Time Warner Delivers Q1 Earnings Beat Despite Operating Income Issues

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Both AT&T and the Department of Justice are probably poring over Time Warner’s first-quarter 2018 earnings release early this morning. We would be, and there is lots to see.

The Jeff Bewkes-led corporation, currently battling the government in a potential big-money merger with Randall Stephenson’s company, experienced what we in the business of reporting on business call a “mixed bag” with its Q1 financial results. Though AT&T delivered a solid beat on both earnings per share (EPS) and in revenue, its operating income dropped 8 percent. That decline would have been worse without adjustments.

Wall Street had forecast earnings of $1.74 per share on $7.94 billion in revenue, per a Yahoo Finance-compiled consensus. Time Warner actually reported $2.28 of adjusted earnings per share on $8 billion in revenue — that’s the good news.

Also Read: Jeff Bewkes Says DOJ’s Key Antitrust Argument Against AT&T-Time Warner Merger Is ‘Ridiculous’

The revenue number is up 3 percent overall, and the adjusted EPS grew 37 percent from the same quarter last year. Forty-nine cents of Time Warner’s earnings per share can be credited to tax reform — thanks Donald Trump!

Turner and HBO increased their top line totals year over year, though Warner Bros. shed revenue in both TV and film. Tough comparisons to Q1 2017 releases “Kong: Skull Island” and “The LEGO Batman Movie” help explain the 90-day box office struggle.

Higher programming costs at HBO were a leading contributor to the down operating income figure of $2 billion.

Also Read: AT&T Q1 Earnings Fail to Meet Wall Street Expectations

“We’re off to a strong start to 2018 and we remain on track to meet the financial goals we laid out at the beginning of the year, as we continue to execute our strategic objectives, including investing in and delivering the most compelling content to audiences around the globe and across platforms,” Bewkes said in written remarks accompanying the financials. “Turner had another successful multiplatform airing of the NCAA Division I Men’s Basketball Tournament, while CNN was the #1 news network among adults 18-34 and remained the leader in digital news. Additionally, year-to-date, TNT’s ‘The Alienist’ is the #1 new cable drama and TBS’s ‘The Last O.G’. is the #1 new cable comedy. Home Box Office had another standout quarter and recently had the much-anticipated return of ‘Westworld’ (produced by Warner Bros.), which saw viewership of the second season premiere episode increase 13% compared to the prior season’s average.”

“Warner Bros. remained a leader in television production with top comedies like ‘The Big Bang Theory’ and ‘Young Sheldon’ and top unscripted series, including ‘The Voice,’ ‘The Bachelor’ and ‘Ellen’s Game of Games,’ airing across the broadcast networks,” the chairman and CEO continued. “Theatrically, Warner Bros.’ latest sci-fi epic, ‘Ready Player One,’ which opened at the end of March, is off to a strong start at the global box office and is the studio’s highest grossing film ever in China. We look forward to the resolution of the legal challenge to our pending merger with AT&T and remain excited about the benefits of the merger, such as the potential to further strengthen our businesses by accelerating our innovation and increasing our ability to connect more directly with consumers.”

Time Warner is skipping another investor call due to its pending acquisition by AT&T. Shares of TWX stock closed Wednesday at $96.28, up 24 cents for the day. TWX is currently down almost a dollar per shark in pre-market trading.

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AT&T Q1 Earnings Fail to Meet Wall Street Expectations

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AT&T reported first-quarter earnings on Wednesday that were just below Wall Street expectations.

The telecommunications company said in its quarterly filing that earnings per share were 85 cents, which was just below analysts’ consensus expectations of 87 cents per share, according to forecasts on Yahoo Finance. The earnings were up 15 percent compared with the 74 cents per-share earnings the company reported for the same quarter a year ago.

Revenue for the first quarter was $38 billion, below the $39.3 billion analysts on Wall Street projected. AT&T’s revenue was down compared with the $39.4 billion it reported a year ago.

AT&T shares fell more than 4 percent in after-hours trading on Wednesday.

Also Read: AT&T Boss Randall Stephenson Reveals New ‘Watch’ Streaming Service During DOJ Testimony

The company said that total wireless subscriptions were up 8.9 percent to 159.5 million customers, while total video subscribers fell slightly to 38.97 million from 39.08 million a year ago.

AT&T’s DIRECTV Now TV streaming service added 312,000 new subscribers during the quarter. The platform is nearing 1.5 million subscribers, the company said.

Chief Financial Officer John  Stephens told analysts during the company’s quarterly earnings call that the company has more video subscribers now than it did two years ago thanks to DIRECTV Now.

Also Read: Who Is Winning in DoJ’s Case Against AT&T-Time Warner?

The company didn’t say much about the part of the business analysts and investors are undoubtedly most interested in — it’s proposed $85.4 billion acquisition of Time Warner.

“Not sure I really need to update anyone on our ongoing bid to merge with Time Warner,” AT&T Chief Financial Officer John Stephens said during the company’s quarterly conference call with analysts and investors. “There’s not much more we can add at this point.”

Over the last several weeks AT&T has been arguing its case against the U.S. Department of Justice’s attempt to block the merger. The DOJ worries that a combined AT&T-Time Warner would allow the company to raise licensing fees and blackout pay-TV operators in the midst of negotiations.

Also Read: Jeff Bewkes Says DOJ’s Key Antitrust Argument Against AT&T-Time Warner Merger Is ‘Ridiculous’

Both the DOJ and AT&T-Time Warner have wrapped up their arguments in DC District Court. All that’s left are closing arguments on April 30 followed by the decision of District Judge Richard Leon.

Depending on the Judge Leon’s decision, which experts say could go either way, AT&T said all the financing is in place and the company is ready to close the deal with Time Warner.

Related stories from TheWrap:

AT&T Boss Randall Stephenson Reveals New ‘Watch’ Streaming Service During DOJ Testimony

Jeff Bewkes Says DOJ’s Key Antitrust Argument Against AT&T-Time Warner Merger Is ‘Ridiculous’

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Facebook Crushes Wall Street Expectations, Reports $12 Billion in Q1 Revenue

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What scandal? Facebook shrugged off the impact of a massive data leak and reported better-than-expected revenue for the 12th straight quarter when the social network reported its Q1 earnings after the bell on Wednesday.

Facebook pulled in $11.97 billion in revenue and earnings of $1.69 a share for the three months ended March 31 — pushing past analyst expectations of $1.35 a share and sales of $11.41 billion. The revenue haul was a 49 percent year-over-year increase.

The social network saw a slight uptick in daily active users, hitting 1.45 billion DAUs, compared with 1.40 billion last quarter. After losing daily users in North America for the first time last quarter, Facebook bounced back in Q1, adding back the 1 million users it lost while hitting 185 million DAUs. Its monthly active users increased to 2.2 billion overall, slightly passing Wall Street expectations of 2.19 billion.

Also Read: ‘Silicon Valley’: Zach Woods on Tech Culture and the Time He Didn’t Recognize Elon Musk (Video)

Facebook shares jumped 4.6 percent in extended trading on Wednesday, hitting $167.40 a share.

“Despite facing important challenges, our community and business are off to a strong start in 2018,” said Facebook CEO Mark Zuckerberg in a statement. “We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.”

Facebook was humming along for much of the quarter before being derailed by the Cambridge Analytica data leak — where up to 87 million users had their information unknowingly grabbed by the political firm in 2014. To be sure, with the leak only coming to light in the final weeks of the quarter, its reverberations might not be felt until the social network reports for Q2. Still, the incident forced Facebook and its execs into a series of mea culpas, along with changes to how the company shares data with apps and advertisers.

Also Read: Facebook Isn’t Listening to Your Conversations, Says Mark Zuckerberg

It’s share price has taken a beating in the meantime, falling from about $185 a share in mid-March — pushing near all-time highs for the company — to $160 a share heading into Wednesday afternoon.

The dip appeared to be a buying opportunity for Facebook’s board, however, with the company announcing a $9 billion share buyback in its earnings release.

One thing conspicuously missing from Facebook’s earnings release, as well as Zuckerberg’s comments, was how much time users are spending on the platform. Last quarter, the chief exec said users “reduced time spent on Facebook by roughly 50 million hours every day” — or about 2.1 minutes on average for each user.

Also Read: ‘Senator, We Run Ads’: Hatch Mocked for Basic Facebook Question to Zuckerberg

The company will hold a conference call to discuss its earnings at 5 p.m. ET.

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What Does Comcast’s $31 Billion Sky Bid Mean for Disney and Fox?

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Comcast has thrown its hat in the ring with a $31 billion bid for U.K. broadcaster Sky, but the question now is whether that hat is actually a wrench for Disney and 21st Century Fox?

Analysts have speculated on what Comcast’s next big move could be for the past year. As video growth slows, the media company is in need of an acquisition to give to it some juice and Sky is an attractive asset because of its 23 million subscriber-foothold in Europe.

During Comcast’s quarterly conference call with investors in February, CEO Brian Roberts said that Comcast has “admired Sky for a long time.”

Also Read: Dolby, Disney Extend Deal Starting With ‘Avengers: Infinity War,’ ‘Solo: A Star Wars Story’

Disney CEO Bob Iger has also been eyeing Sky, even calling the company a crown jewel. Fox owns 39 percent of Sky, which is an important part of Disney’s $52.4 billion bid for some of Fox’s assets.

“Based on my perception of how Disney views this asset, I don’t think they’ll just walk away,” CFRA Research analyst Tuna Amobi told TheWrap. “I think they’re likely to counter bid, which will probably lead to a bidding war.”

Also Read: Stocks Soar for Comcast and Sky After $31 Billion Offer

Disney has previously indicated that they could even make a separate offer for Sky aside from its pending Fox deal, Amobi said. The company could pursue that, or even go back and renegotiate its deal with Fox.

Comcast’s bid puts both Disney and Fox in tough situations. It raises the stakes for Disney’s Fox bid, but Amobi said it likely doesn’t make the deal less attractive.

A Fox insider told TheWrap that the deal with Disney isn’t contingent on the Sky outcome. “We can do the current deal with current 39 percent — or 100 percent,” they said.

Also Read: Comcast Tops Q1 Earnings Estimates Thanks to Winter Olympics and Super Bowl

Comcast has been linked with Disney, Fox and Sky since Disney announced its bid for Fox’s assets in December. At the time, BTIG analyst Rich Greenfield posited that Comcast was a more logical buyer considering its position.

“Comcast could pay significantly more for Fox’s to-be-sold assets than Disney,” Greenfield said. “With Sky as the largest asset being sold by Fox, the synergies with Comcast are significant. The two companies could leverage their set-top box technology, buy original and library content for a wider subscriber base and reach more global deals with third-parties who want to be on their set-top platform (such as a Netflix or Amazon) whereas Disney has no pay TV business in the US to leverage off, nor any experience operating a pay TV business.”

Eric Schiffer, CEO of The Patriarch Organization and chairman of Reputation Management Consultants, told TheWrap that if Comcast could buy Fox, it would have. “But that would be like watching cobras circle each other. Murdoch would rather chew glass than sell to Comcast,” he said.

Also Read: Disney Must Make Offer to Buy All of Sky If Fox’s Own Deal Falls Through

Comcast’s bid for 100 percent of Sky values the company significantly higher than Fox’s offer for the 61 percent of the company it doesn’t own.

The ball is in now Disney’s court, but how this shakes out also depends on the regulatory perception in the U.K.

“We’ll have to wait to see what happens,” Amobi said about the battle for Sky. “It’s shaping up to be a highly contested scenario.”

Disney, Comcast and Sky did not immediately respond to TheWrap’s request for comment.
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Facebook Earnings Preview: Three Things to Watch After Cambridge Analytica Scandal

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Can Facebook — despite concerns over waning user enthusiasm and its protection of data — post another big quarter, when the social network reports its Q1 earnings on Wednesday afternoon?

The social network’s business looked to be extremely strong back in January, with the company reporting that it hauled in nearly $13 billion during the final months of 2017 — making it the 11th straight quarter Facebook had topped sales estimates. Things were getting boring. Facebook would report earnings, and they’d beat expectations, and that was that. Even after admitting it did little to block Russian trolls from hitting more than 100 million users with disinformation during the 2016 U.S. election, Facebook was still racking up users and ad dollars. Its business was Teflon.

But is that still the case? Following the revelation in March that political firm Cambridge Analytica grabbed data on up to 87 million unwitting users, the company has been publicly skewered. Outcry over how Facebook protects its 2 billion users has forced the company into issuing a mea culpa on seemingly an every-other-day basis. CEO Mark Zuckerberg testified in front of Congress earlier this month, and Facebook has tightened its restrictions on the data apps can access. It has also forced the company to tweak how advertisers can target users — potentially impacting its revenue stream.

Also Read: Sen. John Kennedy to Mark Zuckerberg: ‘Your User Agreement Sucks’

Before the scandal, Facebook had been cruising near all-time highs on Wall Street, trading at $185 a share. It was quickly knocked down to $150 share and has since lingered around $160 a share, as investors wait to get a glimpse of the business’ health.

With the company reporting its first-quarter earnings on Wednesday, we’re about to find out how healthy it is. Here are three things to keep an eye on:

1) Lagging User Growth

Also Read: Russian Trolls Increase ‘2,000 Percent’ After Syrian Bombing, Says Pentagon

Even before the Cambridge Analytica news, Facebook was grappling with an apathetic audience at home. The company reported it lost 1 million daily active users in the U.S. last quarter –falling from 185 million to 184 million DAUs. It was the first time since Facebook started reporting earnings it had lost domestic users.

Investors gave it a pass, with the company’s global growth still outpacing its U.S. decline. Facebook reported 1.4 billion international DAUs and 2.13 billion monthly active users in January. Still, two straight down quarters would be cause for concern on Wall Street.

A #DeleteFacebook movement gained momentum during the Cambridge Analytica fallout, with celebs from Will Ferrell to Elon Musk dumping their pages. Whether that foreshadowed a widespread exile remains to be seen, though. At the same time, as people were dropping the social network, Facebook’s app was sitting atop the App Store.

Also Read: Here’s How to Check If Your Facebook Data Was Leaked

2) Ad Dollars

This goes hand-in-hand with its massive user base — will advertisers start jumping ship? The full impact of Cambridge Analytica, if there is one, might not show itself until Facebook reports its Q2 earnings, but the company’s ad dominance doesn’t appear in danger, yet. Analysts are still projecting Facebook will bring in $11.4 billion in revenue for the quarter.

The reason is simple: Besides Google, Facebook is the only other game in town when it comes to online advertising. Together, both companies bring in 85 percent of all new ad dollars online. “Marketers don’t have realistic options for social ads, and re-marketing is just too powerful and profitable to stop doing it,” Dennis Yu, chief technical officer of digital marketing firm BlitzMetrics, told TheWrap.

And the changes Facebook has made to its targeted ads will have a negligible impact on its sales, according to Yu.”The fact that you can no longer target black people who are 34, gay, like My Little Pony, and work at the Post Office is something people were afraid could happen, but such micro-targeting generated basically zero ad revenue for Facebook,” said Yu.

3) Instagram 

Also Read: Facebook Announces Independent Probe Into Social Media’s Impact on Elections

Instagram could be Facebook’s ace in the hole. If it slips on user growth for the mothership or misses on revenue or earnings, Facebook might look to divert attention by highlighting its picture-sharing app. The company has been quick to point out how fast Instagram is growing — with more than 800 million users now — but hesitant to report how much money it is pulling in from those eyeballs. This could be the time for Facebook to show off how it’s monetizing Instagram, with the app now boasting more than 2 million advertisers.

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