Discovery Revenue Soars in Olympics Quarter – but Not as Much as Expenses

Q3 net income is cut in half

Tokyo Olympics
Photo by Elsa/Getty Images

Discovery’s revenue soared 23% in the third quarter of 2021, thanks in large part to the Tokyo Olympics, slightly outpacing Wall Street’s forecasts. Unfortunately, expenses increased even more, and the company’s profit of $154 million was effectively cut in half from Q3 2020.

The Olympics are a big revenue generator, but they are also a very expensive show to put on.

Wall Street had forecast earnings per share (EPS) of 41 cents on $3.14 billion in revenue, according to a consensus estimate compiled by Yahoo Finance. Discovery whiffed at the bottom line, reporting diluted EPS of 24 cents on $3.15 billion in revenue.

All told, revenue grew 12% domestically and 44% internationally. However, expenses increased 26% in the U.S. and 77% overseas.

One particular highlight for Discovery was ad sales, which increased 5% in the U.S. (and 28% internationally). Distribution revenue here was up 21%, driven by Discovery+. The streaming platform is helping to offset continued cable cord-cutting, which was in the low- to mid-single digits on a percentage basis.

Free cash flow decreased a bit in the quarter due to higher content spend.

The company also updated us on streaming numbers: Discovery’s SVOD platforms combined for 20 million paying subscribers worldwide at the end of Q3. The vast majority of that is Discovery+, though the company does not break it down subscribers in a more granular way.

Discovery, Inc. had 17 million paying direct-to-consumer subscribers at the end of the previous quarter.

“We made great strides in the quarter operationally, financially and creatively,” Discovery chief David Zaslav said in a statement on Wednesday. “The team drove solid momentum in our direct-to-consumer business, which we grew to 20 million paid subscribers at quarter end on the strength of our global brands and fan-favorite content, including the Summer Olympic Games and Shark Week. Additionally, we delivered double-digit growth in both advertising and distribution revenues, as we doubled next generation revenues year over year. This strong performance once again drove very healthy cash flows during the quarter, further strengthening our balance sheet and financial profile. We are very excited about our pending merger with WarnerMedia and the opportunity to bring these two companies together, combining iconic and globally cherished franchises and brands, and positioning us to more efficiently drive global scale across the combined portfolio.”

Shares in Discovery (DISCA) closed Tuesday afternoon at $24.55 apiece. The U.S. stock markets reopen at 9:30 a.m. ET.

Discovery, Inc. is set to merge with the AT&T-owned WarnerMedia in the first half of 2022. Find AT&T’s Q3 earnings here.

Zaslav and other top Discovery executives will hold a conference call at 8 a.m. ET to discuss the quarter in greater detail.