Warner Bros Discovery Inc (NASDAQ:WBD) has cut its full-year earnings guidance due to the ongoing impact of the strike by writers and actors.
In a Securities and Exchange Commission filing, the entertainment group lowered its adjusted underlying earnings (EBITDA) for 2023 to between $10.5 billion and $11 billion, saying earnings would be $300 million to $500 million lower than previously forecast, mostly due to the impact of the strikes.
However, it raised its free cash flow expectations for the full year to at least $5 billion. Additionally, it expects to exceed $1.7 billion in free cash flow for the third quarter of the year, in part due to the strong performance of Barbie as well as the incremental impact of strike-related factors.
Members of the Writers Guild of America union have been on strike for more than 100 days, and the actors joined picket lines in July.
In its August 2023 earnings call, the company said it assumed the strike would be over by early September. However, it said if the strike were to continue through the end of the year, it expected incremental upside to free cash flow and incremental downside to adjusted EBITDA due to the strikes’ impact on ming and performance of the remainder of the 2023 film slate, as well as its ability to produce and deliver content.
Last month, the studio confirmed it was delaying the release of the big-budget sequel Dune 2 due to the industrial action.
“WBD continues to prioritize and work diligently with other industry leadership to resolve the current WGA and SAG-AFTRA strikes in a manner that is fair and values the important work of, and partnership with, the writers and actors,” the company said.
“While WBD is hopeful that these strikes will be resolved soon, it cannot predict when the strikes will ultimately end. With both guilds still on strike today, the company now assumes the financial impact to WBD of these strikes will persist through the end of 2023.”
Contact the author at stephen.gunnion@proactiveinvestors.com