

1 unchanged sentence

Interest Rate as of

December 31, 2023 2023 2022

Term loans with maturities of 3 years or less — % $ — $ 4,000

Floating rate senior notes with maturities of 5 years or less — % $ — $ 40

7 unchanged sentences

Noncurrent portion of debt $ 36,757 $ 41,889

During the year ended December 31, 2024, the Company commenced a tender offer to purchase for cash up to $ 2.61 billion in aggregate purchase price (excluding accrued and unpaid interest) of (i) DCL’s outstanding 3.900 % Senior Notes due 2024, 4.000 % Senior Notes due 2055, 4.650 % Senior Notes due 2050, 4.950 % Senior Notes due 2042, 4.875 % Senior Notes due 2043, 5.200 % Senior Notes due 2047, and 5.300 % Senior Notes due 2049;

(ii) Scripps Networks Interactive, Inc.’s (“Scripps Networks”) outstanding 3.900 % Senior Notes due 2024;

(iii) the legacy WarnerMedia Business’s outstanding 4.650 % Senior Notes due 2044, 4.850 % Senior Notes due 2045, 4.900 % Senior Notes due 2042, and 5.350 % Senior Notes due 2043;

and (iv) WMH’s outstanding 5.050 % Senior Notes due 2042, which was funded using the aggregate net proceeds from debt financing transactions together with available cash on hand and other available sources of liquidity.

The Company completed the tender offer in June 2024 by purchasing senior notes in the aggregate principal amount of $ 3,399 million validly tendered and accepted for purchase pursuant to the offer and recorded a gain on extinguishment of $ 542 million.

During the year ended December 31, 2024, the Company also repaid in full at maturity $ 296 million of aggregate principal amount outstanding of its senior notes due November 2024;

£ 400 million ($ 529 million equivalent at repayment) of aggregate principal amount outstanding of its senior notes due September 2024;

$ 48 million of aggregate principal amount outstanding of its senior notes due June 2024;

$ 726 million of aggregate principal amount outstanding of its senior notes due February and March 2024;

and completed open market repurchases for $ 965 million of aggregate principal amount outstanding of its senior notes.

During the year ended December 31, 2024, the Company 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, the proceeds of which were used to fund the aforementioned tender offer.

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

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the year ended December 31, 2023, the Company’s wholly-owned subsidiaries, Warner Media, LLC (“WML”), Historic TW Inc.

(“TWI”), Discovery Communications, LLC (“DCL”) and WMH, commenced cash tender offers to purchase for cash any and all of (i) WML’s outstanding 4.050 % Senior Notes due 2023 and 3.550 % Senior Notes due 2024, (ii) TWI’s outstanding 7.570 % Senior Notes due 2024, (iii) DCL’s outstanding 3.800 % Senior Notes due 2024, and (iv) WMH’s outstanding 3.528 % Senior Notes due 2024 and 3.428 % Senior Notes due 2024.

(“TWI”), DCL, and WMH, commenced cash tender offers to purchase for cash any and all of (i) WML’s outstanding 4.050 % Senior Notes due 2023 and 3.550 % Senior Notes due 2024;

(ii) TWI’s outstanding 7.570 % Senior Notes due 2024;

(iii) DCL’s outstanding 3.800 % Senior Notes due 2024;

and (iv) WMH’s outstanding 3.528 % Senior Notes due 2024 and 3.428 % Senior Notes due 2024.

The Company completed the tender offers in August 2023 by purchasing senior notes in the amount of $ 1.9 billion validly tendered and accepted for purchase pursuant to the offers.

3 unchanged sentences

repaid in full at maturity $ 42 million of aggregate principal amount outstanding of its senior notes due December 2023, $ 178 million of aggregate principal amount outstanding of its senior notes due September 2023, and $ 106 million of aggregate principal amount outstanding of its senior notes due February 2023;

and completed open market purchases for $ 183 million of aggregate principal amount outstanding of its senior notes.

and completed open market repurchases for $ 183 million of aggregate principal amount outstanding of its senior notes.

During the year ended December 31, 2023, the Company 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, 2022, the Company repaid $ 6.0 billion of aggregate principal amount outstanding of its term loans prior to the due dates of October 2023 and April 2025 and repaid in full at maturity $ 327 million of aggregate principal amount outstanding of its 2.375 % Euro Denominated Senior Notes due March 2022.

In addition, the Company redeemed in full and prior to maturity all $ 192 million of aggregate principal amount outstanding of its 3.250 % senior notes due in 2023 and all $ 796 million of aggregate principal amount outstanding of its 2.950 % senior notes due 2023 (collectively the “2023 Notes”).

The 2023 Notes were redeemed in December 2022 for an aggregate redemption price of $ 988 million, plus accrued interest.

The redemptions during 2023 and 2022 resulted in an immaterial gain on extinguishment of debt.

(See Note 18.)

As of December 31, 2023, all senior notes are fully and unconditionally guaranteed by the Company, Scripps Networks Interactive, Inc.

(“Scripps Networks”), DCL (to the extent it is not the primary obligor on such senior notes), and WMH (to the extent it is not the primary obligor on such senior notes), except for $ 1.1 billion of senior notes of the legacy WarnerMedia Business assumed by the Company in connection with the Merger and $ 23 million of un-exchanged senior notes issued by Scripps Networks.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2024, all senior notes are fully and unconditionally guaranteed by the Company, Scripps Networks, DCL (to the extent it is not the primary obligor on such senior notes), and WMH (to the extent it is not the primary obligor on such senior notes), except for $ 1,043 million of senior notes of the legacy WarnerMedia Business assumed by the Company in connection with the Merger and $ 11 million of un-exchanged senior notes issued by Scripps Networks.

Revolving Credit Facility and Commercial Paper Programs

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

The Revolving Credit Agreement includes a $ 150 million sublimit for the issuance of standby letters of credit.

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

Obligations under the Revolving Credit Agreement are unsecured and are fully and unconditionally guaranteed by the Company, Scripps Networks, and WMH.

The Credit Facility will be available on a revolving basis until June 2026, with an option for up to two additional 364 -day renewal periods subject to the lenders’ consent.

In October 2024, DCL and certain subsidiaries of the Company, as borrowers, entered into a multicurrency revolving credit agreement (the “Credit Agreement”), replacing the existing $ 6.0 billion multicurrency revolving credit agreement dated June 9, 2021 (as amended).

The Credit Agreement provides for a senior revolving credit facility (the “Credit Facility”) with aggregate commitments of $ 6.0 billion and includes a $ 150 million sublimit for the issuance of standby letters of credit.

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

The obligations of the borrowers under the Credit Agreement are unsecured and are guaranteed by the Company, Scripps Networks, and WMH.

The Credit Agreement is available on a revolving basis until October 2029, with an option for up to two additional 364 -day renewal periods subject to the lenders’ consent.

Additionally, the Company's commercial paper program is supported by the Credit Facility.

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

Under the commercial paper program, the Company 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.

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

Credit Agreement Financial Covenants

The Revolving Credit Agreement includes financial covenants that require the Company to maintain a minimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum adjusted consolidated leverage ratio of 5.75 to 1.00 following the closing of the Merger, with step-downs to 5.00 to 1.00 and 4.50 to 1.00 upon completion of the first full quarter following the first and second anniversaries of the closing, respectively.

As of December 31, 2023, DCL and WMH 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, and also requires maintenance of a minimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum consolidated leverage ratio of 4.50 to 1.00.

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

Long-term Debt Repayment Schedule

3 unchanged sentences

Interest payments $ 1,792 $ 1,674 $ 1,532 $ 1,408 $ 1,324 $ 19,606

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has operating and finance leases for transponders, office space, studio facilities, software, and other equipment.

10 unchanged sentences

Total finance lease liabilities $ 463 $ 265

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental information related to leases was as follows.

6 unchanged sentences

The Company’s leases have remaining lease terms of up to 28 years, some of which include multiple options to extend the leases for up to a total of 20 years.

Most leases are not cancellable prior to their expiration.

Most leases are not cancelable prior to their expiration.

The components of lease cost were as follows (in millions):

Year Ended December 31,

2024 2023 2022

Operating lease cost $ 441 $ 540 $ 372

4 unchanged sentences

Variable fees and other (a)

$ 44 $ 74 $ 66

Total lease cost $ 615 $ 707 $ 524

(a) Includes variable lease payments related to our operating and finance leases and costs of leases with initial terms of less than one year.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental cash flow information related to leases was as follows (in millions):

Year Ended December 31,

2024 2023 2022

Cash paid for amounts included in the measurement of lease liabilities:

5 unchanged sentences

Finance leases $ 300 $ 95 $ 39

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of December 31, 2024 were as follows (in millions):

5 unchanged sentences

Total $ 3,038 $ 463

As of December 31, 2023, the Company’s total minimum lease payments for additional leases that have not yet commenced were not material.

During the year ended December 31, 2024, ROU asset impairment charges were $ 411 million and were primarily related to impairments of the Company’s Hudson Yards, New York office as a result of recoverability tests performed during the year as subleases for the office were executed.

The impairment charges were recorded in impairment and loss on dispositions in the consolidated statements of operations.

As of December 31, 2024, the Company has additional leases that have not yet commenced with total minimum lease payments of approximately $ 66 million.

DERIVATIVE FINANCIAL INSTRUMENTS

3 unchanged sentences

The Company does not enter into or hold derivative financial instruments for speculative trading purposes.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

There were no amounts eligible to be offset under master netting agreements as of December 31, 2024 and 2023.

The fair value of the Company’s derivative financial instruments at December 31, 2024 and 2023 was determined using a market-based approach (Level 2).

The Company’s derivative financial instruments were reflected in the Company’s consolidated balance sheets as follows (in millions).

The following table summarizes the Company’s derivative financial instruments recorded on its consolidated balance sheets (in millions).

December 31, 2024 December 31, 2023

8 unchanged sentences

$ 1,608 $ 47 $ 14 $ 25 $ 28 $ 1,484 $ 40 $ 8 $ 37 $ 8

Cross-currency swaps — — — — — 482 3 58 — —

Net investment hedges:

9 unchanged sentences

$ 73 $ 21 $ 55 $ 155 $ 90 $ 21 $ 45 $ 138

(a) Excludes € 164 million of euro-denominated notes ($ 174 million equivalent at December 31, 2022) designated as a net investment hedge and £ 402 million of sterling notes re-designated as a net investment hedge in 2023 ($ 513 million equivalent at December 31, 2023.

(a) Excludes € 1,500 million of euro-denominated notes ($ 1,558 million equivalent at December 31, 2024) and £ 402 million of sterling notes ($ 513 million equivalent at December 31, 2023) designated as net investment hedges.

(See Note 11.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Derivatives Designated for Hedge Accounting

Cash Flow Hedges

The Company is exposed to foreign currency risk related to revenues, production rebates and production expenses.

As such, we have entered into foreign exchange forward contracts designated as cash flow hedges to mitigate this risk.

The Company uses foreign exchange forward contracts to mitigate the foreign currency risk related to revenues, production rebates, and production expenses.

As production spend occurs or when rebate receivables are recognized, foreign forward exchange contracts designated as cash flow hedges are de-designated.

Upon de-designation, gains and losses on these derivatives directly impact earnings in the same line and same period as the hedged risk.

These cash flow hedges are carried at fair market value on the Company’s consolidated balance sheets.

3 unchanged sentences

During the year ended December 31, 2023, the Company unwound the cross-currency swaps related to its Sterling debt and recognized a gain of $ 76 million as an adjustment to other comprehensive income.

The Sterling debt was subsequently re-designated as a net investment hedge effective May 2023.

The Company is exposed to interest rate risk associated with future issuances of debt and unwound the forward starting swap derivatives designated as hedging instruments to mitigate this risk in 2022.

The realized gain from these derivatives will remain in other comprehensive loss until the debt is issued during the hedging window, which extends through 2025, and interest payments are made.

The following table presents the pretax impact of derivatives designated as cash flow hedges on income and other comprehensive loss (in millions).

Realized gains from these derivatives will remain in other comprehensive loss until the debt is issued during the hedging window or the hedging window expires, which extends through 2025, and interest payments are made.

An immaterial portion of the realized gain was released in 2024 since no debt was issued during this period of the hedging window.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pre-tax impact of derivatives designated as cash flow hedges on income and other comprehensive loss (in millions).

Year Ended December 31,

2 unchanged sentences

Foreign exchange - derivative adjustments $ 37 $ 23 $ 7

Interest rate - derivative adjustments — — 112

Gains (losses) reclassified into income from accumulated other comprehensive loss:

2 unchanged sentences

Foreign exchange - costs of revenues 7 3 25

Foreign exchange - other (expense) income, net

Foreign exchange - other income (expense), net

Interest rate - interest expense, net ( 5 ) ( 1 ) ( 2 )

Interest rate - other (expense) income, net

Interest rate - gain (loss) on extinguishment of debt ( 4 ) 1 —

Interest rate - other income (expense), net

If current fair values of designated cash flow hedges as of December 31, 2024 remained static over the next twelve months, the amount the Company would reclassify from accumulated other comprehensive loss into income in the next twelve months would not be material for the current fiscal year.

2 unchanged sentences

The Company is exposed to foreign currency risk associated with the net assets of non-USD functional entities and uses fixed-to-fixed cross currency swaps to mitigate this risk.

During the year ended December 31, 2024, to mitigate the currency risk associated with the net assets of non-USD functional entities, the Company designated its € 1,500 million denominated debt issued in May 2024 as a net investment hedge (see Note 11 ) and subsequently de-designated and re-designated € 225 million of its Euro denominated debt.

During the year ended December 31, 2024, the Company also designated an additional € 900 million of fixed-to-fixed cross currency swaps as a net investment hedge and subsequently settled € 300 million and de-designated € 200 million of fixed-to-fixed cross currency swaps designated as a net investment hedge.

During the year ended December 31, 2023, to mitigate the risk associated with the net assets of non-USD functional entities, the Company re-designated its Sterling denominated debt due in 2024 as a net investment hedge after the unwind of the cash flow hedge previously noted.

During the year ended December 31, 2024, the Company de-designated £ 255 million of the Sterling debt, repaid the Sterling debt in full at maturity, and settled the remaining £ 145 million designated as a net investment hedge.

The Company is also exposed to foreign currency risk stemming from foreign denominated debt.

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pretax impact of derivatives designated as net investment hedges on other comprehensive loss (in millions).

The following table presents the pre-tax impact of derivatives designated as net investment hedges on other comprehensive loss (in millions).

Other than amounts excluded from effectiveness testing, there were no other material gains (losses) reclassified from accumulated other comprehensive loss to income during the years ended December 31, 2024, 2023 and 2022.

3 unchanged sentences

Cross currency swaps $ 70 $ 43 $ 46 Interest expense, net $ 4 $ 24 $ 33

Foreign exchange contracts — — 5 Other (expense) income, net

Euro denominated notes (foreign denominated debt) 78 3 4 N/A — — —

4 unchanged sentences

Simultaneously, the Company entered into a fixed-to-floating interest rate swap designated as a fair value hedge to allow the Company to mitigate the variability in the fair value of its senior notes due to fluctuations in the benchmark interest rate.

Changes in the fair value of the senior note and the interest rate swap are recorded in interest expense, net.

The following table presents fair value hedge adjustments to hedged borrowings (in millions).

Carrying Amount of

Hedged Borrowings Cumulative Amount of Fair Value Hedging Adjustments Included in Hedged Borrowings

Balance Sheet Location December 31, 2023 December 31, 2022 December 31, 2023 December 31, 2022

Noncurrent portion of debt $ 1,502 $ — $ 2 $ —

The following table presents the pretax impact of derivatives designated as fair value hedges on income, including offsetting changes in fair value of the hedged items (in millions).

Year Ended December 31,

(Loss) gain on changes in fair value of hedged fixed rate debt (1)

Gain (loss) on changes in the fair value of derivative contracts (1)

Total in interest expense, net $ — $ —

(1) Accrued interest expense related to the hedged debt and derivative contracts is excluded from the amounts above and was $ 27 million as of December 31, 2023.

Changes in the fair value of the senior note and the interest rate swap were recorded in interest expense, net.

The fair value hedge was settled during the year ended December 31, 2024.

Derivatives Not Designated for Hedge Accounting

The Company has deferred compensation plans that have risk related to the fair market value gains and losses on investments and has entered into total return swaps to mitigate this risk.

The Company has deferred compensation plans that have risk related to the fair market value gains and losses on investments and uses total return swaps to mitigate this risk.

The gains and losses associated with these swaps are recorded to selling, general and administrative expenses, offsetting the deferred compensation investment gains and losses.

The Company is exposed to risk of secured overnight financing rate changes in connection with securitization interest paid on the receivables securitization program.

To mitigate this risk, the Company entered into and unwound and settled $ 6.0 billion notional of non-designated interest rate swaps for a total realized gain of $ 63 million during the year ended December 31, 2023.

To mitigate this risk, the Company entered into and unwound and settled $ 3.0 billion notional of non-designated interest rate swaps for an immaterial realized gain during the year ended December 31, 2024.

The Company entered into and unwound and settled $ 6.0 billion notional of non-designated interest rate swaps for a total realized gain of $ 63 million during the year ended December 31, 2023.

The gains and losses on these derivatives are recorded to selling, general and administrative expenses, offsetting securitization interest expense.

Forward contracts designated as cash flow hedges are de-designated as production spend occurs or when rebate receivables are recognized.

After de-designation, gains and losses on these derivatives directly impact earnings in the same line as the hedged risk.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the pretax gains (losses) on derivatives not designated as hedges and recognized in selling, general and administrative expense and other (expense) income, net in the consolidated statements of operations (in millions).

The following table presents the pre-tax gains (losses) on derivatives not designated as hedges and recognized in selling, general and administrative expense and other income (expense), net in the consolidated statements of operations (in millions).

Year Ended December 31,

6 unchanged sentences

Foreign exchange derivatives ( 27 ) 7 ( 37 )

Total in other (expense) income, net

Total in other income (expense), net

( 29 ) 28 475

4 unchanged sentences

Level 1 - Quoted prices for identical instruments in active markets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Level 2 - Quoted prices for similar instruments in active markets;

8 unchanged sentences

Equity securities:

Money market fund Cash and cash equivalents 1 — — 1

Money market funds Cash and cash equivalents 46 — — 46

Mutual funds Prepaid expenses and other current assets 16 — — 16

6 unchanged sentences

Total $ 712 $ — $ — $ 712

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

8 unchanged sentences

Company-owned life insurance contracts Other noncurrent assets — 97 — 97

Time deposits Other noncurrent assets — 8 — 8

Total $ 276 $ 203 $ — $ 479

2 unchanged sentences

Total $ 681 $ — $ — $ 681

Equity securities include money market funds, time deposits, investments in mutual funds held in separate trusts, which are owned as part of the Company’s supplemental retirement plans, and company-owned life insurance contracts.

Equity securities include money market funds, investments in mutual funds held in separate trusts, which are owned as part of the Company’s supplemental retirement plans, and company-owned life insurance contracts.

(See Note 17.) The fair value of the deferred compensation plan liability was determined based on the fair value of the related investments elected by employees.

Company-owned life insurance contracts are recorded at their cash surrender value, which approximates fair value (Level 2).

In addition to the financial instruments listed in the tables above, the Company holds other financial instruments, including cash deposits, accounts receivable, accounts payable, term loans, and senior notes.

In addition to the financial instruments listed in the tables above, the Company holds other financial instruments, including cash deposits, accounts receivable, accounts payable, and senior notes.

The carrying values for such financial instruments, other than the senior notes, each approximated their fair values as of December 31, 2024 and 2023.

The estimated fair value of the Company’s outstanding senior notes, including accrued interest, using quoted prices from over-the-counter markets, considered Level 2 inputs, was $ 34.9 billion and $ 40.5 billion as of December 31, 2024 and 2023, respectively.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s derivative financial instruments are discussed in Note 13, its investments with readily determinable fair value are discussed in Note 10, and the obligation for its revolving receivable program is discussed in Note 8.

12 unchanged sentences

Tax benefit recognized $ 96 $ 97 $ 79

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Liability-classified share-based compensation awards include certain PRSUs.

8 unchanged sentences

Granted 6.1 $ 8.66

Performance adjustments 2.4 $ 15.26

Converted ( 2.9 ) $ 16.70 $ 25

3 unchanged sentences

As of December 31, 2024, there was $ 49 million of unrecognized compensation cost related to PRSUs.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below presents RSU activity (in millions, except years and weighted-average grant price).

10 unchanged sentences

Stock settled RSUs are expected to be recognized over a weighted-average period of 1.6 years, and cash settled RSUs are expected to be recognized over a weighted-average period of 1.5 years.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock Options

19 unchanged sentences

The weighted-average grant date fair value of options granted during 2024, 2023 and 2022 was $ 4.30 , $ 7.43 and $ 9.60 , respectively, per option.

The total intrinsic value of options exercised during 2023, 2022 and 2021 was $ 0 million , $ 0 million and $ 145 million, respectively.

The domestic and foreign components of (loss) income before income taxes were as follows (in millions).

The total intrinsic value of options exercised during 2024, 2023 and 2022 was $ 0 million.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The domestic and foreign components of loss before income taxes were as follows (in millions).

Year Ended December 31,

2 unchanged sentences

Foreign 455 839 ( 213 )

(Loss) income before income taxes $ ( 3,863 ) $ ( 8,960 ) $ 1,433

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Loss before income taxes $ ( 11,388 ) $ ( 3,863 ) $ ( 8,960 )

The components of the provision for income taxes were as follows (in millions).

9 unchanged sentences

( 1,732 ) ( 2,344 ) ( 2,842 )

Income tax (benefit) expense $ ( 784 ) $ ( 1,663 ) $ 236

Income tax expense (benefit) $ 94 $ ( 784 ) $ ( 1,663 )

The following table reconciles the Company’s effective income tax rates to the U.S.

4 unchanged sentences

federal statutory income tax rate $ ( 2,391 ) 21 % $ ( 811 ) 21 % $ ( 1,881 ) 21 %

Non-deductible goodwill impairment 1,881 ( 17 ) % — — % — — %

State and local income taxes, net of federal tax benefit 30 — % ( 388 ) 10 % ( 218 ) 3 %

1 unchanged sentence

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

UK Finance Act legislative change — — % — — % ( 155 ) ( 11 ) %

Noncontrolling interest adjustment ( 9 ) — % ( 17 ) — % ( 40 ) ( 3 ) %

Change in unrecognized tax benefits 153 ( 1 ) % 33 ( 1 ) % ( 6 ) — %

Other, net 90 ( 1 ) % 40 ( 1 ) % 30 — %

Income tax (benefit) expense $ ( 784 ) 20 % $ ( 1,663 ) 19 % $ 236 16 %

Income tax expense (benefit) $ 94 ( 1 ) % $ ( 784 ) 20 % $ ( 1,663 ) 19 %

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.) 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.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

These decreases were partially offset by an unrecognized state tax benefit remeasurement following a multi-year tax settlement 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.

(See Note 3.)

Income tax (benefit) expense was $( 1,663 ) million and $ 236 million, and the Company’s effective tax rate was 19 % and 16 % for 2022 and 2021, respectively.

The decrease in the tax expense for the year ended December 31, 2022, was primarily attributable to a decrease in pre-tax book income, partially offset by a one-time expense incurred in 2022 related to a preferred stock conversion transaction expense that was not deductible for tax purposes (see Note 3), as well as the effect of foreign operations, including taxation and allocation of income and losses across multiple foreign jurisdictions.

The decrease for the year ended December 31, 2022 was further offset by a deferred tax benefit of $ 155 million recorded in the year ended December 31, 2021 resulting from the UK Finance Act 2021 enacted in June 2021.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Components of deferred income tax assets and liabilities were as follows (in millions).

2 unchanged sentences

Tax attribute carry-forward 2,661 2,908

Lease liabilities 793 851

Accrued liabilities and other 1,180 919

3 unchanged sentences

Deferred income tax liabilities:

Accounts receivable ( 267 ) —

Intangible assets ( 6,916 ) ( 7,988 )

Right-of-use assets ( 636 ) ( 796 )

Content rights ( 342 ) ( 685 )

Equity method and other investments in partnerships ( 411 ) ( 522 )

Equity method investments and other outside basis differences ( 61 ) ( 411 )

Other ( 741 ) ( 560 )

27 unchanged sentences

Ending balance $ 2,371 $ 2,147 $ 1,929

The balances as of December 31, 2023, 2022, and 2021 included $ 2,147 million, $ 1,929 million, and $ 420 million, respectively, of unrecognized tax benefits that, if recognized, would reduce the Company’s income tax expense and effective tax rate after giving effect to interest deductions and offsetting benefits from other tax jurisdictions.

As of December 31, 2024, if the Company were to recognize the full amount of unrecognized tax benefits, $ 2,182 million would reduce the Company’s income tax expense and effective tax rate after giving effect to interest deductions and offsetting benefits from other tax jurisdictions.

The Company and its subsidiaries file income tax returns in the U.S.

3 unchanged sentences

With few exceptions, the Company is no longer subject to audit by any jurisdiction for years prior to 2008.

Adjustments that arose from the completion of audits for certain tax years have been included in the change in uncertain tax positions in the table above.

It is reasonably possible that the total amount of unrecognized tax benefits related to certain of the Company’s 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.

Adjustments that arose from the completion of audits for certain tax years have been included in the change in unrecognized tax benefits in the table above.

It is reasonably possible that the total amount of unrecognized tax benefits related to certain of the Company’s unrecognized tax benefits could decrease by as much as $ 67 million within the next twelve months as a result of ongoing audits, foreign judicial proceedings, lapses of statutes of limitations, or regulatory developments.

As of December 31, 2024, 2023, and 2022, the Company had accrued approximately $ 732 million, $ 571 million, and $ 413 million, respectively, of total interest and penalties payable related to unrecognized tax benefits.

The increase in the accrual for interest and penalties payable at December 31, 2023 includes interest and penalty accruals recorded in 2023 through purchase price accounting related to the Merger.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

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.

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.

2 unchanged sentences

The determination of the amount of unrecognized deferred income tax liability with respect to these undistributed foreign earnings is not practicable.

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.

RETIREMENT SAVINGS PLANS

The Company has defined contribution, defined benefit, and other savings plans for the benefit of its employees that meet eligibility requirements.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Defined Contribution Plans

Eligible employees may contribute a portion of their compensation to the plans, which may be subject to certain statutory limitations.

For these plans, the Company also makes contributions, including discretionary contributions, subject to plan provisions, which vest immediately.

The Company contributes to certain of the plans to either match qualifying employee contributions or as discretionary contributions.

The Company made total contributions of $ 204 million, $ 210 million, and $ 188 million for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company’s contributions were recorded in cost of revenues and selling, general and administrative expense on the consolidated statements of operations.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Executive Deferred Compensation Plans

7 unchanged sentences

The values of the investments and deferred compensation obligation are recorded at fair value.

Changes in the fair value of the investments are included as a component of other (expense) income, net, on the consolidated statements of operations.

Changes in the fair value of the investments are included as a component of other income (expense), net, on the consolidated statements of operations.

Changes in the fair value of the deferred compensation obligation are included as a component of selling, general and administrative expenses on the consolidated statements of operations.

9 unchanged sentences

Year Ended December 31,

2024 2023 2022

Pension benefits $ 115 $ 128 $ 112

1 unchanged sentence

Total contributions $ 363 $ 281 $ 294

Since these plans were acquired as part of the Merger, there were no contributions for the year ended December 31, 2021.

Defined Benefit Plans

7 unchanged sentences

Some of these plans are unfunded and all are noncontributory.

Assets are recorded in other noncurrent assets, and liabilities are recorded in accrued liabilities and other noncurrent liabilities on the consolidated balance sheets.

At a plan level, net asset positions are recorded in other noncurrent assets, and net liability positions are recorded in accrued liabilities and/or other noncurrent liabilities on the consolidated balance sheets.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Discount rates, long-term rate of return on plan assets, increases in compensation levels, and mortality rates are key assumptions used in determining the benefit obligation.

5 unchanged sentences

Mortality Various mortality tables adjusted and projected using mortality improvement rates.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net Periodic Pension Cost

1 unchanged sentence

Inherent in those valuations are key assumptions, including discount rates and, where applicable, expected returns on assets.

The service cost component of net periodic pension cost is recorded in operating expenses on the consolidated statements of operations, while the remaining components are recorded in other (expense) income, net.

Net periodic pension cost was not material for the years ended December 31, 2024, 2023 and 2022.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Obligations and Funded Status

1 unchanged sentence

December 31, 2024 December 31, 2023

Pension Plans Pension Plans

Accumulated benefit obligation $ 683 $ 753

1 unchanged sentence

Projected benefit obligation at beginning of year $ 753 $ 762

Amounts assumed upon acquisition (See Note 4) — 908

Service cost 2 3

6 unchanged sentences

Fair value at beginning of year 540 533

Amounts assumed upon acquisition (See Note 4) — 756

Actual return on plan assets ( 46 ) 9

12 unchanged sentences

Net loss $ 104 $ 79

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted average assumptions used to determine benefit obligations were as follows.

The weighted average assumptions used to determine benefit obligations of the pension plans were as follows.

December 31, 2024 December 31, 2023

Pension Plans Pension Plans

Discount rate 5.20 % 4.62 %

Rate of compensation increases 3.16 % 3.18 %

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s investment policy is to maximize the total rate of return on plan assets to meet the long-term funding obligations of the pension plans.

5 unchanged sentences

Investment Type Target Actual

Debt securities 4 % 4 %

Equity securities 10 % 10 %

9 unchanged sentences

Total Level 1 Level 2 Level 3

Debt securities $ 19 $ 19 $ — $ —

Equity securities 55 25 30 —

8 unchanged sentences

Total plan assets $ 471

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The table below sets forth a summary of changes in the fair value of the Level 3 pension assets for the year ended December 31, 2024 (in millions).

1 unchanged sentence

Fair value at beginning of year $ 76

Unrealized gains 9

Transfers out ( 5 )

Unrealized losses ( 5 )

Purchases, issuances, sales and settlements, net ( 5 )

Balance at end of year $ 66

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

13 unchanged sentences

Fair value at beginning of year $ 72

Unrealized losses ( 26 )

Unrealized gains 9

Transfers out ( 5 )

Balance at end of year $ 76

29 unchanged sentences

Production receivables $ 979 $ 1,265

Prepaid content rights 843 545

Content rights and prepaid license fees 784 843

Other current assets 2,056 2,283

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other (Expense) Income, net

Other (expense) income, net, consisted of the following (in millions).

Other Income (Expense), net

Other income (expense), net, consisted of the following (in millions).

Year Ended December 31,

2024 2023 2022

Foreign currency (losses) gains, net $ ( 173 ) $ ( 150 ) $ 93

Gains (losses) on derivative instruments, net 28 475 ( 33 )

Gain on sale of investment with readily determinable fair value — — 15

Foreign currency losses, net $ ( 323 ) $ ( 173 ) $ ( 150 )

(Losses) gains on derivative instruments, net ( 9 ) 28 475

Change in the value of investments with readily determinable fair value ( 1 ) 37 ( 105 )

1 unchanged sentence

Gain on sale of equity method investments 194 — 195

Gain (loss) on extinguishment of debt 17 — ( 10 )

Interest income 210 179 67

Other (expense) income, net ( 27 ) 7 4

Total other (expense) income, net

Indemnification receivable accrual 77 ( 53 ) —

Other income, net 13 26 7

Total other income (expense), net

$ 150 $ ( 29 ) $ 347

5 unchanged sentences

Non-cash investing and financing activities:

Non-cash consideration related to the sale of the Ranch Lot 175 — —

Non-cash consideration related to the purchase of the Burbank Studios Lot 175 — —

Non-cash consideration transferred related to the transaction agreements with JCOM 68 — —

Non-cash consideration paid related to the transaction agreements with JCOM 2 — —

Non-cash consideration related to MegaMedia put exercise 36 — —

Accrued purchases of property and equipment 36 41 66

Assets acquired under finance lease and other arrangements 390 235 53

Non-cash settlement of PRSU awards 59 35 —

Accrued advances for Venu Sports 11 — —

Non-cash consideration related to the sale and purchase of the Ranch and Burbank Studios Lots — 350 —

Non-cash consideration related to the transaction agreements with JCOM — 70 —

Non-cash consideration related to MegaMedia put exercise — 36 —

Equity issued for the acquisition of WarnerMedia — — 42,309

1 unchanged sentence

Accrued consideration for the joint venture with BT — — 90

Accrued purchases of property and equipment 41 66 34

Assets acquired under finance lease and other arrangements 235 53 134

Cash, Cash Equivalents, and Restricted Cash

3 unchanged sentences

Total cash, cash equivalents, and restricted cash $ 5,416 $ 4,319

(a) Restricted cash primarily includes cash posted as collateral related to the Company’s revolving receivables and hedging programs.

(a) Restricted cash at December 31, 2024 primarily included cash posted as collateral related to the Company’s revolving receivables program.

Restricted cash at December 31, 2023 primarily included cash posted as collateral related to the Company’s revolving receivables and hedging programs.

(See Note 8 and Note 13.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets Held for Sale

3 unchanged sentences

The Burbank Studios Lot was purchased during 2023 in exchange for the Ranch Lot and cash.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplier Finance Programs

4 unchanged sentences

This confirmation does not involve a security interest in the underlying content or otherwise result in the payable receiving seniority with respect to other payables of the Company.

As of December 31, 2023 and December 31, 2022, the Company has confirmed $ 338 million and $ 273 million, respectively, of accrued content producer liabilities.

These amounts were outstanding and unpaid by the Company and were recorded in accrued liabilities on the consolidated balance sheets, given the principal purpose of the arrangement is to allow producers access to funds prior to the typical payment due date and the arrangement does not significantly change the nature of the payables and does not significantly extend the payment terms beyond the industry norms.

Invoices processed through the program are subject to a one-year maximum tenor.

2 unchanged sentences

These payments are reported as cash flows from operating activities.

Changes in confirmed accrued content producer liabilities were as follows (in millions).

Year Ended December 31,

Obligations outstanding at the beginning of the year $ 338 $ 273

Invoices confirmed during the year 949 735

Invoices paid during the year ( 980 ) ( 671 )

Foreign currency translation and other adjustments — 1

Obligations outstanding at the end of the year $ 307 $ 338

Accumulated Other Comprehensive Loss

30 unchanged sentences

Discovery Family $ 86 $ 156

MotorTrend Group LLC (“MTG”) — 112

Total $ 109 $ 165

14 unchanged sentences

Discovery Family

(“Hasbro”) had the right to put the entirety of its remaining 40 % interest in Discovery Family to the Company at any time during the one-year period beginning December 31, 2021, or in the event the Company’s performance obligation related to Discovery Family is not met.

Embedded in the redeemable noncontrolling interest is also a Warner Bros.

Discovery call right that is exercisable for one year after December 31, 2021.

Neither the put nor call was exercised in 2022.

Embedded in the redeemable noncontrolling interest was a call right that was exercisable for one year after December 31, 2021.

Neither the put nor the call was exercised in 2022.

In December 2022, Hasbro and WBD signed an amendment to the previous agreement extending the put-call election to the period January 31, 2025 to March 31, 2025.

Upon the exercise of the put or call options, the price to be paid for the redeemable noncontrolling interest is a function of the then-current fair market value of the redeemable noncontrolling interest, to which certain discounts and redemption floor values may apply in specified situations depending upon the party exercising the put or call and the basis for the exercise of the put or call.

GoldenTree acquired a put right that required the Company to either purchase all of GoldenTree’s noncontrolling 32.5 % interest in the joint venture at fair value or participate in an initial public offering for the joint venture.

In 2022, GoldenTree exercised its put right and in 2023, the Company finalized its purchase of GoldenTree’s 32.5 % noncontrolling interest for $ 49 million.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

GoldenTree acquired a put right exercisable during 30 -day windows beginning on each of March 25, 2021, September 25, 2022 and March 25, 2024, that requires the Company to either purchase all of GoldenTree’s noncontrolling 32.5 % interest in the joint venture at fair value or participate in an initial public offering for the joint venture.

In 2022, GoldenTree exercised its irrevocable put right and in 2023, the Company finalized its purchase of GoldenTree’s 32.5 % noncontrolling interest for $ 49 million.

In August 2023, the Company and JCOM Co., Ltd.

(“JCOM”) executed a series of transaction agreements to which the Company and JCOM each contributed to Discovery Japan, Inc.

(“JVCo”), an existing 80 / 20 joint venture between the Company and JCOM, certain rights, liabilities, or rights via license agreements in exchange for new common shares of JVCo, resulting in the Company and JCOM owning 51 % and 49 % of JVCo, respectively.

(“JCOM”) executed a series of transaction agreements to which the Company and JCOM each contributed certain rights, liabilities, or rights via license agreements to Discovery Japan, Inc.

(“JVCo”), an existing 80 / 20 joint venture between the Company and JCOM, in exchange for new common shares of JVCo, resulting in the Company and JCOM owning 51 % and 49 % of JVCo, respectively.

Retaining controlling financial interest subsequent to the transaction, the Company continues to consolidate the joint venture.

4 unchanged sentences

The Company holds 80 % of the voting interest and 68.7 % of the economic interest in the Partnership.

During the fourth quarter of 2023, the Partnership agreement was extended and specifies a dissolution date of December 31, 2024.

During the fourth quarter of 2024, the Partnership agreement was extended and specified a dissolution date of December 31, 2025.

If the term of the Partnership is not extended prior to the dissolution date of December 31, 2025, the Partnership agreement permits the Company, as holder of 80 % of the applicable votes, to reconstitute the Partnership and continue its business.

5 unchanged sentences

In the normal course of business, the Company enters into transactions with related parties.

Related parties include entities that share common directorship, such as Liberty Global plc (“Liberty Global”), Liberty Broadband Corporation (“Liberty Broadband”) and their subsidiaries (collectively the “Liberty Group”).

The Company’s board of directors includes Dr.

5 unchanged sentences

2024 2023 2022

Revenues and service charges:

Liberty Group $ 1,887 $ 1,758 $ 671

Equity method investees 687 464 253

Other 216 311 169

Total revenues and service charges $ 2,790 $ 2,533 $ 1,093

Revenues and service charges (a)

$ 1,404 $ 2,790 $ 2,533

Expenses $ 268 $ 357 $ 406

Distributions to noncontrolling interests and redeemable noncontrolling interests $ 193 $ 301 $ 300

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a) The decrease in revenue and service charges in 2024 is primarily attributable to transactions with certain entities that are no longer considered related parties, as such entities and the Company ceased to share common directorship in 2024.

The table below presents receivables due from and payables due to related parties (in millions).

1 unchanged sentence

Payables $ 13 $ 18

In October 2024, the Company sold its minority interests in Formula E to Liberty Global and recorded a $ 61 million gain not included in the table above.

(See Note 4.)

In September 2022, the Company sold 75 % of its interest in The CW Network to Nexstar, a related party, and recorded an immaterial gain not included in the table above.

(See Note 4.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS, CONTINGENCIES, AND GUARANTEES

20 unchanged sentences

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 the Company pursuant to the Six Flags Guarantee.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

2 unchanged sentences

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.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Contingencies

1 unchanged sentence

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 of 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.

The Company’s other contingent commitments at December 31, 2024 were immaterial.

The Company has granted put rights to non-controlling interest holders in certain consolidated subsidiaries, but the Company is unable to reasonably predict the ultimate amount or timing of any payment.

2 unchanged sentences

From time to time, in the normal course of its operations, the Company is subject to various litigation matters and claims, including claims related to employees, stockholders, vendors, other business partners, government regulations, or intellectual property, as well as disputes and matters involving counterparties to contractual agreements, such as disputes arising out of definitive agreements entered into in connection with the Merger.

However, a determination as to the amount of the accrual required for such contingencies is highly subjective and requires judgment about future events.

The Company may not currently be able to estimate the reasonably possible loss or range of loss for such matters until developments in such matters have provided sufficient information to support an assessment of such loss.

A determination as to the amount of the accrual required for such contingencies is highly subjective and requires judgment about future events.

In connection with a contract dispute arising out of definitive agreements entered into in connection with the Merger, the Company established an immaterial accrual in the first quarter of 2024.

At this time, the Company is not able to estimate the reasonably possible range of loss or any loss in excess of the accrual associated with such matter.

There can be no assurance that any settlement of such dispute will be reached and, if a settlement is reached, what the total dollar amount will be of any such settlement.

The Company may not currently be able to estimate the reasonably possible loss or range of loss for certain matters until developments in such matters have provided sufficient information to support an assessment of such loss.

In the absence of sufficient information to support an assessment of the reasonably possible loss or range of loss, no accrual for such contingencies is made and no loss or range of loss is disclosed.

5 unchanged sentences

There were no material amounts for indemnifications or other contingencies recorded as of December 31, 2024 and 2023.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORTABLE SEGMENTS

The Company’s operating segments are determined based on:

(i) financial information reviewed by its chief operating decision maker, the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions.

During the fourth quarter of 2023, the Company updated its DTC subscriber definition to include Premium Sports Products, which were previously included in the Networks segment.

Prior period segment results were not recast to reflect this change because the impact was not material.

(i) financial information reviewed by its chief operating decision maker (“CODM”), the Chief Executive Officer (“CEO”), (ii) internal management and related reporting structure, and (iii) the basis upon which the CEO makes resource allocation decisions.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting policies of the reportable segments are the same as the Company’s, except that certain inter-segment transactions that are eliminated for consolidation are not eliminated at the segment level.

Inter-segment transactions primarily include advertising and content licenses.

The Company records inter-segment transactions of content licenses at the gross amount.

The Company generally records inter-segment transactions of content licenses at market value.

The Company does not report assets by segment because it is not used to allocate resources or evaluate segment performance.

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• gains and losses on business and asset dispositions;

• certain inter-segment eliminations;

• third-party transaction and integration costs;

2 unchanged sentences

• 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 CODM uses this measure to assess the operating results and performance of the 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.

1 unchanged sentence

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.

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

We prospectively updated certain corporate allocations at the beginning of 2024.

The impact to prior periods was immaterial.

The tables below present summarized financial information for each of the Company’s reportable segments, corporate, and inter-segment eliminations, and other (in millions).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adjusted EBITDA

Reconciliation of Revenues to Segment Adjusted EBITDA

Year Ended December 31, 2024

Studios Networks DTC

Revenues $ 11,607 $ 20,175 $ 10,313

Content expense (a)

7,260 7,135 6,183

Studios $ 2,183 $ 1,772 $ 14

Networks 9,063 8,725 5,533

DTC 103 ( 1,596 ) ( 1,345 )

Corporate ( 1,242 ) ( 1,200 ) ( 385 )

Inter-segment eliminations 93 17 —

Adjusted EBITDA $ 10,200 $ 7,718 $ 3,817

Reconciliation of Net Income (Loss) Available to Warner Bros.

Discovery, Inc, to Adjusted EBITDA

Personnel expense (b)

943 2,153 773

Marketing expense 1,064 454 1,147

Other segment expenses (c)

688 2,284 1,533

Segment Adjusted EBITDA $ 1,652 $ 8,149 $ 677

Year Ended December 31, 2023

Studios Networks DTC

Revenues $ 12,192 $ 21,244 $ 10,154

Content expense (a)

7,112 7,140 6,454

Net (loss) income available to Warner Bros.

Personnel expense (b)

927 2,173 844

Marketing expense 1,268 439 1,313

Other segment expenses (c)

702 2,429 1,440

Segment Adjusted EBITDA $ 2,183 $ 9,063 $ 103

Year Ended December 31, 2022

Studios Networks DTC

Revenues $ 9,731 $ 19,348 $ 7,274

Content expense (a)

6,208 6,061 5,727

Personnel expense (b)

712 2,124 837

Marketing expense 647 505 1,583

Other segment expenses (c)

392 1,933 723

Segment Adjusted EBITDA $ 1,772 $ 8,725 $ ( 1,596 )

(a) Content expense includes amortization, impairments, participations, residuals, development expense, and production costs, including talent costs, and is a component of costs of revenues.

Content expense excludes content impairments and other development costs recorded in restructuring and other charges, amortization of purchase accounting fair value step-up for content, and amortization of capitalized interest for content as these items are excluded from the calculation of Adjusted EBITDA.

(b) Personnel expense is a component of costs of revenues and selling, general and administrative expense.

Personnel expense includes marketing personnel compensation and excludes commissions (included in other segment expenses) and talent costs (included in content expense).

(c) Other segment expenses include distribution costs, other direct costs, software and hardware costs, IT services, professional and consulting fees, commissions, and certain other overhead costs.

Other segment items exclude depreciation and amortization, amortization of purchase accounting fair value step-up for content, amortization of capitalized interest for content, employee share-based compensation, third-party transaction and integration costs, and other items impacting comparability as these items are excluded from the calculation of Adjusted EBITDA.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Reconciliation of Segment Adjusted EBITDA to loss before income taxes

Year Ended December 31,

2024 2023 2022

Net income attributable to redeemable noncontrolling interests 9 6 53

Net income attributable to noncontrolling interests 38 68 138

Income tax (benefit) expense ( 784 ) ( 1,663 ) 236

(Loss) income before income taxes ( 3,863 ) ( 8,960 ) 1,433

Other expense (income), net 12 ( 347 ) ( 72 )

Loss from equity investees, net 82 160 18

Interest expense, net 2,221 1,777 633

Operating (loss) income ( 1,548 ) ( 7,370 ) 2,012

Impairments and loss (gain) on dispositions 77 117 ( 71 )

Restructuring and other charges 585 3,757 32

Studios $ 1,652 $ 2,183 $ 1,772

Networks 8,149 9,063 8,725

DTC 677 103 ( 1,596 )

Segment Adjusted EBITDA $ 10,478 $ 11,349 $ 8,901

Depreciation and amortization 7,037 7,985 7,193

Employee share-based compensation 546 488 410

Restructuring and other charges 447 585 3,757

Transaction and integration costs 242 162 1,195

Facility consolidation costs 4 32 —

Amortization of fair value step-up for content 2,373 2,416 —

Impairment and amortization of fair value step-up for content 1,139 2,373 2,416

Amortization of capitalized interest for content 46 46 —

Adjusted EBITDA $ 10,200 $ 7,718 $ 3,817

Impairments and loss on dispositions 9,603 77 117

Corporate 1,260 1,242 1,200

Inter-segment eliminations 186 ( 93 ) ( 17 )

Operating loss ( 10,032 ) ( 1,548 ) ( 7,370 )

Other (income) expense, net ( 150 ) 29 ( 347 )

Loss from equity investees, net 121 82 160

Gain on extinguishment of debt ( 632 ) ( 17 ) —

Interest expense, net 2,017 2,221 1,777

Loss before income taxes $ ( 11,388 ) $ ( 3,863 ) $ ( 8,960 )

Content Amortization and Impairment Expense

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(See Note 9.)

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues by Geography

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Revenues are attributed to each country based on the customer or viewer location.

DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and Equipment by Geography

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SUBSEQUENT EVENTS

In February 2024, the Company finalized an agreement to sell its 50 % stake in All3Media.

On February 6, 2024, the Company announced that it would enter into a joint venture with ESPN, a subsidiary of The Walt Disney Company (“Disney”), and Fox Corporation (“Fox”) to form Venu Sports, a sports-centric streaming service in the United States.

On February 20, 2024, FuboTV Inc.

and FuboTV Media Inc.

(collectively, “Fubo”) filed a lawsuit against Disney, including certain affiliates, Fox, and WBD (collectively, the “Defendants”) in the U.S.

District Court for the Southern District of New York alleging claims under federal and New York antitrust laws.

On January 6, 2025, Disney announced that it had entered into a definitive agreement to combine certain of Hulu Live TV’s assets with Fubo (the “Fubo Transaction”) and provide Fubo a senior unsecured term loan of up to $ 145 million in January 2026 (the “Fubo Loan”).

If Disney funds the Fubo Loan prior to the consummation of the Fubo Transaction, the Company and Fox will participate in a portion of the Fubo Loan by providing loans to Disney with substantially the same economic terms as the Fubo Loan.

A $ 130 million termination fee will be payable by Disney to Fubo if the transaction is terminated under certain circumstances.

The Company and Fox have agreed to reimburse a portion of the termination fee to Disney if it becomes payable.

In addition, the Defendants reached a settlement with Fubo related to Fubo’s antitrust claims and collectively paid $ 220 million to Fubo in January 2025, of which the Company’s share was $ 55 million.

On January 10, 2025, the Defendants announced their decision to discontinue the Venu Sports joint venture and not launch its streaming service effective immediately.

On January 28, 2025, WMH issued a conditional notice for the redemption in full of all $ 1,500 million aggregate principal amount of its outstanding 6.412 % Senior Notes due 2026 (the “Notes”), in accordance with the terms of the indenture governing the Notes.

Such redemption was funded with the proceeds of borrowings pursuant to a new $ 1,500 million 364 -day senior unsecured term loan credit facility entered into on January 28, 2025 by DCL, WBD, certain wholly-owned subsidiaries of WBD party thereto, the lenders party thereto, and Mizuho Bank, Ltd.

The Notes were redeemed on February 7, 2025.

Joint Venture

On January 31, 2025, the Company contributed a 70 % interest in its music catalog to a joint venture with Cutting Edge Group in exchange for net proceeds of $ 601 million.

The Company will retain a controlling financial interest and consolidate the joint venture as a VIE.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data