Pavlo Gonchar | Rocket | Getty Images
Warner Bros. Discovery saw its stock rise for a second straight day on Thursday after announcing it had paid off some of its debt this week.
The financial update, announced Wednesday, was overshadowed by the turmoil at news outlet CNN, where CEO Chris Licht was ousted. Shares closed nearly 7% higher on Thursday after closing more than 8% higher on Wednesday. The stock is up 49% so far this year.
The media giant is heavily indebted following the merger of Warner Bros. and Discovery in 2022. The company, which ended the first quarter with $49.5 billion in debt, was in the middle of several cost-cutting initiatives, such as layoffs and content spending cuts.
The share of Warner Bros. Discovery rose in recent days after the company announced it was paying off some of its heavy debt.
In a submit publiclysaid Warner Bros. Discovery that it had repaid approximately $1.5 billion in debt on two of its loans. The company also announced that it has launched a $500 million cash offer to purchase one or all of its floating rate bonds, part of its high-interest debt maturing in March 2024.
That resulted in a $2.05 billion debt reduction in the second quarter, about $1 billion more than Wells Fargo had forecast, according to Steven Cahall, an analyst with the bank.
The analyst noted that Warner Bros. Discovery forecast it would have about $930 million in free cash flow in the second quarter, after finishing the first quarter with $2.6 billion in cash.
“We are taking the debt reduction to indicate management confidence in 2023 for cash generation and deleveraging,” Cahall wrote.
Warner Bros. executives Discovery said during recent earnings calls that the company is sticking to its goal of reducing its debt-to-EBITDA leverage to less than four times.
Whatever meaningful money the company generates will likely be used to pay back debt, said a person familiar with the matter who was not authorized to speak publicly. Public offers, such as the cash offer announced this week, will likely serve as a means of paying down debt, the person said.
Warner Bros. Discovery has also worked to make its streaming business profitable. CEO David Zaslav recently said during a corporate earnings call that the streaming business is expected to become profitable in the US in 2023, a year ahead of expectations. The company recently relaunched and rebranded its flagship streaming service as Max, combining content from HBO and its portfolio of cable TV networks such as the Discovery Channel and TLC.
During the first quarter, Warner Bros. Discovery reported revenue of $10.7 billion, as well as a net loss of $1.1 billion.