WarnerMedia Parent AT&T Earnings Miss, Revenue Meets Expectations

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AT&T fell short of profit expectations when it disclosed its third quarter earnings on Wednesday, its first financial report that includes a full three months of Time Warner ownership.

The telecommunications giant earned an adjusted 90 cents per share on revenue up 15.3 percent to $45.7 billion, which included $8.2 billion in new revenue, compared to 2017, from the Time Warner acquisition. Analysts expected AT&T to report 94 cents in per-share earnings on revenue of $45.65 billion.

AT&T completed its $85 billion acquisition of Time Warner on June 14, and then changed the entertainment division's name to WarnerMedia, with its HBO, Turner and Warner Bros. divisions set to compete against Netflix amid cord-cutting and a turn by consumers to streaming services.

The second-quarter report three months ago included just 16 days worth of WarnerMedia's financials.

“I’m pleased with the progress we made on a number of fronts in the third quarter,” Randall Stephenson, AT&T chairman and CEO said in a statement. “WarnerMedia was immediately accretive in its first full quarter, contributing 5 cents to EPS, and our free cash flow grew by double digits."

For the third quarter, WarnerMedia posted revenue of $8.2 billion, up 6.5 percent from a year-earlier $7.7 billion on higher subscription revenues and increased licensing revenue from Warner Bros. AT&T indicated Turner revenue was up 3.9 percent to $3 billion, while HBO was up 2.4 percent to $1.6 billion.

Warner Bros. saw its revenue rise 7.5 percent to $3.7 billion, on higher TV licensing revenue and a "solid theatrical slate" from titles like Crazy Rich Asians, The Meg and The Nun. Theatrical revenues were flat as fiscal 2017 included titles like Dunkirk, It and Wonder Woman.

For WarnerMedia, third quarter operating expenses were up 5.4 percent to $5.6 billion, due to increased TV production costs at Warner Bros. and consolidating Otter Media. Operating income for the division was up 9.1 percent to $2.6 billion on "strong gains" from Turner and HBO. 

AT&T's Entertainment Group, which houses DirecTV, posted revenue of $11.58 in the third quarter, against $12.4 billion in 2017. 

DirecTV Now added 49,000 subscribers to get to 1.9 million total subscribers. The traditional satellite service lost 346,000 customers, while the DirecTV Now streaming product making gains as the Entertainment Group starts beta testing a new streaming video service.

The Entertainment Group ended the third quarter with 25.2 million video subscribers.

This article was originally published by The Hollywood Reporter.