Discovery, Inc. missed analysts’ first-quarter earnings forecasts by quite a bit. Q1 2021 was the launch quarter of streaming service Discovery+.
Wall Street had forecast earnings per share (EPS) of 65 cents on revenue of $2.77 billion, according to a consensus estimate compiled by Yahoo Finance. A smaller compilation by Zacks was a penny lower on the EPS prediction, but concurred with the sales figure.
Discovery actually reported diluted EPS of 21 cents on $2.792 billion in revenue. While the revenue was up 4%, the per-share earnings were down 62% (from 55 cents). Net income for the quarter was $140 million.
Last we heard from CEO David Zaslav, Discovery, Inc. had topped 11 million total paid streaming subscribers since the Jan. 4, 2021 debut of Discovery+ and the company was “on pace” to hit 12 million SVOD subs by the end of February. That number encompassed the company’s entire portfolio, including international direct-to-consumer products, like Eurosport Player and GolfTV, but the vast majority were paying Discovery+ customers.
On Wednesday, Discovery said it ended Q1 “with 13 million global next generation paying direct-to-consumer subscribers.”
And at present-day, that cross-portfolio number is 15 million, Zaslav added.
Due to lower TV ratings, U.S. ad sales fell 4% in the first quarter of 2021. But thanks to the launch of Discovery+, distribution revenues rose 12%. There was some cord-cutting as the streaming option cannibalized some cable users.
Operating expenses jumped 33% and SG&A (selling, general and administrative) expenses soared 89% due to reinvestment in — and marketing of –Discovery+.
Internationally, advertising increased 16% and distribution revenue was flat.
“The global rollout of discovery+ is off to a fantastic start by any measure,” Zaslav said in prepared remarks accompanying the Discovery financials. “Key metrics, including subscriber additions, customer engagement, and retention, are exceeding our expectations and demonstrating sustained momentum into the second quarter. We now have 15 million total paying direct-to-consumer subscribers across our global portfolio driven primarily by discovery+, having crossed 13 million total paying direct-to-consumer subscribers at the end of March. Our strong direct-to-consumer performance underscores the outstanding value and appeal of our content, brands and personalities to both consumers and distribution partners alike. We continue to expand the reach of discovery+ with recent launches on Comcast Xfinity and Amazon Prime Video Channels. At the same time, we continue to extend our overall engagement with viewers across screens, anchored by another quarter as the most-watched pay-TV portfolio in the U.S. and our seventh consecutive quarter of international share growth.”
Discovery, Inc. stock (DISCA) closed Tuesday at $39.01 per share. The U.S. stock markets reopen at 9:30 a.m. ET.
Zaslav and other top Discovery executives will host a conference call at 8:30 a.m. ET to discuss the quarter in greater detail.
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