Item 1. Unaudited Financial Statements.

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Item 1. Unaudited Financial Statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues:
Distribution	$	4,920	$	5,026	$	14,784	$	15,324
Advertising	1,682		1,796		6,260		6,613
Content	2,721		2,840		7,388		8,240
Other	300		317		862		860
Total revenues	9,623		9,979		29,294		31,037
Costs and expenses:
Costs of revenues, excluding depreciation and amortization	5,181		5,309		17,443		18,630
Selling, general and administrative	2,385		2,291		7,078		7,241
Depreciation and amortization	1,762		1,989		5,394		5,961
Restructuring and other charges	9		269		161		510
Impairments and loss on dispositions	5		24		9,412		61


Total costs and expenses	9,342		9,882		39,488		32,403
Operating income (loss)	281		97		(10,194)		(1,366)
Interest expense, net	(494)		(574)		(1,527)		(1,719)
Gain on extinguishment of debt	23		22		590		17
Loss from equity investees, net	(18)		(14)		(89)		(73)
Other income (expense), net	30		(63)		188		(109)
Loss before income taxes	(178)		(532)		(11,032)		(3,250)
Income tax benefit	319		125		190		563
Net income (loss)	141		(407)		(10,842)		(2,687)
Net income attributable to noncontrolling interests	(3)		(8)		(20)		(32)
Net (income) loss attributable to redeemable noncontrolling interests	(3)		(2)		45		(7)
Net income (loss) available to Warner Bros. Discovery, Inc.	$	135	$	(417)	$	(10,817)	$	(2,726)
Net income (loss) per share available to Warner Bros. Discovery, Inc. Series A common stockholders:
Basic	$	0.06	$	(0.17)	$	(4.42)	$	(1.12)
Diluted	$	0.05	$	(0.17)	$	(4.42)	$	(1.12)
Weighted average shares outstanding:
Basic	2,453		2,438		2,449		2,436
Diluted	2,470		2,438		2,449		2,436

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(unaudited; in millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income (loss)	$	141	$	(407)	$	(10,842)	$	(2,687)
Other comprehensive income (loss):



Currency translation, net of income tax benefit (expense) of $15, $(22), $13, and $(32)	482		(393)		315		93
Pension plan and SERP liability, net of income tax (expense) of $— and $(2), $—, and $(8)	—		(1)		—		(14)
Derivatives
Change in net unrealized gains	15		15		40		29
Less: Reclassification adjustment for net gains included in net income	(8)		(6)		(15)		(12)
Net change, net of income tax (expense) benefit of $(1), $3, $(5), and $(1)	7		9		25		17
Comprehensive income (loss)	630		(792)		(10,502)		(2,591)
Comprehensive income attributable to noncontrolling interests	(10)		(8)		(23)		(32)
Comprehensive (income) loss attributable to redeemable noncontrolling interests	(3)		(2)		45		(7)
Comprehensive income (loss) attributable to Warner Bros. Discovery, Inc.	$	617	$	(802)	$	(10,480)	$	(2,630)

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except par value)


	September 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	3,336	$	3,780
Receivables, net	5,534		6,047

Prepaid expenses and other current assets	3,635		4,391
Total current assets	12,505		14,218
Film and television content rights and games	20,039		21,229
Property and equipment, net	6,158		5,957


Goodwill	25,869		34,969
Intangible assets, net	33,767		38,285

Other noncurrent assets	7,995		8,099
Total assets	$	106,333	$	122,757
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,120	$	1,260
Accrued liabilities	10,002		10,368

Deferred revenues	1,530		1,924
Current portion of debt	3,043		1,780
Total current liabilities	15,695		15,332
Noncurrent portion of debt	37,166		41,889
Deferred income taxes	7,339		8,736
Other noncurrent liabilities	9,959		10,328
Total liabilities	70,159		76,285
Commitments and contingencies (See Note 15)
Redeemable noncontrolling interests	117		165

Warner Bros. Discovery, Inc. stockholders’ equity:
Series A common stock: $0.01 par value; 10,800 and 10,800 shares authorized; 2,683 and 2,669 shares issued; and 2,452 and 2,439 shares outstanding	27		27
Preferred stock: $0.01 par value; 1,200 and 1,200 shares authorized, 0 shares issued and outstanding	—		—
Additional paid-in capital	55,463		55,112
Treasury stock, at cost: 230 and 230 shares	(8,244)		(8,244)
Accumulated deficit	(11,745)		(928)
Accumulated other comprehensive loss	(401)		(741)
Total Warner Bros. Discovery, Inc. stockholders’ equity	35,100		45,226
Noncontrolling interests	957		1,081
Total equity	36,057		46,307
Total liabilities and equity	$	106,333	$	122,757

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in millions)


	Nine Months Ended September 30,
	2024		2023
Operating Activities
Net loss	$	(10,842)	$	(2,687)
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Content rights amortization and impairment	10,879		12,547
Depreciation and amortization	5,394		5,961
Deferred income taxes	(1,351)		(2,071)

Share-based compensation expense	419		391

Equity in losses of equity method investee companies and cash distributions	130		136
Gain on sale of investments	(204)		—
Gain on extinguishment of debt	(590)		(17)
Impairments and loss on dispositions	9,412		61
Gain from derivative instruments, net	(41)		(100)
Other, net	96		186
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables, net	517		(33)
Film and television content rights, games, and production payables, net	(9,506)		(9,853)
Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities	(1,493)		(1,245)
Foreign currency, prepaid expenses and other assets, net	(160)		623
Cash provided by operating activities	2,660		3,899
Investing Activities
Purchases of property and equipment	(662)		(1,048)

Proceeds from sales of investments	324		—
Investments in and advances to equity investments	(104)		(91)





Other investing activities, net	87		114
Cash used in investing activities	(355)		(1,025)
Financing Activities
Principal repayments of term loans	—		(2,850)
Principal repayments of debt, including premiums and discounts to par value	(4,550)		(2,818)
Borrowings from debt, net of discount and issuance costs	1,617		1,496
Distributions to noncontrolling interests and redeemable noncontrolling interests	(172)		(282)






Securitization receivables collected but not remitted	13		238
Borrowings under commercial paper program and revolving credit facility	14,203		4,298
Repayments under commercial paper program and revolving credit facility	(14,203)		(4,304)


Other financing activities, net	(57)		(86)
Cash used in financing activities	(3,149)		(4,308)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	15		(66)
Net change in cash, cash equivalents, and restricted cash	(829)		(1,500)
Cash, cash equivalents, and restricted cash, beginning of period	4,319		3,930
Cash, cash equivalents, and restricted cash, end of period	$	3,490	$	2,430

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in millions)


	Warner Bros. Discovery, Inc. Common Stock			Additional Paid-In Capital		Treasury Stock		Accumulated Deficit		Accumulated Other Comprehensive Loss		Warner Bros. Discovery, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Par Value
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. Discovery, Inc. and attributable to noncontrolling interests	—	—		—		—		(966)		—		(966)		7		(959)
Other comprehensive loss	—	—		—		—		—		(172)		(172)		(1)		(173)
Share-based compensation	—	—		108		—		—		—		108		—		108



Tax settlements associated with share-based plans	—	—		(53)		—		—		—		(53)		—		(53)
Dividends paid to noncontrolling interests	—	—		—		—		—		—		—		(123)		(123)
Issuance of stock in connection with share-based plans	10	—		30		—		—		—		30		—		30
Redeemable noncontrolling interest adjustments to redemption value	—	—		(22)		—		—		—		(22)		—		(22)

March 31, 2024	2,679	$	27	$	55,175	$	(8,244)	$	(1,894)	$	(913)	$	44,151	$	964	$	45,115


Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests	—	—		—		—		(9,986)		—		(9,986)		10		(9,976)
Other comprehensive income (loss)	—	—		—		—		—		23		23		(3)		20
Share-based compensation	—	—		151		—		—		—		151		—		151



Tax settlements associated with share-based plans	—	—		(2)		—		—		—		(2)		—		(2)
Dividends paid to noncontrolling interests	—	—		—		—		—		—		—		(19)		(19)
Issuance of stock in connection with share-based plans	2	—		6		—		—		—		6		—		6
Redeemable noncontrolling interest adjustments to redemption value	—	—		2		—		—		—		2		—		2

June 30, 2024	2,681	$	27	$	55,332	$	(8,244)	$	(11,880)	$	(890)	$	34,345	$	952	$	35,297


Net income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests	—	—		—		—		135		—		135		3		138
Other comprehensive income	—	—		—		—		—		489		489		7		496
Share-based compensation	—	—		135		—		—		—		135		—		135



Tax settlements associated with share-based compensation	—	—		(5)		—		—		—		(5)		—		(5)
Dividends paid to noncontrolling interests	—	—		—		—		—		—		—		(5)		(5)
Issuance of stock in connection with share-based plans	2	—		4		—		—		—		4		—		4
Redeemable noncontrolling interest adjustments to redemption value	—	—		(3)		—		—		—		(3)		—		(3)

September 30, 2024	2,683	$	27	$	55,463	$	(8,244)	$	(11,745)	$	(401)	$	35,100	$	957	$	36,057

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in millions)


		Warner Bros. Discovery, Inc. Common Stock				Additional Paid-In Capital		Treasury Stock		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Warner Bros. Discovery, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares		Par Value
December 31, 2022		2,660		$	27	$	54,630	$	(8,244)	$	2,205	$	(1,523)	$	47,095	$	1,254	$	48,349


Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests		—		—		—		—		(1,069)		—		(1,069)		8		(1,061)
Other comprehensive income		—		—		—		—		—		418		418		—		418
Share-based compensation		—		—		101		—		—		—		101		—		101



Tax settlements associated with share-based plans		—		—		(53)		—		—		—		(53)		—		(53)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		—		(225)		(225)
Issuance of stock in connection with share-based plans		6		—		9		—		—		—		9		—		9
Redeemable noncontrolling interest adjustments to redemption value		—		—		—		—		(3)		—		(3)		—		(3)
Other adjustments to stockholders' equity		—		—		(2)		—		—		—		(2)		—		(2)
March 31, 2023		2,666		$	27	$	54,685	$	(8,244)	$	1,133	$	(1,105)	$	46,496	$	1,037	$	47,533


Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests		—		—		—		—		(1,240)		—		(1,240)		16		(1,224)
Other comprehensive income		—		—		—		—		—		63		63		—		63
Share-based compensation		—		—		130		—		—		—		130		—		130



Tax settlements associated with share-based plans		—		—		(7)		—		—		—		(7)		—		(7)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		—		(26)		(26)
Issuance of stock in connection with share-based plans		1		—		8		—		—		—		8		—		8
Redeemable noncontrolling interest adjustments to redemption value		—		—		—		—		2		—		2		—		2

June 30, 2023		2,667		$	27	$	54,816	$	(8,244)	$	(105)	$	(1,042)	$	45,452	$	1,027	$	46,479


Net (loss) income available to Warner Bros. Discovery, Inc. and attributable to noncontrolling interests		—		—		—		—		(417)		—		(417)		8		(409)
Other comprehensive loss		—		—		—		—		—		(385)		(385)		—		(385)
Share-based compensation		—		—		126		—		—		—		126		—		126

Reclassification of redeemable noncontrolling interest to noncontrolling interest (See Note 13)		—		—		2		—		—		—		2		60		62

Tax settlements associated with share-based plans		—		—		(5)		—		—		—		(5)		—		(5)
Dividends paid to noncontrolling interests		—		—		—		—		—		—		—		(8)		(8)
Issuance of stock in connection with share-based plans		1		—		5		—		—		—		5		—		5
Redeemable noncontrolling interest adjustments to redemption value		—		—		—		—		(4)		—		(4)		—		(4)

September 30, 2023		2,668		$	27	$	54,944	$	(8,244)	$	(526)	$	(1,427)	$	44,774	$	1,087	$	45,861

The accompanying notes are an integral part of these consolidated financial statements.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

Warner Bros. Discovery, Inc. (“Warner Bros. Discovery”, “WBD”, the “Company”, “we”, “us” or “our”) is a leading global media and entertainment company that creates and distributes a differentiated and complete portfolio of branded content across television, film, streaming and gaming. Warner Bros. Discovery inspires, informs and entertains audiences worldwide through its iconic brands and products including: Discovery Channel, Max, discovery+, CNN, DC, TNT Sports, Eurosport, HBO, HGTV, Food Network, OWN, Investigation Discovery, TLC, Magnolia Network, TNT, TBS, truTV, Travel Channel, MotorTrend, Animal Planet, Science Channel, Warner Bros. Motion Picture Group, Warner Bros. Television Group, Warner Bros. Pictures Animation, Warner Bros. Games, New Line Cinema, Cartoon Network, Adult Swim, Turner Classic Movies, Discovery en Español, Hogar de HGTV and others.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries in which a controlling interest is maintained, including variable interest entities (“VIE”) for which the Company is the primary beneficiary. Intercompany accounts and transactions between consolidated entities have been eliminated.

Unaudited Interim Financial Statements

These consolidated financial statements are unaudited; however, in the opinion of management, they reflect all adjustments consisting only of normal recurring adjustments necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods. The results of operations for the interim periods presented are not necessarily indicative of results for the full year or future periods. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”).

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from these estimates.

Accounting and Reporting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (“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 of this guidance and will update its segment disclosures upon adoption.

Income Taxes

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. The amendments are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is permitted. 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.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 2. GOODWILL AND INTANGIBLE ASSETS

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.

During the three months ended June 30, 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 in the second quarter of 2024 for the Networks reporting unit.

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 Discounted Cash Flow (“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 three months ended June 30, 2024 in impairments and loss on dispositions on 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 June 30, 2024, the carrying value of remaining goodwill assigned to the Networks reporting unit was $8.4 billion and the net assets of the reporting unit were approximately $25.6 billion. The Networks segment included accumulated impairments of $10.8 billion and $1.6 billion as of September 30, 2024 and December 31, 2023, respectively.

During the three months ended September 30, 2024, the Company performed goodwill and intangible assets impairment monitoring procedures for all of its reporting units and identified no indicators of impairment or triggering events. The Company continues to monitor its reporting units for triggers that could impact 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 our Studios reporting unit; and
risks in executing the projected growth strategies of the Company’s DTC reporting unit.

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.

Intangible Assets

During the three months ended September 30, 2024, as a result of the goodwill impairment charge 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

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

estimate, was accounted for prospectively, and resulted in incremental amortization expense of $94 million during the three months ended September 30, 2024.

During the three months ended September 30, 2023, the Company reassessed the useful lives and amortization methods for its linear networks and HBO trademarks and trade names and concluded the pattern of amortization should be accelerated. Accordingly, the Company changed the amortization method for these assets from the straight-line method to the sum-of-the months’ digits method effective July 1, 2023. This change was considered a change in estimate, was accounted for prospectively, and resulted in incremental amortization expense of $171 million during the three months ended September 30, 2023.

NOTE 3. RESTRUCTURING AND OTHER CHARGES

In connection with the completion of its merger (the “Merger”) with the WarnerMedia business (the “WarnerMedia Business”) of AT&T Inc. on April 8, 2022, the Company has announced and has taken actions to implement projects to achieve cost synergies for the Company, which includes, 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 is expected to be substantially completed by the end of 2024. During the three months ended June 30, 2024, the Company initiated an organizational and personnel restructuring plan and, during 2023, initiated a strategic realignment plan associated with its Warner Bros. Pictures Animation group.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Studios	$	2	$	134	$	32	$	220
Networks	5		48		58		161
DTC	(16)		34		1		61
Corporate and inter-segment eliminations	18		53		70		68

Total restructuring and other charges	$	9	$	269	$	161	$	510

During the three months ended September 30, 2024, restructuring and other charges were primarily related to organization restructuring costs. During the three months ended September 30, 2023, restructuring and other charges primarily included content impairments and other content developments costs and write-offs of $112 million, contract terminations and facility consolidation activities of $31 million, organization restructuring costs of $125 million, and other charges of $1 million.

During the nine months ended September 30, 2024, restructuring and other charges were primarily related to organization restructuring costs. During the nine months ended September 30, 2023, restructuring and other charges primarily included content impairments and other content development costs and write-offs of $123 million, contract terminations and facility consolidation activities of $102 million, organization restructuring of $284 million, and other charges of $1 million. Facility consolidation impairment charges of $234 million were recorded in impairment and loss on dispositions in the consolidated statements of operations during the nine months ended September 30, 2024.

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, 2023	$	98	$	202	$	80	$	80	$	460


Contract termination accruals, net	—		1		—		2		3

Employee termination accruals, net	31		56		22		61		170
Other accruals and adjustments	—		—		(20)		—		(20)
Cash paid	(80)		(151)		(46)		(78)		(355)
September 30, 2024	$	49	$	108	$	36	$	65	$	258

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 4. REVENUES

The following tables present the Company’s revenues disaggregated by revenue source (in millions).


	Three Months Ended September 30, 2024
	Studios		Networks		DTC		Corporate and Inter-segment Eliminations		Total
Revenues:
Distribution	$	6	$	2,598	$	2,320	$	(4)	$	4,920
Advertising	1		1,490		205		(14)		1,682
Content	2,463		833		107		(682)		2,721
Other	210		89		2		(1)		300
Total	$	2,680	$	5,010	$	2,634	$	(701)	$	9,623


	Three Months Ended September 30, 2023
	Studios		Networks		DTC		Corporate and Inter-segment Eliminations		Total
Revenues:
Distribution	$	13	$	2,833	$	2,179	$	1	$	5,026
Advertising	4		1,709		138		(55)		1,796
Content	3,000		215		120		(495)		2,840
Other	209		111		1		(4)		317
Total	$	3,226	$	4,868	$	2,438	$	(553)	$	9,979


	Nine Months Ended September 30, 2024
	Studios		Networks		DTC		Corporate and Inter-segment Eliminations		Total
Revenues:
Distribution	$	14	$	8,070	$	6,707	$	(7)	$	14,784
Advertising	5		5,691		620		(56)		6,260
Content	7,323		1,396		329		(1,660)		7,388
Other	608		250		6		(2)		862
Total	$	7,950	$	15,407	$	7,662	$	(1,725)	$	29,294


	Nine Months Ended September 30, 2023
	Studios		Networks		DTC		Corporate and Inter-segment Eliminations		Total
Revenues:
Distribution	$	19	$	8,769	$	6,536	$	—	$	15,324
Advertising	11		6,394		362		(154)		6,613
Content	8,425		744		715		(1,644)		8,240
Other	564		300		12		(16)		860
Total	$	9,019	$	16,207	$	7,625	$	(1,814)	$	31,037

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Contract Liabilities and Contract Assets

The following table presents contract liabilities on the consolidated balance sheets (in millions).


Category	Balance Sheet Location	September 30, 2024		December 31, 2023


Contract liabilities	Deferred revenues	$	1,530	$	1,924
Contract liabilities	Other noncurrent liabilities	190		160

For the nine months ended September 30, 2024 and 2023, respectively, revenues of $1,542 million and $1,202 million were recognized that were included in deferred revenues as of December 31, 2023 and December 31, 2022, respectively. Contract assets were not material as of September 30, 2024 and December 31, 2023.

Remaining Performance Obligations

As of September 30, 2024, $10,202 million of revenue is expected to be recognized from remaining performance obligations under our long-term contracts. The following table presents a summary of remaining performance obligations by contract type (in millions).


Contract Type	September 30, 2024		Duration
Distribution - fixed price or minimum guarantee	$	2,802	Through 2031
Content licensing and sports sublicensing	4,673		Through 2030
Brand licensing	2,096		Through 2043
Advertising	631		Through 2027
Total	$	10,202

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; 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.

NOTE 5. SALES OF RECEIVABLES

Revolving Receivables Program

During the three months ended June 30, 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 sheet was $4,761 million as of September 30, 2024.

The Company recognized $33 million and $121 million for the three and nine months ended September 30, 2024, respectively, and $36 million and $78 million for the three and nine months ended September 30, 2023, respectively, in selling, general and administrative expenses in the consolidated statements of operations from the revolving receivables program (net of non-designated derivatives). (See Note 9.)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Gross receivables sold/cash proceeds received	$	3,528	$	3,381	$	11,024	$	9,797
Collections reinvested under revolving receivables program	(3,834)		(3,487)		(11,464)		(9,974)
Net cash proceeds remitted	$	(306)	$	(106)	$	(440)	$	(177)
Net receivables sold	$	3,524	$	3,352	$	10,967	$	9,656
Obligations recorded (Level 3)	$	31	$	114	$	270	$	374

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table presents a summary of the amounts transferred or pledged, which were held at the Company’s bankruptcy-remote consolidated subsidiary (in millions).


	September 30, 2024		December 31, 2023
Gross receivables pledged as collateral	$	2,453	$	3,088
Restricted cash pledged as collateral	$	150	$	500
Balance sheet classification:
Receivables, net	$	2,036	$	2,780
Prepaid expenses and other current assets	$	150	$	500
Other noncurrent assets	$	417	$	308

Accounts Receivable Factoring

Total trade accounts receivable sold under the Company’s factoring arrangement were $57 million and $72 million for the nine months ended September 30, 2024 and 2023, respectively. The impact to the consolidated statements of operations was immaterial for the three and nine months ended September 30, 2024 and 2023. This accounts receivable factoring agreement is separate and distinct from the revolving receivables program.

NOTE 6. CONTENT RIGHTS

For purposes of amortization and impairment, capitalized content costs are grouped based on their predominant monetization strategy: individually or as a group. Programming rights are presented as two separate captions: licensed content and advances and live programming and advances. Live programming includes licensed sports rights and related advances. The tables below present the components of content rights (in millions).


	September 30, 2024
		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Theatrical film production costs:
Released, less amortization		$	1,629	$	—	$	1,629
Completed and not released		369		—		369
In production and other		1,474		—		1,474

Television production costs:
Released, less amortization		1,480		5,804		7,284
Completed and not released		561		717		1,278
In production and other		375		2,213		2,588
Total theatrical film and television production costs		$	5,888	$	8,734	$	14,622
Licensed content and advances, net						4,316
Live programming and advances, net						1,347
Game development costs, less amortization						442
Total film and television content rights and games						20,727
Less: Current content rights and prepaid license fees, net						(688)
Total noncurrent film and television content rights and games						$	20,039

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	December 31, 2023
		Predominantly Monetized Individually		Predominantly Monetized as a Group		Total
Theatrical film production costs:
Released, less amortization		$	2,823	$	—	$	2,823
Completed and not released		107		—		107
In production and other		1,300		—		1,300

Television production costs:
Released, less amortization		1,471		5,317		6,788
Completed and not released		380		606		986
In production and other		417		2,624		3,041
Total theatrical film and television production costs		$	6,498	$	8,547	$	15,045
Licensed content and advances, net						4,519
Live programming and advances, net						1,943
Game development costs, less amortization						565
Total film and television content rights and games						22,072
Less: Current content rights and prepaid license fees, net						(843)
Total noncurrent film and television content rights and games						$	21,229

Content amortization consisted of the following (in millions).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023

Predominantly monetized individually	$	1,624	$	631	$	3,300	$	3,193





Predominantly monetized as a group	1,363		2,364		7,256		9,039



Total content amortization	$	2,987	$	2,995	$	10,556	$	12,232

Content expense includes amortization, impairments, and development expense and is generally a component of costs of revenues on the consolidated statements of operations. Content impairments were $145 million and $323 million, for the three and nine months ended September 30, 2024, respectively, and were $191 million and $315 million for the three and nine months ended September 30, 2023, respectively.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 7. INVESTMENTS

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


Category	Balance Sheet Location	Ownership	September 30, 2024		December 31, 2023
Equity method investments:
The Chernin Group (TCG) 2.0-A, LP	Other noncurrent assets	44%	$	227	$	249
nC+	Other noncurrent assets	32%	136		142
TNT Sports	Other noncurrent assets	50%	102		102
Other	Other noncurrent assets		352		503
Total equity method investments			817		996

Investments with readily determinable fair values	Other noncurrent assets		37		53


Investments without readily determinable fair values	Other noncurrent assets(a)		420		438
Total investments			$	1,274	$	1,487

(a) Investments without readily determinable fair values included $17 million as of September 30, 2024 and December 31, 2023, respectively that were included in prepaid expenses and other current assets.

Equity Method Investments

Certain of the Company’s other equity method investments are VIEs, for which the Company is not the primary beneficiary. As of September 30, 2024, the Company’s maximum exposure for all of its unconsolidated VIEs, including the investment carrying values and unfunded contractual commitments made on behalf of VIEs, was approximately $644 million. The Company’s maximum estimated exposure excludes the non-contractual future funding of VIEs. The aggregate carrying values of these VIE investments were $624 million and $697 million as of September 30, 2024 and December 31, 2023, respectively. VIE gains and losses are recorded in loss from equity investees, net on the consolidated statements of operations. VIE losses were $8 million and $6 million for the three months ended September 30, 2024 and 2023, respectively, and $46 million and $59 million for nine months ended September 30, 2024 and 2023, respectively.

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 millions).

NOTE 8. DEBT

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


	Weighted-Average Interest Rate as of September 30, 2024		September 30, 2024		December 31, 2023

Floating rate senior notes with maturities of 5 years or less	—	%	$	—	$	40
Senior notes with maturities of 5 years or less	4.10	%	14,088		13,664
Senior notes with maturities between 5 and 10 years	4.37	%	7,974		8,607
Senior notes with maturities greater than 10 years	5.20	%	18,170		21,644
Total debt			40,232		43,955
Unamortized discount, premium, debt issuance costs, and fair value adjustments for acquisition accounting, net			(23)		(286)
Debt, net of unamortized discount, premium, debt issuance costs, and fair value adjustments for acquisition accounting			40,209		43,669
Current portion of debt			(3,043)		(1,780)
Noncurrent portion of debt			$	37,166	$	41,889

During the three months ended September 30, 2024, the Company repaid in full at maturity £400 million ($529 million equivalent at repayment) of aggregate principal amount outstanding of its senior notes due September 2024 and completed open market repurchases for $361 million of aggregate principal amount outstanding of its senior notes.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

During the three months ended June 30, 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) Discovery Communications, LLC’s (“DCL”) 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) WarnerMedia Holdings, Inc.’s (“WMH”) 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. The Company also repaid in full at maturity $48 million of aggregate principal amount outstanding of its senior notes due June 2024.

During the three months ended June 30, 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 tender offer. After December 2029 and February 2033, respectively, the senior notes are redeemable at par plus accrued and unpaid interest.

During the three months ended March 31, 2024, the Company repaid in full at maturity $726 million of aggregate principal amount outstanding of its senior notes due February and March 2024 and completed open market repurchases for $364 million of aggregate principal amount outstanding of its senior notes.

During the three months ended September 30, 2023, the Company’s wholly-owned subsidiaries, Warner Media, LLC (“WML”), Historic TW Inc. (“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 offer in August 2023 by purchasing senior notes in the amount of $1.9 billion validly tendered and accepted for purchase pursuant to the offers. The Company also repaid $250 million of aggregate principal amount outstanding of its term loan prior to the due date of April 2025, repaid in full at maturity $178 million of aggregate principal amount outstanding of its senior notes due September 2023, and completed open market repurchases for $95 million of aggregate principal amount outstanding of its senior notes.

During the three months ended June 30, 2023, the Company commenced a tender offer to purchase for cash any and all of its outstanding Floating Rate Notes due in 2024. The Company completed the tender offer in June 2023, by purchasing Floating Rate Notes in the amount of $460 million validly tendered and accepted for purchase pursuant to the offer. The Company also repaid $1.1 billion of aggregate principal amount outstanding of its term loan prior to the due date of April 2025 and completed open market repurchases for $88 million of aggregate principal amount outstanding of its senior notes.

During the three months ended March 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. The proceeds were used to pay $1.5 billion of aggregate principal amount outstanding of the Company’s term loan prior to the due date of April 2025. The Company also repaid $106 million of aggregate principal amount outstanding of its senior notes due February 2023.

As of September 30, 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 $22 million of un-exchanged senior notes issued by Scripps Networks.

Revolving Credit Facility and Commercial Paper Programs

As of September 30, 2024, the Company had a multicurrency revolving credit agreement (the “Revolving Credit Agreement”) and had the capacity to borrow up to $6.0 billion under the Revolving Credit Agreement (the “Credit Facility”). The Company could also request additional commitments up to $1.0 billion from the lenders upon the satisfaction of certain conditions. The Company’s commercial paper program is supported by the Credit Facility. Borrowing capacity under the Credit Facility is effectively reduced by any outstanding borrowings under the commercial paper program. As of September 30, 2024 and December 31, 2023, the Company had no outstanding borrowings under its Credit Facility or its commercial paper program. In October 2024, the Company replaced the Revolving Credit Agreement with a new multicurrency revolving credit agreement. (See Note 17.)

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Credit Agreement Financial Covenants

The Revolving Credit Agreement included financial covenants that required the Company to maintain a minimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum adjusted consolidated leverage ratio of 4.50 to 1.00. As of September 30, 2024, the Company was in compliance with all covenants and there were no events of default under the Revolving Credit Agreement.

NOTE 9. DERIVATIVE FINANCIAL INSTRUMENTS

In the normal course of business, the Company is exposed to foreign currency exchange rate market risk and interest rate fluctuations. As part of its risk management strategy, the Company uses derivative financial instruments, primarily foreign currency forward contracts, fixed-to-fixed currency swaps, total return swaps and interest rate swaps to hedge certain foreign currency, market value, and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not enter into or hold derivative financial instruments for speculative trading purposes.

There were no amounts eligible to be offset under master netting agreements as of September 30, 2024 and December 31, 2023. The fair value of the Company’s derivative financial instruments was determined using a market-based approach (Level 2). The following table summarizes the impact of derivative financial instruments on the Company’s consolidated balance sheets (in millions).


	September 30, 2024										December 31, 2023
			Fair Value										Fair Value
	Notional		Prepaid expenses and other current assets		Other non- current assets		Accounts payable and accrued liabilities		Other non- current liabilities		Notional		Prepaid expenses and other current assets		Other non- current assets		Accounts payable and accrued liabilities		Other non- current liabilities
Cash flow hedges:
Foreign exchange	$	1,712	$	43	$	23	$	25	$	15	$	1,484	$	40	$	8	$	37	$	8


Net investment hedges: (a)
Cross-currency swaps	1,546		16		31		—		17		1,779		23		12		7		42

Fair value hedges:
Interest rate swaps	—		—		—		—		—		1,500		7		—		—		5
No hedging designation:
Foreign exchange	1,013		19		2		16		97		1,058		1		1		1		83

Interest rate swaps	3,000		1		—		2		—		—		—		—		—		—
Total return swaps	451		7		—		—		—		395		19		—		—		—


Total			$	86	$	56	$	43	$	129			$	90	$	21	$	45	$	138

(a) Excludes £402 million of sterling notes ($513 million equivalent at December 31, 2023), and €1,275 million of euro notes ($1,427 million equivalent at September 30, 2024) designated as a net investment hedge. (See Note 8.)

Derivatives Designated for Hedge Accounting

Cash Flow Hedges

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.

In April 2023, the Company unwound 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, and in May 2024, the Company de-designated £255 million of the Sterling debt. During the three months ended September 30, 2024, the Company repaid the Sterling debt in full at maturity and settled the remaining £145 million designated as a net investment hedge.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Gains (losses) recognized in accumulated other comprehensive loss:
Foreign exchange - derivative adjustments	$	15	$	15	$	46	$	35

Gains (losses) reclassified into income from accumulated other comprehensive loss:
Foreign exchange - distribution revenue	9		(3)		12		(5)
Foreign exchange - advertising revenue	1		—		1		—
Foreign exchange - costs of revenues	(1)		12		6		3
Foreign exchange - other income (expense), net	—		—		—		18
Interest rate - interest expense, net	(2)		(1)		(4)		—
Interest rate - gain (loss) on extinguishment of debt	—		—		(4)		—
Interest rate - other income (expense), net	—		1		5		1

If current fair values of designated cash flow hedges as of September 30, 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. The maximum length of time the Company is hedging exposure to the variability in future cash flows is 31 years.

Net Investment Hedges

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

During the three months ended June 30, 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 8) and designated an additional €300 million of fixed-to-fixed cross currency swaps as a net investment hedge. The Company de-designated €225 million of its Euro denominated debt during the three months ended September 30, 2024.

During the three months ended June 30, 2023, to mitigate the currency 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 three months ended September 30, 2023, the Company settled its Euro denominated debt that was designated as the hedging instrument in a net investment hedge.

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 three and nine months ended September 30, 2024 and 2023.


	Three Months Ended September 30,
	Amount of gain (loss) recognized in AOCI				Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)		Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
	2024		2023			2024			2023
Cross currency swaps	$	23	$	5	Interest expense, net		$	6		$	7


Euro-denominated notes (foreign denominated debt)	(71)		(2)		N/A		—			—
Sterling notes (foreign denominated debt)	(9)		17		N/A		—			—
Total	$	(57)	$	20			$	6		$	7

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Nine Months Ended September 30,
	Amount of gain (loss) recognized in AOCI				Location of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)		Amount of gain (loss) recognized in income on derivative (amount excluded from effectiveness testing)
	2024		2023			2024			2023
Cross currency swaps	$	62	$	30	Interest expense, net		$	18		$	18


Euro-denominated notes (foreign denominated debt)	(50)		3		N/A		—			—
Sterling notes (foreign denominated debt)	(5)		11		N/A		—			—
Total	$	7	$	44			$	18		$	18

Fair Value Hedges

During the three months ended March 31, 2023, the Company issued $1.5 billion of 6.412% fixed rate senior notes due March 2026. 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 were recorded in interest expense, net. The fair value hedge was subsequently settled during the three months ended September 30, 2024.

Derivatives Not Designated for Hedge Accounting

The Company has deferred compensation plans that have risk related to the fair value gains and losses on these investments and entered into 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 $3.0 billion notional of non-designated interest rate swaps. The gains and losses on these derivatives are recorded to selling, general and administrative expenses, offsetting securitization interest expense.

The following table presents the pretax 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).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Interest rate swaps	$	(29)	$	18	$	(1)	$	80
Total return swaps	21		(19)		41		12
Total in selling, general and administrative expense	(8)		(1)		40		92

Interest rate swaps	—		(1)		(3)		(1)
Cross-currency swaps	—		—		—		1


Foreign exchange derivatives	(6)		(1)		(31)		1
Total in other income (expense), net	(6)		(2)		(34)		1
Total	$	(14)	$	(3)	$	6	$	93

NOTE 10. FAIR VALUE MEASUREMENTS

Fair value is defined as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants. Assets and liabilities carried at fair value are classified in the following three categories:


Level 1	–	Quoted prices for identical instruments in active markets.
Level 2	–	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
Level 3	–	Valuations derived from techniques in which one or more significant inputs are unobservable.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The tables below present assets and liabilities measured at fair value on a recurring basis (in millions).


		September 30, 2024
Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Time deposits	Cash and cash equivalents	$	—	$	129	$	—	$	129

Equity securities:
Money market fund	Cash and cash equivalents	30		—		—		30

Mutual funds	Prepaid expenses and other current assets	17		—		—		17
Company-owned life insurance contracts	Prepaid expenses and other current assets	—		2		—		2
Mutual funds	Other noncurrent assets	217		—		—		217
Company-owned life insurance contracts	Other noncurrent assets	—		101		—		101



Total		$	264	$	232	$	—	$	496
Liabilities
Deferred compensation plan	Accrued liabilities	$	64	$	—	$	—	$	64
Deferred compensation plan	Other noncurrent liabilities	656		—		—		656
Total		$	720	$	—	$	—	$	720


		December 31, 2023
Category	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Time deposits	Cash and cash equivalents	$	—	$	105	$	—	$	105

Equity securities:
Money market funds	Cash and cash equivalents	1		—		—		1

Mutual funds	Prepaid expenses and other current assets	42		—		—		42
Company-owned life insurance contracts	Prepaid expenses and other current assets	—		1		—		1
Mutual funds	Other noncurrent assets	233		—		—		233
Company-owned life insurance contracts	Other noncurrent assets	—		97		—		97

Total		$	276	$	203	$	—	$	479
Liabilities
Deferred compensation plan	Accrued liabilities	$	67	$	—	$	—	$	67
Deferred compensation plan	Other noncurrent liabilities	614		—		—		614
Total		$	681	$	—	$	—	$	681

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 September 30, 2024 and December 31, 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 $35.7 billion and $40.5 billion as of September 30, 2024 and December 31, 2023, respectively.

The Company’s derivative financial instruments are discussed in Note 9, its investments with readily determinable fair value are discussed in Note 7, and the obligation for its revolving receivable program is discussed in Note 5.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 11. SHARE-BASED COMPENSATION

The Company has various incentive plans under which performance based restricted stock units (“PRSUs”), service based restricted stock units (“RSUs”), and stock options have been issued. The table below presents awards granted (in millions, except weighted-average grant price).


	Nine Months Ended September 30, 2024
	Awards	Weighted-Average Grant Price
Awards granted:
PRSUs	6.1	$	8.66
RSUs	55.0	$	8.66
Stock options	4.1	$	8.67

The table below presents unrecognized compensation cost related to non-vested share-based awards and the weighted-average amortization period over which these expenses will be recognized as of September 30, 2024 (in millions, except years).


	Unrecognized Compensation Cost		Weighted-Average Amortization Period (years)
PRSUs	$	65	1.5
RSUs	582		1.7
Stock options	92		2.0

Total unrecognized compensation cost	$	739

NOTE 12. INCOME TAXES

Income tax benefit was $319 million and $125 million for the three months ended September 30, 2024 and 2023, respectively, and income tax benefit was $190 million and $563 million for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 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 2.) For the three months ended September 30, 2024, the increase in income tax benefit compared to the same period in 2023 was primarily attributable to the effect of foreign operations, including a net tax benefit related to prior year tax positions finalized in tax returns filed during the three months ended September 30, 2024. The increase in income tax benefit was partially offset by a decrease in pre-tax book loss. For the nine months ended September 30, 2024, the decrease in income tax benefit compared to the same period in 2023 was primarily attributed to a decrease in pre-tax book loss (excluding the non-cash goodwill impairment charge), and an increase in uncertain tax positions, primarily attributable to a one-time favorable audit resolution reserve release included in the 2023 income tax benefit for the nine months ended September 30, 2023. The decrease was partially offset by an increase in tax benefits associated with the foreign operations.

Income tax benefit for the three and nine months ended September 30, 2024, reflects an effective income tax rate that differs from the federal statutory tax rate primarily attributable to the non-deductible goodwill impairment charge and the effect of foreign operations.

As of September 30, 2024 and December 31, 2023, the Company’s reserves for uncertain tax positions totaled $2,443 million and $2,147 million, respectively. 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 $99 million within the next twelve months as a result of ongoing audits, lapses of statutes of limitations or regulatory developments.

As of September 30, 2024 and December 31, 2023, the Company had accrued $707 million and $571 million, respectively, of total interest and penalties payable related to unrecognized tax benefits. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Organization 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 September 30, 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.

NOTE 13. SUPPLEMENTAL DISCLOSURES

The following tables present supplemental information related to the consolidated financial statements (in millions).

Other Income (Expense), net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Foreign currency losses, net	$	(15)	$	(83)	$	(206)	$	(180)
(Losses) gains on derivative instruments, net	(6)		(2)		(29)		1

Change in the value of investments with readily determinable fair value	(5)		—		(7)		21
Gain on sale of equity method investments	—		—		203		—

Change in fair value of equity investments without readily determinable fair value	—		(2)		(27)		(73)

Interest income	49		43		172		128
Indemnification receivable accrual	4		(14)		100		(9)
Other (loss) income, net	3		(5)		(18)		3
Total other income (expense), net	$	30	$	(63)	$	188	$	(109)

Supplemental Cash Flow Information


	Nine Months Ended September 30,
	2024		2023
Cash paid for income taxes, net	$	832	$	1,191
Cash paid for interest, net	1,873		2,065
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 transaction agreements with JCOM	—		68
Non-cash consideration paid related to transaction agreements with JCOM	—		2
Accrued purchases of property and equipment	32		33
Assets acquired under finance lease and other arrangements	384		94

Settlement of PRSU awards	50		22

Cash, Cash Equivalents, and Restricted Cash


	September 30, 2024		December 31, 2023
Cash and cash equivalents	$	3,336	$	3,780
Restricted cash - recorded in prepaid expenses and other current assets (1)	154		539
Total cash, cash equivalents, and restricted cash	$	3,490	$	4,319

(1) Restricted cash at September 30, 2024 primarily includes cash posted as collateral related to the Company’s revolving receivables program. Restricted cash at December 31, 2023 primarily includes cash posted as collateral related to the Company’s revolving receivables and hedging programs. (See Note 5 and Note 9.)

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Earnings Per Share

The table below presents a reconciliation of net income (loss) available to Warner Bros. Discovery, Inc. Series A common stockholders for basic and diluted earnings per share (in millions).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net income (loss)	$	141	$	(407)	$	(10,842)	$	(2,687)
Less:
Net income attributable to noncontrolling interests	(3)		(8)		(20)		(32)
Net (income) loss attributable to redeemable noncontrolling interests	(3)		(2)		45		(7)
Redeemable noncontrolling interest adjustments of carrying value to redemption value (redemption value does not equal fair value)	—		—		(4)		—
Net income (loss) available to Warner Bros. Discovery, Inc. Series A common stockholders for basic and diluted earnings per share	$	135	$	(417)	$	(10,821)	$	(2,726)

Denominator — weighted average:
Common shares outstanding — basic	2,453		2,438		2,449		2,436

Dilutive effect of share-based awards	17		—		—		—
Common shares outstanding — diluted	2,470		2,438		2,449		2,436

Basic net income (loss) per share allocated to common stockholders	$	0.06	$	(0.17)	$	(4.42)	$	(1.12)
Diluted net income (loss) per share allocated to common stockholders	$	0.05	$	(0.17)	$	(4.42)	$	(1.12)

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


	Three Months Ended September 30,		Nine Months Ended September 30,
	2024	2023	2024	2023
Anti-dilutive share-based awards	57	73	73	68

Supplier Finance Programs

As of September 30, 2024 and December 31, 2023, the Company has confirmed $427 million and $338 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.

Leases

During the three months ended June 30, 2024, the Company subleased two separate portions of its Hudson Yards, New York office. As a result of executing the subleases, recoverability tests were performed and the Company recorded a combined right-of-use (“ROU”) asset impairment charge of $231 million. The ROU asset impairment charge was recorded in impairment and loss on dispositions in the consolidated statements of operations.

Other than the item disclosed above, no other material changes have occurred to the Company’s lease portfolio for the periods presented. Refer to the Company’s 2023 Form 10-K for more information on the Company’s leases.

Assets Held for Sale

In 2022, the Company classified its Ranch Lot and Knoxville office building and land as assets held for sale. The Knoxville office building and land was sold during the three months ended March 31, 2023 and the Ranch Lot was sold during the three months ended September 30, 2023. The Burbank Studios Lot was purchased during the three months ended September 30, 2023 in exchange for the Ranch Lot and cash.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Noncontrolling Interest

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. Retaining controlling financial interest subsequent to the transaction, the Company continues to consolidate the joint venture. As the terms of the agreement no longer incorporate JCOM’s option to put its noncontrolling interest to the Company, JCOM’s noncontrolling interest was reclassified from redeemable noncontrolling interest to noncontrolling interest outside of stockholders’ equity on the Company’s consolidated balance sheet.

Accumulated Other Comprehensive Loss

The table below presents the changes in the components of accumulated other comprehensive loss, net of taxes (in millions).


	Three Months Ended September 30, 2024
	Currency Translation		Derivatives		Pension Plan and SERP Liability		Accumulated Other Comprehensive Loss
Beginning balance	$	(866)	$	36	$	(60)	$	(890)
Other comprehensive income (loss) before reclassifications	482		15		—		497
Reclassifications from accumulated other comprehensive loss to net income	—		(8)		—		(8)
Other comprehensive income (loss)	482		7		—		489
Ending balance	$	(384)	$	43	$	(60)	$	(401)


	Three Months Ended September 30, 2023
	Currency Translation		Derivatives		Pension Plan and SERP Liability		Accumulated Other Comprehensive Loss
Beginning balance	$	(1,012)	$	22	$	(52)	$	(1,042)
Other comprehensive income (loss) before reclassifications	(393)		15		(1)		(379)
Reclassifications from accumulated other comprehensive loss to net income	—		(6)		—		(6)
Other comprehensive income (loss)	(393)		9		(1)		(385)
Ending balance	$	(1,405)	$	31	$	(53)	$	(1,427)


	Nine Months Ended September 30, 2024
	Currency Translation		Derivatives		Pension Plan and SERP Liability		Accumulated Other Comprehensive Loss
Beginning balance	$	(699)	$	18	$	(60)	$	(741)
Other comprehensive income (loss) before reclassifications	315		40		—		355
Reclassifications from accumulated other comprehensive loss to net income	—		(15)		—		(15)
Other comprehensive income (loss)	315		25		—		340
Ending balance	$	(384)	$	43	$	(60)	$	(401)

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Nine Months Ended September 30, 2023
	Currency Translation		Derivatives		Pension Plan and SERP Liability		Accumulated Other Comprehensive Loss
Beginning balance	$	(1,498)	$	14	$	(39)	$	(1,523)
Other comprehensive income (loss) before reclassifications	93		29		(14)		108
Reclassifications from accumulated other comprehensive loss to net income	—		(12)		—		(12)
Other comprehensive income (loss)	93		17		(14)		96
Ending balance	$	(1,405)	$	31	$	(53)	$	(1,427)

NOTE 14. RELATED PARTY TRANSACTIONS

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. John Malone, who is Chairman of the Board of Liberty Global and Liberty Broadband and beneficially owns approximately 31% and 49% of the aggregate voting power with respect to the election of directors of Liberty Global and Liberty Broadband, respectively. The majority of the revenue earned from the Liberty Group relates to multi-year network distribution arrangements. Related party transactions also include revenues and expenses for content and services provided to or acquired from equity method investees, or minority partners of consolidated subsidiaries.

The table below presents a summary of the transactions with related parties (in millions).


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues and service charges:
Liberty Group	$	18	$	469	$	497	$	1,443
Equity method investees	122		161		422		560
Other	97		63		210		157
Total revenues and service charges	$	237	$	693	$	1,129	$	2,160
Expenses	$	58	$	79	$	218	$	271
Distributions to noncontrolling interests and redeemable noncontrolling interests	$	11	$	13	$	172	$	282

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


	September 30, 2024		December 31, 2023
Receivables	$	273	$	363
Payables	$	8	$	18

NOTE 15. COMMITMENTS AND CONTINGENCIES

Put Rights

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.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Legal Matters

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. 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. Although the outcome of these matters cannot be predicted with certainty and the impact of the final resolution of these matters on the Company’s results of operations in a particular subsequent reporting period is not known, management does not currently believe that the resolution of these matters will have a material adverse effect on the Company’s future consolidated financial position, future results of operations, or cash flows.

NOTE 16. 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.

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

The Company evaluates the operating performance of its operating segments based on financial measures such as revenues and Adjusted EBITDA. Adjusted EBITDA is defined as operating income excluding:

employee share-based compensation;
depreciation and amortization;
restructuring and facility consolidation;
certain impairment charges;
gains and losses on business and asset dispositions;
third-party transaction and integration costs;
amortization of purchase accounting fair value step-up for content;
amortization of capitalized interest for content; and
other items impacting comparability.

The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance, and allocate resources to each segment. The Company believes Adjusted EBITDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes employee share-based compensation, restructuring, certain impairment charges, gains and losses on business and asset dispositions, and transaction and integration costs from the calculation of Adjusted EBITDA due to their impact on comparability between periods. Integration costs include transformative system implementations and integrations, such as Enterprise Resource Planning systems, and may take several years to complete. The Company also excludes the depreciation of fixed assets and amortization of intangible assets, amortization of purchase accounting fair value step-up for content (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. 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. GAAP. We prospectively updated certain corporate allocations at the beginning of 2024. The impact to prior periods was immaterial.

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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

Revenues


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Studios	$	2,680	$	3,226	$	7,950	$	9,019
Networks	5,010		4,868		15,407		16,207
DTC	2,634		2,438		7,662		7,625
Corporate	4		(2)		6		(3)
Inter-segment eliminations	(705)		(551)		(1,731)		(1,811)
Total revenues	$	9,623	$	9,979	$	29,294	$	31,037

Reconciliation of segment adjusted EBITDA to loss before income taxes:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Studios	$	308	$	727	$	702	$	1,640
Networks	2,115		2,396		6,232		6,855
DTC	289		111		268		158
Segment Adjusted EBITDA	2,712		3,234		7,202		8,653
Depreciation and amortization	1,762		1,989		5,394		5,961
Employee share-based compensation	157		140		412		381
Restructuring and other charges	9		269		161		510
Transaction and integration costs	33		31		165		125
Facility consolidation costs	2		14		9		37
Impairment and amortization of fair value step-up for content	156		393		913		1,986
Amortization of capitalized interest for content	8		12		38		34
Impairments and loss on dispositions	5		24		9,412		61

Corporate	296		328		927		928
Inter-segment eliminations	3		(63)		(35)		(4)
Operating income (loss)	281		97		(10,194)		(1,366)
Other (income) expense, net	(30)		63		(188)		109
Loss from equity investees, net	18		14		89		73
Gain on extinguishment of debt	(23)		(22)		(590)		(17)
Interest expense, net	494		574		1,527		1,719
Loss before income taxes	$	(178)	$	(532)	$	(11,032)	$	(3,250)

WARNER BROS. DISCOVERY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 17. SUBSEQUENT EVENTS

Revolving Credit Facility

In October 2024, DCL entered into a multicurrency revolving credit agreement (the “Credit Agreement”), replacing the existing $6.0 billion credit agreement dated June 9, 2021. The Credit Agreement provides for a senior revolving 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. Obligations under the Credit Agreement are unsecured and are guaranteed by WBD, 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. The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants, and requires DCL to maintain a minimum consolidated interest coverage ratio of 3.00 to 1.00 and a maximum consolidated leverage ratio of 4.50 to 1.00.

Dispositions

In October 2024, the Company completed the sale of a minority interest in Formula E to Liberty Global, a related party, and expects to record a gain of $61 million.

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