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Ladies and gentlemen, welcome to the Warner Bros. Discovery, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Additionally, please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mr. Peter Lee, Senior Vice President, Investor Relations. You may now begin. Good morning.

Thank you for joining us for our Q4 and full year 2025 earnings call. Joining me today from Warner Bros. Discovery, Inc. management are David

It is clear we fulfilled our ambition. Warner Bros. Motion Picture Group delivered a historic run of success. The most innovative and exciting place to tell stories in the world. We set our goal for Warner Bros. Discovery, Inc. has been to make this great company weapons, looking at 2025, seven consecutive films opening with more than $40,000,000 in box office sales, a first for any studio. And our films spent 16 total weeks atop the global box office. We accomplished this through brilliant original films with nine films debuting number one at the box office in 2025, Sinners, like One Battle After Another, and global tentpole titles like a Minecraft movie and Superman. And we revived IP like The Conjuring: Last Rites and Final Destination: Bloodlines. Fans responded and critics did too. Our film slate won nine Golden Globe Awards, including Best Picture, Musical or Comedy, for One Battle After Another, and Cinematic and Box Office Achievement for Sinners. Next month, we are up for an industry-leading 30 Academy Awards. We are up for an industry-leading 30 Academy Awards. The incredible original films we produced have generated over $160,000,000 at the global box office in two weeks, including an $83,000,000 opening weekend. Including an $83,000,000 opening weekend, the incredible original films we produced have generated over $160,000,000 at the global box office in two weeks. We are up for an industry-leading 30 Academy Awards. To exceptional original storytelling, further reinforcing our commitment with tentpole and franchise powerhouses on the horizon, and talent we have worked with, our 2027 film slate is set to deliver, be recognized, and will deservedly be recognized. And we are seeing momentum continue in 2026. Our ninth consecutive Wuthering Heights theatrical release, for the world's leading creative talent. And we are optimistic as a premier destination, from Godzilla vs. Kong 3, Superman: Man of Tomorrow from James Gunn, and our position. Building on the momentum, a truly monumental year for Warner Bros. Discovery, Inc., to open number one, Minecraft 2, The Conjuring: First Communion, The Batman Part II from Matt Reeves, Gremlins, and The Lord of the Rings: Gollum. We also brought innovative and exciting storytelling to television, both in streaming and through our linear networks. So many of the series that shaped global culture in 2025 were delivered to audiences around the world by HBO and HBO Max. In the fourth quarter, with several breakout sensations. That momentum is ongoing. In the fourth quarter, with several breakout sensations. That momentum is ongoing. Has also debuted strongly, which averaged 13,000,000 viewers an episode and drove meaningful social media engagement. Both The Pit and Industry have become cultural sensations with their new seasons, which debuted in 2026. A Knight of the Seven Kingdoms, building on shows like The Pit, HBO continued to deliver hits, seeing 30–50% respective audience growth versus their prior season. The third installment of the Game of Thrones franchise, The White Lotus, and The Last of Us, in HBO history, averaging 27,000,000 viewers per episode. And Heated Rivalry, It: Welcome to Derry delivered the fourth strongest debut season, Euphoria, averaging over 24,000,000 viewers per episode and growing. With House of the Dragon, The Gilded Age, Dune: Prophecy, and Hacks returning this year, as well as the premiere of Lanterns in 2026 for HBO. Our streaming segment also delivered terrific growth. Scaling HBO Max globally has been one of our core priorities for four years. We have executed our plan with focus and discipline. For four years, we have executed our plan with focus and discipline. For four years, we have executed our plan with focus and discipline. Following the successful launches of HBO Max in Germany and Italy and the upcoming launches in the UK and Ireland, we are on track to reach more than 140,000,000 total streaming subscribers by the end of the first quarter. And we are well on our way to exceed 150,000,000 subscribers by the end of the year. The 130,000,000 subscriber target and improved general entertainment viewership trends in recent months also continue, now exceeding, with 17 of last year's top 25 new cable TV series, we set out in August 2022. Our global linear networks teams clearly remain highly attuned to today's audiences. While secular headwinds persist, our portfolio of networks attracted 30% of all prime time cable viewing in the U.S. And we advanced critical initiatives like the launch of CNN All Access. Encouragingly, we saw a sequential improvement in advertising trends during the fourth quarter, which has continued into Q1. The 2026 Milano Cortina Olympic Winter Games, which closed this past Sunday, was a massive success for Warner Bros. Discovery, Inc. Warner Bros. Discovery, Inc. was a massive success and reignited important legacy Warner Bros. IP like our DC attack plan. Like our DC attack plan, and reignited important legacy Warner Bros. IP, was a massive success for Warner Bros. Discovery, Inc., which James Gunn and Peter Safran have been executing, that have shaped Lord of the Rings, four years ago, Harry Potter, in need of transformation. Warner Bros. was a business in need of transformation. Over the course of the Winter Games, we have invested aggressively. We invested in streaming technology. Over that time, together, telling stories, global culture, and we more than tripled our streaming audience. We saw more than 50% growth in linear hours viewed throughout Europe on HBO Max and Discovery+. Compared to the 2022 Winter Games, and turned HBO Max into a world-class DTC platform that we have now launched globally in over 100 countries and territories. And we invested in our global networks, evolving our brands, accelerating our digital future, and empowering teams to adapt, innovate, and continue entertaining audiences worldwide. The result has been a creative renaissance at Warner Bros. Motion Pictures, Warner Bros. Television, DC, and HBO. We have taken decisive actions when we made clear we were evaluating all paths, which led to eight price increases. We have taken decisive actions, which led to eight price increases, when we made clear we were evaluating all paths, and have thus far achieved a 63% increase in value, and thorough sales process, while mitigating downside risks. Since our Q3 2024 earnings call, and ultimately, a comprehensive, strategic review. Our board continues to lead a rigorous, highly competitive, strategic review to unlock value, then announcing the planned separation of Warner Bros. and Discovery Global, first through our corporate reorganization. Our focus has and always will be maximizing value and certainty, delivering significant value for Warner Bros. Discovery, Inc. shareholders throughout the process. And the board will evaluate any proposal against that standard with the objective of delivering the best deal for our shareholders. When we started Warner Bros. Discovery, Inc. in April 2022, the WBD stock was around $24. Since then, we have been laser focused on transforming the business for the future, investing big in our creative culture and original storytelling at HBO, and original storytelling at HBO, all of which created meaningful shareholder value.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please while we assemble the queue. Your first question comes from Rich Greenfield of LightShed Partners. Please go ahead. Please press the star key followed by the number two.

Hey, thanks for taking the question. Really, the first one for Gunnar. As you think ahead to the spin-off of Discovery Global this summer, there is a tremendous amount of investor focus on what leverage it can handle and what is really achievable. I guess, do you see any issues with Discovery Global being three to four times levered given the free cash flow dynamics of DG right now, and why do you believe—because there has been, obviously, a lot of focus on Versant—why do you not look at that as a good comp for DG? Thanks.

Okay. Good morning, everyone, and thank you, Rich, for those questions.

Look, I do not want to talk about specific comparison with our competitors here, but I do want to talk about the opportunity for Discovery Global, in general, internationally and locally. We have iconic brands reaching a billion people. We have trusted journalism with CNN and TV and another players everywhere in the world, fan-favorite talent, world-class sports portfolio, and I will say a little bit more about sport and how that differentiates. And a strong digital footprint that is already contributing meaningfully to the monetization of our brands and our network content. I have spent a lot of my time over the past half a year working with the great networks leadership team—you know, fantastic people—and I really do believe we have an opportunity to double down on what already makes us a global leader in the field. We have unmatched scale, and we are committed to continuing to support that portfolio with opportunities as they arise, but we feel very, very well positioned. I do want to start with the international opportunity a little bit because that is typically harder to understand from a domestic perspective here. But number one, we have fundamentally different trends internationally. For example, we are expecting to be flat to slightly up in international ad sales this year. Obviously, a fundamentally different setup than the domestic business and largely impacted by the fact that we have meaningful free-to-air presence in many of the key markets. We also have scale internationally that allows us to partner, potentially think about M&A, partnerships, representation with other players in the market, and a team that has been in these individual territories for decades. So that is number one, and I think hard or sometimes overlooked from a domestic perspective. Number two is sports, and I will talk about the U.S. side here for a second. Not all sports rights are created equal. And if you look at our sports portfolio and if you just take one metric over the past 12 months, we have had 440 events where we reached 2,000,000 people or more. Do want to talk about Discovery+ for a second. We have not talked about it a lot because HBO Max has been the core priority. But if you remember back when we merged into Warner Bros. Discovery, Inc., we were trying to shut down Discovery+. And the fact of the matter is we still have millions of viewers who are very regularly engaged, who love the content, and there is a tremendous opportunity. We have already opened up the buy flow again in certain international territories, and as you saw in our proxy, it is a profitable business and I think has a lot more ahead for us. CNN, I mentioned the journalism. CNN is the most trusted global news brand. The news-gathering organization is unrivaled, from my perspective. Whenever something happens anywhere in the world, we do not have to have people at a desk. We do not have to send people. We have people on the ground who are within hours or minutes sometimes able to cover whatever is going on. And that is reflected in the broader monetization interaction model we have launched into, a much more ambitious interaction with our news offering to give people however and whenever they want. And, again, you saw in our proxy that we are planning to begin growing that business again after a phase of investments, and the strong viewership we have seen coming into the first quarter of this year. And then, I will speak as the CFO here again for a second, the capital structure. It is sometimes overlooked, and that goes to the first part of your question. Again, if you do the math based on what was disclosed in our proxy, you would see that Discovery Global would come out of the gate with roughly, call it, the 3.3x net leverage number. That is absolutely sustainable and supportable. I actually think that rating agencies are probably going to—and, again, it is early days; we do not have final ratings yet—but I would expect that we are going to see single-B, maybe low double-B ratings for Discovery Global. So absolutely sustainable, and there is a huge opportunity because, as we have shown in the past, we are very well able and willing to leverage the opportunities in our long-dated low-interest capital structure. We are targeting to not have to move any debt around.

Does not sound like you are losing a lot of sleep over leverage.

Absolutely not. I mean, look, you are right. There has been a lot of investor focus. There has been a lot of debate. We put in that estimate range of $0 to $2,000,000,000 in the proxy to give ourselves some wiggle room, and that is the end of it. Also about this famous debt allocation mechanism, just to be absolutely clear, we are targeting to optimize shareholder value in everything we are doing. And, you know, this board and the management team, we are ready to get going.

Thanks. Thanks, Rich. Next question.

Your next question comes from Robert Fishman of MoffettNathanson. Please go ahead.

Good morning, everyone. Looking at all your premium Warner Bros. and HBO original content and the franchise IP that you started to talk about, what do you think is now finally being appreciated that was overlooked before the sales process heated up? And how difficult is building new franchises from scratch? And then just separately, as we think about your internal forecast for streaming profits to roughly triple by 2030, can you help us break down the drivers to reach that goal? What do you think is misunderstood areas of growth? Is it advertising, pricing, subscriber increases, or even more efficient spending?

Thanks, Robert.

Thank you. I think that there was a lot of focus on delevering this company and paying back debt. We certainly had a team, me included, that was focused on delevering this company and paying back debt. The question we asked in each case is, how is this content and how are these stories helping us? And are they doing well? And so we canceled a lot of stuff that was down 50% or 60% that we did not think was going to be successful. We hired a great creative leadership team, and we invested enormously in this mission of investing in original content and bringing back the great franchises. You know, what stories will we tell at this great company? At Warner Bros., at HBO, at Warner Bros. Television. So we really tripled down on investing in getting the best writers and directors back at Warner Bros. We did not lose any creative talent in the last four years, and we added substantially to that. And not just investing in existing franchises. I do not think anybody is investing in original the way we have. It did take time. You know, we are on a long cycle company, and you will continue to see it. When you look at 2027, Batman 2 is very important to us. And Minecraft 2 is important to us. Penguin and Superman. Our commitment to original content, you saw it coming slowly. It came out with Minecraft and talking about building new franchises. Mike and Pam were able to do that with Minecraft, and Minecraft 2 is coming back. It had made almost a billion dollars, and it is coming back in 2027. So I think when you look at Warner Bros. today and HBO, it is a company that is storytelling first, focused primarily on the creative culture, and with a superb creative team that has been given great latitude to take risks to tell original stories. Because we are a business of challenge and failure, but with the Warner Bros. library, together with the creative talent we have, it is stunning. And it is all coming together for Warner and for HBO as well. HBO has never been stronger, and you see it across our entire creative slate. Casey, and the team at HBO have shepherded an extraordinary creative slate, and JB and his team fought to take that all around the world. And now that we will be launching in the UK, Germany, Ireland, and Italy, it is a huge accomplishment to take this business global and to see it soar. We are not done yet.

Robert, on your question about the levers for growth and what makes us highly confident about the future growth of HBO Max in the streaming business, I would say there are five different levers that we look at. One is the product is the content, and it starts with we have never been clearer about what we need, the kind of content we need, the customer segments we have to go after and strengthen. And we have been at work at that for the last four years, continuing to improve it. And some of the hypotheses that we had, like the need for a longer-running series, ended up with The Pit and with the strength of the team that Casey and his organization have. We have a track record of delivering an incredible batting average with the swings that we take. And so we are seeing—and we do expect—further volume and penetration growth as the content is strengthening. The second is launches in big, sizable new markets. Including the European markets that we are in the process of completing this quarter. And then we are in the second inning of our password sharing enforcement. It is just beginning to get scale. It has not expanded globally at all. That will start in 2026. And so there is more growth to be had in those markets. Penetration growth in our existing markets driven by, partly, the content slate, social outreach that is strengthening, a sharper marketing focus, and product enhancements. We talk about this all the time—that we went from not good to good—but we still have a ways to go to get to great. Every day, we made hundreds of improvements last year that moved the dial inches every time. To improve engagement and retention, we have a number of marketing products and enhancements going forward this year and next that will continue to drive churn and retention lower. And then the last is just monetization, which is obviously a combination of both price and ad sales, where we are very early in the ad sales growth trajectory. We are still launching in new markets with our ad tiers, and we think there is further upside. Based on the fact that our fill rates are still relatively low internationally, we feel great about the next couple years and the years to come. We have great visibility to a strengthening content slate, which is at the core of everything we do, and the launches in big markets. It all flows together to drive that growth.

Backing Channing and her great team on rebuilding Warner Bros. Television is such a key initiative for us, and doubling down on the quality content. And also having as the largest and premier producer of TV in the world. But one of our big bets was the motion picture business. We believe in the motion picture business. We love the motion picture business. And four years ago, most of the movies were being made to go direct to streaming. We did get rid of a lot of those movies. But then we took those economics, plus some, and we as a company believe so deeply in putting movies on the screen for shared experience, and with an ambitious idea that people will come back to the theaters. Mike and Pam believe that. James Gunn and Peter believe that. Bremer believe that. And it is what we all grew up with and were awed by. It is at the core of the motion picture business of our company. And it is what when we look at this year and we look at next year and the year after, it is the top of the pyramid. We are just excited about the fact that people are going back to the theaters, and they are going back to see our content.

Thank you, Robert. Thank you, guys. Next question, please.

Your next question comes from Peter Supino of Wolfe Research. Please go ahead.

Hi. Good morning, everybody. Wanted to ask you to expand on the expansion of DC. You mentioned earlier in today's call that the programming is the product, and so I am wondering if the amount of programming that you are offering international audiences is today driving enough engagement to get you a level of ARPU that enables you to make money, or does that flywheel that you are working on require more programming dollars, and does it require any local programming? Thank you.

Yeah.

Yeah, Peter, I guess a couple observations. When we kicked off this journey four years ago, we said that we thought we could actually return to be profitable within a three- to five-year time horizon. That turned out to outperform that metric significantly and turned profitable in most markets within one to two years of launch. And so we are well ahead of where we thought, and the international businesses that have been around for a couple years, like Latin America, for example, are meaningfully profitable. And so we continue to see opportunities to drive that profitability further. The big benefit that we have compared to some is that we would focus on launching in markets where a lot of the IPs that we are working with have global audiences already, whether it be obviously the HBO brands, the Game of Thrones universe as an example, and even on the theatrical side, other series and other things that we have in development that piggyback off of already established global franchises. We do not need to have a meaningful spike up. Our content appeals to those global audiences in a unique way that is different than most streamers in many parts of the world. So our need to do a lot of local international content is a little bit different. We are already investing in local content. We do not see that there is a particular need to have a meaningful spike up. We will continue to invest in those markets as is currently in our plan and in the financials you see represented in the proxy. But that can certainly continue. Certainly, local international content continues to be important, but we do not see a major step change needed to continue to drive our growth. We are doing, and we have been doing, select international content in markets that either have strong scaled opportunities or where the content tends to travel. We were early a couple years ago to acquire the biggest leading local streamer in Turkey, which is a content type that travels well—Turkish novellas across many parts of the world. And we announced this partnership with CJ last year on Korean content, which also obviously has a great track record of traveling well. And so we target investment in markets where both there are strong scaled opportunities as well as opportunities where the content seems to travel better than in most places.

Thanks, Peter. Your next question comes from Bryan Kraft of Deutsche Bank. Please go ahead.

I had two, if I could. Just first on the studio, I was wondering if you could provide some more color on the video games pipeline and how your broader strategy is evolving there, including what is coming in 2026? And just any kind of directional color on what your guidance assumes for 2026 EBITDA with a contribution from video games relative to 2025. And then I just want to ask on the network side, could you give a little more color on the advertising improvement? I know there was an NBA headwind, but how much improvement did you see in domestic advertising, excluding sports, versus the international side, which also sounds like it is performing well and had some improvement. Thanks.

Yeah. Thanks, Bryan. On the first one, on the games side—so, obviously, for the games business, 2025 was a year of reset relative to 2025. The largest part of it was we had too broad a set of studios. We allowed ourselves to get distracted going after too many IPs, and we really went back to kind of the basics. And the core of last year's reset was around getting back to proven studios with proven games and proven players. And so that is where we are now. Obviously, 2026 is a year—given that 2024 we had an unfortunately unsuccessful launch, 2025 was this reset year—so we did not really replenish the pipeline. 2026 will see a sort of year that looks similar to 2025. In 2026, we have two big IPs launching. One in May, from one of our most prolific studios in the UK, TT Games. We are thrilled about what we announced that game last August. We just released another trailer yesterday, and the feedback and the trending and tracking is looking terrific. The quality of the game is fantastic. That is on the console/PC side. And the second game for 2026 is out of our Boston studio with our successful mobile franchise, Game of Thrones: Conquest, which will be coming out with a second game called Dragonfire that will be launching this summer. And, again, that is a different profile. As you know, mobile games tend to have a more upfront cost based on the UA and the marketing cost. But we feel confident, just like its predecessor—Game of Thrones: Conquest, which eight years on is still delivering significant financial returns—that that one will also see a similar trajectory and will help us build an even more robust library, with some of our biggest franchises launching in that time frame and returning to those franchises. We have not announced those yet.

Thank you, JB. And then on the ad sales improvement, the drivers here are, number one, the new upfront has kicked in. We have had 17 out of the top 25 premieres for freshman series. And, importantly, once you correct for NBA, we have done really well with the MLB playoffs. NHL has done well. CNN has seen headwinds in terms of ad sales. And look, number two, we are seeing good scatter premiums. But number three, really, some real health improvement. From our perspective, the market itself has been relatively consistent with prior quarters, and the sequential improvement that you mentioned is the underlying audience delivery, and that is across the board. We do not talk about this enough, but this is across all of our key networks. We had top shows for TLC with Bailing Out Loud, Follow-Up Diddy on ID, Flip Off on HGTV, Tournament of Champions on Food Network, and Discovery with Naked and Afraid: The Pocket Wolf. So all of our top networks are continuing to create high-quality output, and that, I think, puts us in a very good position for 2026 as well. We are seeing those trends continue, with an even more pronounced uptick on CNN audience. Turning to the international side, international, again, as an entire business line, has, relative to the U.S., different trends in the different regions. EMEA, our largest region, continues to do very well, and underlying delivery has been a real helper. As I mentioned earlier, I think we can see some real stability, potentially even a little bit of growth in ad sales going into 2026. We will take the next question, operator.

Your next question comes from John Hodulik of UBS. Please go ahead.

Great. Thank you, guys. Maybe a couple of follow-ups on the Discovery Global side. Gunnar, you guys gave some guidance for ad and OpEx savings for 2026 on that side. Anything you can tell us about the cost savings? Is it just the NBA, or are there additional opportunities for cost savings there? And then is there a way to bottom-line it in terms of how you see EBITDA trends in that business as we look out to 2026 and maybe beyond? And then I would love to get your view on how you see the sports business. You talk about the TMT sports app. Just what is your appetite for building a sports business and potentially securing additional rights? How do you see that business going forward?

Thanks, John. Thank you. We will take the next question, operator.

Yep. Thanks, John. So, look, in terms of cost guidance, you have our projections and long-range plan in the proxy, and I think that answers your question to some extent. Again, there is a big benefit from NBA cost savings, obviously, and it is a little bit of a weird situation because we have maintained that profitability through such a transformation of our sports portfolio, and it has been a great outcome for us. We are going to continue to be very focused on efficiencies in general. We are looking wherever we can at utilizing AI to further improve our efficiency and our effectiveness. We have some great projects ongoing that are creating much better visibility into our content, etc. Those are all going to be things that will help us drive efficiency and generate more output with the same cost structure. On the sports business specifically, we continue to have appetite for sports rights. It is one of the important strategic pillars, as you heard earlier. And what has not changed is we are going to be disciplined. We are not going to be doing deals that do not make financial sense for us, but we are open for business. You will always see us involved in every process that is ongoing, and we will know what is, and we will continue to be great partners. We are very happy with the partnerships that we have, and there will certainly be continued appetite as we go forward, even after separation into Discovery Global.

That concludes today's conference call. Thank you for your participation. You may now disconnect.

And there will certainly be continued appetite as we go forward, even after separation into Discovery Global. Thank you, John, and thank you, everyone.

K. Thanks, Peter.