Warner Bros. Discovery Financial Model

• Total assets: Approximately $100 billion.
• Key asset categories: Content library, goodwill, and intangible assets (trademarks, customer relationships).
• Goodwill & intangibles as % of total assets: Over 60%, even after the massive 2024 impairment charges.
• Working capital profile:
• Days Sales Outstanding (DSO): 60 to 75 days.
• Days Inventory Outstanding (DIO): Not applicable in traditional terms; content is capitalised and amortised.
• Days Payable Outstanding (DPO): 90 to 110 days.
• Net working capital as % of revenue: Typically negative.
• Is working capital positive or negative? Negative. The company benefits from deferred revenue (upfront subscription payments) and extended payable terms with production vendors.
• PP&E: Consists of studio facilities, broadcasting equipment, and corporate offices.
• Right-of-use assets / operating leases: Material, representing long-term leases for office space and production facilities.

• Capex as % of revenue: 2% to 3% (Purchases of property and equipment were $948 million in 2024).
• Maintenance capex vs. growth capex: Mostly maintenance for broadcasting and studio facilities; growth investment is funnelled into content creation rather than traditional capex.
• Major capex programmes underway: Upgrades to the Max streaming platform infrastructure.
• Capitalised software / development costs: Material for the DTC platform.
• M&A pattern: Transformational. The company is the product of a mega-merger and is currently the target of a proposed $81 billion equity value acquisition by Paramount.

• Total debt: $34.6 billion net debt at the end of 2024 (Gross debt approximately $39.5 billion).
• Debt/EBITDA ratio: 3.8x net leverage at the end of 2024, with a target of reaching below 3.0x.
• Credit rating: BBB- / Baa3 (investment grade, but on the lowest rung).
• Key debt instruments: Senior unsecured notes with staggered maturities, term loans, and a revolving receivables programme.
• Maturity profile: The company has been actively paying down near-term maturities using free cash flow to smooth the maturity wall.
• Interest rate profile: Predominantly fixed-rate bonds, with a weighted average cost of debt around 4.5% to 5.0%.
• Covenants: Standard investment-grade covenants; maintaining the rating is critical to avoid step-up interest penalties.
• Share repurchase programme: Paused. All free cash flow is currently directed toward debt paydown.
• Dividend policy: No dividend.

• Operating cash flow conversion: Strong. Cash provided by operating activities was $5.4 billion in 2024.
• Free cash flow margin: Approximately 11% ($4.4 billion FCF on $39.3 billion revenue in 2024).
• Major non-cash items: $9.1 billion goodwill impairment, $7.5 billion of acquisition-related amortisation and restructuring, and standard content amortisation.
• Working capital cash flow impact: Timing of content production spend versus amortisation is the biggest driver of cash flow variance.
• Capex intensity: Low for traditional PP&E, but "content capex" (cash spend on content) is massive and must be modelled separately.
• Cash tax rate vs. GAAP effective tax rate: Cash taxes are significantly lower than the statutory rate due to massive historical net operating losses (NOLs) and amortisation tax shields from the merger.

1. Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth rates, ARPU, margins, and WACC.
2. Scenarios: Toggle for Standalone WBD vs. Paramount Acquisition (adjusts debt paydown, synergies, and terminal value).
3. Income Statement: Consolidated GAAP income statement mirroring the 10-K, ending in Net Income Available to WBD.
4. Balance Sheet: Standard assets, liabilities, and equity, with specific breakouts for Capitalised Content and Deferred Revenue.
5. Cash Flow Statement: Indirect method starting from Net Income, adding back massive D&A and impairments, adjusting for working capital and content spend.
6. Segment Build - Networks: Revenue split by Distribution, Advertising, and Content. Calculates Networks Adjusted EBITDA.
7. Segment Build - Studios: Revenue split by Theatrical, TV, and Games. Calculates Studios Adjusted EBITDA.
8. Segment Build - DTC: Revenue split by Subscriber-related, Advertising, and Content. Tracks Global Subscribers and ARPU. Calculates DTC Adjusted EBITDA.
9. Content Schedule: Roll-forward of the capitalised content asset (Beginning Balance + Cash Content Spend - Content Amortisation = Ending Balance).
10. Debt Schedule: Tranche-by-tranche maturity profile, interest expense calculation, and mandatory vs. optional paydown logic.
11. DCF & Valuation: Unlevered free cash flow calculation, terminal value, enterprise value to equity value bridge, and per-share output to compare against the $31 Paramount offer.

1. `DTC Subscriber Revenue = Average Global DTC Subscribers x Global DTC ARPU x 12`
2. `Networks Distribution Revenue = Prior Year Distribution Revenue x (1 + Linear Subscriber Decline Rate + Affiliate Fee Pricing Growth)`
3. `Networks Advertising Revenue = Prior Year Advertising Revenue x (1 + Audience Decline Rate + CPM Growth)`
4. `Studios Revenue = Prior Year Studios Revenue x (1 + Slate Release Growth Assumption)`
5. `Total Segment Adjusted EBITDA = Networks Adj EBITDA + Studios Adj EBITDA + DTC Adj EBITDA - Corporate Eliminations`
6. `Content Amortisation = Beginning Capitalised Content Balance x Blended Amortisation Rate`
7. `Ending Capitalised Content = Beginning Capitalised Content + Cash Content Spend - Content Amortisation`
8. `Interest Expense = Average Total Debt Balance x Weighted Average Interest Rate`
9. `Free Cash Flow = Cash Provided by Operating Activities - Purchases of Property and Equipment`
10. `Net Debt = Total Debt - Cash and Cash Equivalents`
11. `Net Leverage Ratio = Net Debt / Total Segment Adjusted EBITDA`
12. `Implied Share Price = (Enterprise Value - Net Debt) / Fully Diluted Shares Outstanding`

The Assumptions sheet feeds the three Segment Builds (Networks, Studios, DTC). The Segment Builds calculate Revenue and Adjusted EBITDA, which feed directly into the Income Statement. The Content Schedule calculates cash content spend (which feeds the Cash Flow Statement operating section) and content amortisation (which feeds the Income Statement COGS). The Cash Flow Statement generates the cash balance and cash available for debt paydown, which feeds the Debt Schedule. The Debt Schedule calculates interest expense, feeding back into the Income Statement (creating a circular reference that requires an iterative calculation or a switch). Finally, the Income Statement, Balance Sheet, and Cash Flow Statement feed the DCF & Valuation sheet.

• Revenues, Assets, and Equity: Entered and displayed as positive numbers.
• Expenses (COGS, SG&A, Interest): Entered as positive numbers in their specific schedules, but subtracted in aggregation formulas (e.g., `Gross Profit = Revenue - COGS`).
• Liabilities and Debt: Entered and displayed as positive numbers.
• Cash Flow Statement: Cash inflows are positive; cash outflows (capex, debt paydown, cash content spend) are negative.

1. Content Spend vs. Amortisation: The model must distinguish between cash spent on content (a cash outflow) and content amortisation (a non-cash income statement expense). Confusing these will break the cash flow conversion logic.
2. Goodwill Impairments: WBD took a $9.1 billion non-cash impairment in 2024. The model must exclude this from run-rate operating expenses to avoid artificially depressing future margins.
3. Acquisition-Related Amortisation: The $7.5 billion in pre-tax acquisition-related amortisation and restructuring in 2024 must be added back to calculate Adjusted EBITDA, which is the metric management and debt covenants use.
4. Circularity in Debt Paydown: Because WBD sweeps all free cash flow to debt paydown, interest expense depends on the debt balance, which depends on cash flow, which depends on interest expense. A circuit breaker toggle is required.
5. DTC ARPU Blending: Global ARPU ($7.44) is heavily diluted by international expansion. Domestic ARPU is much higher (~$11.77). The model must account for the mix shift as international subscribers grow faster than domestic.
6. Corporate Eliminations: Segment Adjusted EBITDA does not sum perfectly to Total Adjusted EBITDA; the model must include a line for corporate expenses and inter-segment eliminations (e.g., Studios licensing content to DTC).
7. AT&T SportsNet Exit: Historical Networks revenue includes regional sports networks that were exited. Forward projections must step down the baseline to account for this.
8. Tax Shields: WBD pays very little cash tax compared to its GAAP tax provision due to NOLs and amortisation. The DCF must use the cash tax rate, not the statutory rate, to accurately reflect free cash flow.

1. "Total Revenue should equal the sum of Networks, Studios, and DTC revenues less inter-segment eliminations."
2. "Free Cash Flow conversion (FCF / Adjusted EBITDA) should remain in the 45% to 50% range based on management guidance."
3. "Net Leverage (Net Debt / Adjusted EBITDA) should decrease sequentially each year, targeting <3.0x by 2026."
4. "Global DTC Subscribers must hit 150 million by the end of 2026 to align with management's stated clear path."
5. "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
6. "Networks Adjusted EBITDA margin should compress slightly year-over-year, reflecting the loss of high-margin linear affiliate fees."
7. "DTC Adjusted EBITDA must remain positive and grow, reflecting the segment's 2024 swing to profitability ($677 million)."
8. "Total Debt balance must not increase; all excess cash flow should be routed to debt reduction."

• Filings: SEC EDGAR for WBD 10-K (filed February 2025) and Q4 2024 Earnings Release.
• Investor Relations: WBD IR website for trending schedules and shareholder letters.
• Peers for Benchmarking: The Walt Disney Company (DIS), Netflix (NFLX), Paramount Global (PARA), Comcast (CMCSA).
• Industry Data: Nielsen for linear viewership and cord-cutting trends; Antenna for streaming subscriber churn and acquisition data.
• Consensus Estimates: FactSet or Bloomberg for forward-looking street estimates on DTC subscriber additions.

• Warner Bros. Discovery Q4 2024 Earnings Press Release (February 27, 2025)
• Warner Bros. Discovery 2024 Annual Report on Form 10-K
• Paramount Global Acquisition Announcement Press Release (February 27, 2026)
• Macrotrends WBD Long Term Debt and Margin History
• Simply Wall St WBD Balance Sheet Metrics