Warner Bros. Discovery expects hit to earnings as strikes continue

Warner Bros. Discovery has seen its stock fall on a downward revision of its EBITDA guidance for this year as a result of the ongoing impact of the SAG-AFTRA actors and WGA writers strikes in Hollywood.

The downward revision in guidance comes as WBD’s stated expectation at the time of its last quarterly earnings that the strikes would be resolved by the start of this month clashes with reality.

The studio stated in an SEC filing that it now expects lower adjusted EBITDA for the full year in the range of US$10.5 to US$11 billion, reflecting the Company’s assumption that adjusted EBITDA will be negatively impacted by approximately US$300 to US$500 million, predominantly due to the impact of the strikes.

On the upside, WBD expects the strikes to benefit its free cash flow. It now expects free cash flow for the full year to be at least $5 billion. Further, the Company now expects to exceed US$1.7 billion in free cash flow for the third quarter of 2023, in part due to the strong performance of its runaway hit movie Barbie as well as incremental impact from strike-related factors.

WBD had said at the time if its earnings call that, if the strikes continued through to the end of the year, it expected a negative impact on EBITDA and a positive impact on free cash flow.

During the earnings call, CFO Gunnar Wiedenfels had said that a longer strike would have a negative impact on the company’s film slate for the remainder of the year.

CEO David Zaslav is speaking at the Goldman Sachs Communacopia and Technology conference today, where he will address the impact of the strikes among other topics.