AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 6/6 · 18/10/2026
Moat38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · Differentiated content, fixed-fee licensing and a reported television supply footprint across approximately 20 platforms support an intangible-asset advantage. They do not establish broad barriers to competing content or services.
durability · 2/4 · Multiple monetization channels and distribution renewals support persistence, but release-dependent revenue and declining linear demand constrain confidence in duration.
customer dependency · 1/4 · Recurring distributor royalties provide repeat business, but 10% domestic linear subscriber declines and audience losses demonstrate fragile dependence. No material consumer switching friction is disclosed.
erosion resilience · 1/4 · Streaming growth has helped offset linear contraction, yet advertising and content revenues fell materially in 2026. Realized competitive cost pressure further limits resilience.
Pricing power44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 2/4 · Domestic contractual affiliate rates increased 3% in 2025. The proxy reports streaming price increases and other monetization initiatives contributing jointly to revenue growth, without isolating their effects. Wholesale renewal pressure makes the overall pricing record mixed.
retention · 1/4 · Indirect operating evidence shows weak linear retention through subscriber and audience declines. Streaming expansion and distribution renewals support continued demand but do not reveal cohort retention; the disclosed churn-reduction objective is not an achieved churn result.
margin resilience · 2/4 · Second-quarter 2026 operating income improved despite lower revenue and costs, demonstrating some flexibility. However, first-half revenue fell, operating losses widened with a substantial termination-fee charge, and consolidated Adjusted EBITDA declined in 2025. This is mixed resilience, not proof of pricing protection.
contractual freedom · 2/4 · Short advertising contracts permit periodic repricing and streaming price changes were implemented. Negotiated distribution rates, fixed licensing fees and audience-delivery obligations constrain unilateral pricing freedom.
Predictability61
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 50.00
- Revenue growth volatility (pp)
- 75.87
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 4.16
Financial strength6
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 0.00
- currentRatioGrade
- 24.52
- Debt / FCF (x)
- 10.55
- Net debt / operating income (x)
- 37.94
- Interest coverage (x)
- 0.35
- Current ratio (x)
- 1.06
Capital allocation25
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- -4.52
- 3-year average dilution (%)
- 9.05
- 3-year average SBC / revenue (%)
- 1.56
- cashConversionGrade
- 0.00
Management56
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Positive operating cash generation and debt repayments provide demonstrated support. Operating cash flow declined from $7.477 billion in 2023 to $4.319 billion in 2025 and declined again in the first half of 2026. June 2026 indebtedness of $32.402 billion and contingent fee reimbursement constrain flexibility. Gross repayments are considered alongside new borrowings.
incentive alignment · 2/4 · Actual cash-flow-linked award certification, stock ownership guidelines and clawbacks establish alignment mechanisms. Certified 200% payouts coexist with discretionary performance adjustments, limiting confidence in rigor. Detailed beneficial ownership and guideline compliance are unavailable.
execution · 2/4 · Reported launches, completed renewals and successful 2025 content demonstrate execution achievements. Latest operating results show continued streaming expansion alongside substantial linear and theatrical weakness. Execution is assessed partly from indirect operating outcomes, without attributing every industry headwind to management.
governance · 3/4 · Disclosed independent leadership, fully independent standing committees, annual director elections and single-class voting provide strong structural evidence. Supplemental merger disclosures and dismissed litigation do not establish misconduct; unresolved merger litigation does not establish exceptional governance effectiveness.
Evidence
•Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to third parties and our networks/streaming services, distribution of our films and television programs to various third party and internal television and streaming services, distribution through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming.
Note 1 / Studios business activities and monetization channels · Filed 06/08/2026
Our content licensing arrangements often include fixed license fees from the licensing of feature films and television programs in the off-network cable, premium pay, syndication, streaming, and international television and streaming markets.
Revenue recognition / fixed-fee content licensing arrangements · Filed 27/02/2026
Motion Picture Group as the #1 distributor by domestic box office in 2025 creating strong momentum for 2026 and beyond ■WBTV remains the largest independent supplier of content with 70+ active series across approximately 20 platforms and with 60 Emmy® nominations (leading all TV studios) and 14 wins ■Developed new DC Universe strategy and revitalized Superman as a global cultural phenomenon, ensuring long-term brand relevance and monetization ■Identified and developed key IP that had been underutilized In addition, based on WBD's 2025 FCF performance versus the pre-established target, as noted above, in February 2026, the Committee also certified the vesting of the Supplemental PRSUs granted to the CEO in 2025 at 200%.
Executive compensation / reported Studios accomplishments and certified CEO award vesting · Filed 30/04/2026
network distribution deals, including 3 of the 6 largest distributors ■Launched advanced advertising platforms, creating new revenue streams and future-proofing the business model ■Successfully launched “CNN All Access” – including in partnership with 5 of top 6 platforms, delivering centralized live/on‑demand CNN journalism, which is core to CNN’s digital evolution ■Secured new sports rights with FIFA, NASCAR, Big 12, Big East -- strengthening WBD’s position in live sports and future audience engagement Streaming ■Achieve sustainable profitability in streaming by growing global HBO Max subscriber base internationally ■Secure soft and hard bundles with key partners globally to drive scale and reduce churn 25% ■HBO Max launched in over 30 markets during 2025 and in over 100 markets in total; surpassed 2025 global subscriber and Streaming segment Adjusted EBITDA goals ■Implemented several high-impact, key monetization initiatives (e.g., account sharing rules enforcement, price increases across regions, ad sales improvements) resulting in year-over-year Streaming segment Revenue growth ■Launched numerous new hard and soft bundles across key international markets with various partners Studios ■Expand franchise development pipeline and maximize monetization opportunities across our studios and HBO Max ■Build WBTV brand as highest quality producer of live action TV and leverage it to improve title and portfolio economics 25% ■Consistent, high-quality slate has positioned Warner Bros.
Executive compensation / distribution renewals, streaming expansion and monetization achievements · Filed 30/04/2026
Distribution revenue decreased 2% in 2025, primarily attributable to an 9% decline in Networks domestic linear subscribers and the impact of the previously disclosed domestic wholesale deal renewal that occurred in the second quarter of 2025, partially offset by a 13% increase in streaming subscribers as a result of continued growth and global expansion of HBO Max and a 3% increase in domestic contractual affiliate rates.
Management discussion / 2025 distribution revenue, subscribers and affiliate rates · Filed 27/02/2026
Distributors typically pay royalties via a per-subscriber fee for the right to distribute the Company’s programming under the terms of distribution contracts.
Revenue recognition / distributor per-subscriber royalties · Filed 27/02/2026
dollars. Revenues Distribution revenue increased 1% and remained flat for the three and six months ended June 30, 2026, respectively, primarily attributable to continued growth in existing streaming markets and the global expansion of HBO Max, including new distribution deals, partially offset by a 10% decline in domestic linear subscribers for both periods and the impact of the previously disclosed domestic wholesale streaming deal renewal that occurred in the second quarter of 2025.
Management discussion / second-quarter and first-half 2026 distribution performance · Filed 06/08/2026
Advertising revenue decreased 22% and 16% for the three and six months ended June 30, 2026, respectively, primarily attributable to audience declines in domestic networks of 17% and 13%, respectively, which were impacted by the absence of the NBA in 2026, partially offset by the broadcast of the NCAA Final Four and championship game in the current year quarter and an increase in global ad-lite streaming subscribers.
Management discussion / advertising and audience declines following NBA absence · Filed 06/08/2026
Content revenue decreased 26% and 16% for the three and six months ended June 30, 2026, respectively, primarily attributable to a 46% and 21% decrease in theatrical product revenue as a result of lower film rental revenue due to the current year slate in relation to the strong performance of A Minecraft Movie, Sinners, and Final Destination Bloodlines, which were released in the second quarter of 2025.
Management discussion / content and theatrical revenue declines · Filed 06/08/2026
These increased competitive pressures have resulted in, and could continue to result in, increased costs, including with respect to talent and intellectual property rights.
Risk factors / realized competitive pressure on talent and intellectual-property costs · Filed 27/02/2026
In general, policing unauthorized use of our products and services and related intellectual property is difficult and costly.
Intellectual property / difficulty and cost of enforcement · Filed 27/02/2026
Distribution revenues are largely dependent on the rates negotiated in the agreements, the number of subscribers that receive our networks, the number of platforms covered in the distribution agreement, and the market demand for the content that we provide.
Management discussion / negotiated distribution economics · Filed 27/02/2026
Advertising contracts generally have a term of one year or less.
Management discussion / advertising contract duration · Filed 27/02/2026
The Company provides the advertiser with advertising until the guaranteed audience level is delivered, and invoiced advertising revenue receivables may exceed the value of the audience delivery.
Revenue recognition / advertiser audience-delivery obligations · Filed 27/02/2026
CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2025 2024 2023 Operating Activities Net income (loss) $ 749 $ (11,482) $ (3,079) Adjustments to reconcile net income to cash provided by operating activities: Content rights amortization and impairment 11,855 13,946 16,024 Content restructuring impairments and write-offs — 165 115 Depreciation and amortization 5,684 7,037 7,985 Deferred income taxes (710) (1,732) (2,344) Equity in losses of equity method investee companies and cash distributions 75 167 157 Gain on extinguishment of debt (2,945) (632) (17) Share-based compensation expense 769 557 500 Impairments and loss on dispositions 172 9,603 77 Gain from derivative instruments, net (93) (16) (151) Gain on sale of investments (4) (227) — Other, net 69 115 199 Changes in operating assets and liabilities, net of acquisitions and dispositions: Receivables, net (336) 1,012 312 Film and television content rights, games and production payables, net (11,401) (12,349) (12,305) Accounts payable, accrued liabilities, deferred revenues and other noncurrent liabilities 108 (529) (820) Foreign currency, prepaid expenses and other assets, net 327 (260) 824 Cash provided by operating activities 4,319 5,375 7,477 Investing Activities Purchases of property and equipment (1,231) (948) (1,316) Cash used for business acquisitions — — (50) Investments in and advances to equity investments (100) (109) (112) Proceeds from sales and maturities of investments 54 541 — Proceeds from derivative instruments, net 26 136 121 Other investing activities, net 72 31 98 Cash used in investing activities (1,179) (349) (1,259) Financing Activities Principal repayments of term loans — — (4,000) Principal repayments of debt, including premiums and discounts to par value (22,664) (5,043) (2,860) Borrowings from debt, net of discount and issuance costs 18,306 1,617 1,496 Distributions to noncontrolling interests and redeemable noncontrolling interests (198) (193) (301) Purchase of redeemable noncontrolling interest — — (49) Proceeds from the formation of music catalog joint venture and other joint ventures 633 — — Borrowings under commercial paper program and revolving credit facility 4,228 14,203 5,207 Repayments under commercial paper program and revolving credit facility (4,228) (14,203) (5,214) Principal repayments of finance and other lease obligations (202) (142) (132) Other financing activities, net (115) 12 16 Cash used in financing activities (4,240) (3,749) (5,837) Effect of exchange rate changes on cash, cash equivalents, and restricted cash 254 (180) 8 Net change in cash, cash equivalents, and restricted cash (846) 1,097 389 Cash, cash equivalents, and restricted cash, beginning of period 5,416 4,319 3,930 Cash, cash equivalents, and restricted cash, end of period $ 4,570 $ 5,416 $ 4,319 The accompanying notes are an integral part of these consolidated financial statements.
Consolidated statements of cash flows / 2023–2025 spending, cash generation and financing · Filed 27/02/2026
DISCOVERY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited; in millions, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenues: Distribution $ 4,950 $ 4,885 $ 9,856 $ 9,771 Advertising 1,724 2,216 3,571 4,196 Content 1,828 2,471 3,715 4,337 Other 215 240 468 487 Total revenues 8,717 9,812 17,610 18,791 Costs and expenses: Costs of revenues, excluding depreciation and amortization 4,621 5,967 9,264 11,098 Selling, general and administrative 2,564 2,477 5,039 4,671 Netflix Termination Fee (See Note 1) — — 2,800 — Depreciation and amortization 1,159 1,447 2,385 2,994 Restructuring and other charges 113 80 317 134 Impairments and loss on dispositions 23 26 37 116 Total costs and expenses 8,480 9,997 19,842 19,013 Operating income (loss) 237 (185) (2,232) (222) Interest expense, net (511) (463) (1,092) (931) (Loss) gain on extinguishment of debt, net (75) 2,958 (102) 2,954 Income (loss) from equity investees, net 28 5 23 (2) Other income, net 50 139 12 221 (Loss) income before income taxes (271) 2,454 (3,391) 2,020 Income tax benefit (expense) 433 (866) 647 (881) Net income (loss) 162 1,588 (2,744) 1,139 Net income attributable to noncontrolling interests (13) (7) (23) (15) Net (income) loss attributable to redeemable noncontrolling interests — (1) — 3 Net income (loss) available to Warner Bros.
Unaudited consolidated statements of operations / first-half 2026 revenue, costs and interest · Filed 06/08/2026
June 30, 2026 Total Capacity Outstanding Indebtedness Unused Capacity Cash and cash equivalents $ 3,369 $ — $ 3,369 Revolving credit facility and commercial paper program 4,000 — 4,000 Term loans 14,708 14,708 — Senior notes (a) 17,694 17,694 — Total $ 39,771 $ 32,402 $ 7,369 (a) Interest on the senior notes is paid annually or semi-annually.
Capital resources / June 30, 2026 debt and liquidity · Filed 06/08/2026
The amount paid by PSKY is reimbursable by the Company to PSKY in certain circumstances in the event the PSKY Merger Agreement is terminated and has been recorded in accrued liabilities in the consolidated balance sheets.
Note 1 / contingent reimbursement of merger termination fee · Filed 06/08/2026
Some highlights of WBD’s corporate governance include: Director and Committee Independence ■12 of 13 directors are independent ■All standing Board committees - Audit, Compensation, Nominating and Corporate Governance - are fully independent Board Accountability and Leadership ■Annual election of directors ■Independent Board Chair ■Board and Committee evaluation processes Board Refreshment ■Balance of new and experienced directors, with tenure of independent directors averaging 5 years ■Added 11 independent directors since 2022 Stockholder Rights ■Single class of common stock with one vote per share ■No stockholder rights plan or "poison pill" ■No supermajority provisions in Third Restated Certificate of Incorporation ■Stockholders have the right to call a special meeting Risk Mitigation ■Comprehensive Clawback policy for cash and equity incentives triggered by financial statement restatements resulting from fraud or intentional misconduct ■Robust stock ownership guidelines for Named Executive Officers and non-executive directors ■Insider Trading Policy covers directors, officers and all employees 2026 PROXY STATEMENT 9 Table of Contents Proxy Statement Summary Election of Directors Corporate Governance Audit Matters Executive Compensation Other Matters Additional Information Appendices 2025 Executive Compensation Compensation Philosophy WBD's compensation philosophy is to pay for performance, encourage excellence, retain our high-performing executive talent across the blended organization and reward executives who deliver.
Corporate governance highlights / independence, voting rights, clawbacks and ownership guidelines · Filed 30/04/2026
The Committee believed it was appropriate to adjust our FCF results for the amount of the tax payment as this was an unanticipated expense, out of management’s control and the result of management executing a strategic transaction that was beneficial to the Company.
Compensation discussion / discretionary adjustment of free-cash-flow performance · Filed 30/04/2026
Other NEOs 2024 Supplemental PRSUs Threshold Target Above Target Actual Achievement Payout Two-Year Free Cash Flow (2024-2025) ($ in millions) $5,425 $7,750 $8,525 $8,926 200 % 2026 PROXY STATEMENT 69 Table of Contents Proxy Statement Summary Election of Directors Corporate Governance Audit Matters Executive Compensation Other Matters Additional Information Appendices Retirement Plans and Other Benefits Retirement Benefits Our NEOs, all of whom are U.S.-based, generally participate in the same benefit plans on the same terms as are offered to other U.S.-based full-time employees.
Executive compensation / certified two-year cash-flow achievement and award payout · Filed 30/04/2026
Following the issuance of certain supplemental disclosures via Form DEFA14A on April 16, 2026, the plaintiff voluntarily dismissed the litigation with prejudice on April 20, 2026.
Legal proceedings / supplemental transaction disclosures and dismissal · Filed 06/08/2026
(See Note 15.) The outcome of such litigation is uncertain and could prevent the completion of the PSKY Merger.
Note 1 / uncertain merger litigation outcome · Filed 06/08/2026
The decrease in cash provided by operating activities was primarily attributable to a decrease in net income excluding non-cash items and an increase in cash used from working capital activity.
Liquidity discussion / reasons for declining operating cash flow · Filed 06/08/2026
$ 727 $ (11,311) Net income (loss) attributable to noncontrolling interests 22 (171) Income tax expense 890 94 Income (loss) before income taxes 1,639 (11,388) Other (income) expense, net (65) (150) (Income) loss from equity investees, net 24 121 Loss (gain) on extinguishment of debt (2,945) (632) Interest expense, net 2,085 2,017 Operating income (loss) 738 (10,032) Impairments and loss on dispositions 172 9,603 Depreciation and amortization 5,684 7,037 Impairment and amortization of fair value step-up for content 784 1,139 Employee share-based compensation 751 546 Restructuring and other charges 399 447 Transaction and integration costs 166 242 Amortization of capitalized interest for content 40 46 Facility consolidation costs 10 4 Adjusted EBITDA $ 8,744 $ 9,032 Free Cash Flow (FCF): The Company defines free cash flow as cash flow from operations less acquisitions of property and equipment.
Appendix A / consolidated Adjusted EBITDA reconciliation · Filed 30/04/2026
