Warner Bros. Discovery Inc. (NASDAQ:WBD)

Net Operating Profit After Taxes (NOPAT)

The NOPAT exhibits a notable positive turnaround from a significant loss of $121 million in 2017 to substantial profits in subsequent years. It increased to $1,195 million in 2018 and further to a peak of $2,393 million in 2019. However, after reaching this peak, NOPAT declined to $1,788 million in 2020 and continued its downward trend to $1,066 million in 2021. This indicates a strong recovery followed by a weakening profitability trend in the most recent years.

Cost of Capital

The cost of capital fluctuated over the analyzed period. Starting at 8.32% in 2017, it rose to a high of 11.68% in 2020 before falling back to 9.61% by 2021. The increase during 2019-2020 suggests rising capital costs or perceived risk during that period, which subsequently eased somewhat in 2021.

Invested Capital

Invested capital shows a steady increase from $21,151 million in 2017 to $31,259 million in 2018, after which it remained relatively stable around the $30,000 million mark through 2019 to 2021, with slight fluctuations. This indicates that the company maintained a consistent investment base after a significant increase early in the period.

Economic Profit

Economic profit remained negative throughout the period, indicating that the returns were not sufficient to cover the cost of capital. Losses worsened from -$1,880 million in 2017 to a peak loss of -$1,926 million in 2018. There was a temporary improvement in 2019 with losses narrowing to -$491 million, but this was followed by a deterioration in 2020 and 2021, with economic losses reaching -$1,795 million and -$1,886 million respectively. This pattern suggests ongoing challenges in generating value beyond capital costs despite fluctuations in operating profit.

Net Income (Loss) Available to Discovery, Inc.

The net income experienced significant fluctuations over the five-year period. In 2017, the company reported a net loss of 337 million USD. A substantial turnaround occurred in 2018, with net income improving sharply to 594 million USD. This positive trend continued through 2019, peaking at 2069 million USD, indicating a phase of strong profitability. However, subsequent years showed a decline, with net income falling to 1219 million USD in 2020 and further down to 1006 million USD in 2021. Despite this decline, net income remained positive and considerably higher than the 2017 loss, reflecting sustained profitability after the initial recovery.

Net Operating Profit After Taxes (NOPAT)

NOPAT mirrored a similar trajectory to net income but on a different scale. The value was negative in 2017 at -121 million USD, indicating operational challenges. A sharp recovery took place in 2018 as NOPAT increased substantially to 1195 million USD. This improvement continued in 2019, reaching a high point of 2393 million USD, which suggests enhanced operational efficiency and profitability. However, the subsequent years showed a downward trend with NOPAT decreasing to 1788 million USD in 2020 and 1066 million USD in 2021. This decline suggests that while operations remained profitable, perhaps operational cost pressures or other factors impacted the efficiency or scale of profit generation.

Overall Trends and Insights

Both net income and NOPAT demonstrate a recovery from losses in 2017 to strong profitability in 2019. This trend indicates successful strategic or operational changes during these years. However, the decline in the last two years suggests emerging challenges or market conditions affecting profitability. Despite this decline, the company maintained positive earnings, indicating resilience. The gap between NOPAT and net income also suggests consistent tax impacts and possibly financing costs that moderated net income compared to operating profits.

Provision for Income Taxes

The provision for income taxes fluctuated significantly over the analyzed period. Starting at 176 million US dollars in 2017, it increased sharply to 341 million in 2018. This was followed by a notable decline to 81 million in 2019. Subsequently, the provision rose again to 373 million in 2020 before decreasing to 236 million in 2021. These fluctuations indicate variability in the company’s taxable income or tax planning strategies over the years.

Cash Operating Taxes

Cash operating taxes demonstrated a generally increasing trend throughout the period. From 537 million US dollars in 2017, the amount increased steadily to 627 million in 2018 and further to 728 million in 2019. Although there was a slight decline to 698 million in 2020, the figure rebounded to reach a peak of 880 million in 2021. This overall upward trajectory may suggest growing taxable operations or changes in tax payment timing and cash flow management.

The financial data reveals several notable trends over the five-year period ending December 31, 2021. The total reported debt and leases exhibited fluctuation rather than a consistent trajectory. Starting at approximately $14.99 billion in 2017, the debt increased notably to about $17.78 billion in 2018. Subsequently, it declined over the next three years, reaching approximately $15.64 billion in 2021. This suggests a period of increased borrowing followed by a gradual reduction or restructuring of debt obligations.

Stockholders’ equity showed a consistent and robust upward trend throughout the period. Beginning at $4.61 billion in 2017, equity rose sharply to approximately $8.39 billion in 2018 and continued to increase steadily year-over-year, reaching about $11.60 billion by 2021. This steady growth in equity indicates an improvement in the company’s net asset position and indicates potentially positive retained earnings or capital injections over time.

Invested capital peaked in 2018 at approximately $31.26 billion, having increased significantly from $21.15 billion in 2017. Following 2018, invested capital remained relatively stable through 2021, hovering around $30.7 billion without substantial increase or decrease. This stabilization after an initial sharp rise could imply a plateau in new investments or acquisitions during the latter part of the period under review.

Total Reported Debt & Leases

Increased from 2017 to 2018, then gradually decreased each subsequent year, ending lower in 2021 than its peak.

Total Stockholders’ Equity

Displayed continuous and steady growth across the entire period, indicating strengthening financial foundations.

Invested Capital

Experienced a significant rise from 2017 to 2018, followed by a plateau, remaining relatively unchanged from 2018 through 2021.

Economic Profit

The economic profit demonstrated a generally negative trend throughout the periods analyzed, with all values indicating losses. The loss started at US$ -1,880 million in 2017, slightly worsened to US$ -1,926 million in 2018, improved significantly to US$ -491 million in 2019, before deteriorating again to US$ -1,795 million in 2020 and further to US$ -1,886 million in 2021. This pattern suggests a temporary improvement in 2019, followed by a notable decline in subsequent years.

Invested Capital

Invested capital showed a substantial increase from US$ 21,151 million in 2017 to US$ 31,259 million in 2018. After this sharp rise, the invested capital remained relatively stable with a slight decrease and plateau around US$ 30,994 million in 2019, US$ 30,674 million in 2020, and US$ 30,724 million in 2021, indicating a period of capital stability following rapid growth.

Economic Spread Ratio

The economic spread ratio remained negative across all years, revealing that the returns on invested capital were consistently below the cost of capital. The ratio improved from -8.89% in 2017 to -6.16% in 2018, further improved significantly to -1.58% in 2019, but then declined again to -5.85% in 2020 and slightly worsened to -6.14% in 2021. This fluctuation aligns with the economic profit trends and indicates challenges in generating value over the cost of capital, despite the temporary improvement in 2019.

Overall Insights

The data reflects a challenging financial performance with persistent negative economic profit and economic spread ratios. The brief improvement in 2019 suggests some operational or market factors favored the company that year, but the overall trend indicates difficulties in achieving positive returns on invested capital. The significant increase and subsequent stabilization in invested capital suggest considerable investments made by the company followed by a period of capital maintenance. The negative economic spread indicates continued value erosion relative to the cost of capital, signaling potential areas for operational improvement or cost restructuring to enhance financial performance.

The financial data over the five-year period reveals distinct trends in key economic and revenue-related metrics.

Adjusted Revenues

Adjusted revenues showed an overall upward trajectory, increasing from US$6,952 million in 2017 to US$12,115 million in 2021. The most significant increase occurred between 2017 and 2018, followed by continued albeit slower growth through 2019. A slight dip occurred in 2020, but the revenues rebounded and reached their highest point in 2021, indicating resilience and growth despite potential market challenges during 2020.

Economic Profit

Economic profit remained consistently negative throughout the period, indicating ongoing economic losses. The loss narrowed significantly in 2019 to -US$491 million from larger deficits in previous years (-US$1,880 million in 2017 and -US$1,926 million in 2018), suggesting improvements in operational efficiency or cost management during that year. However, the economic profit deteriorated again in 2020 and 2021, with losses of -US$1,795 million and -US$1,886 million respectively, nearly returning to the high loss levels observed at the start of the period.

Economic Profit Margin

The economic profit margin followed a similar pattern to economic profit, remaining negative throughout. It improved markedly in 2019 to -4.32% from -27.04% in 2017 and -18.24% in 2018, reflecting better relative profitability despite negative economic profit. Nevertheless, the margin contracted again in the following years to -16.74% in 2020 and -15.57% in 2021, indicating deteriorated profitability margins concurrent with the worsening economic profit.

In summary, while adjusted revenues grew consistently over the reported period, economic profit and economic profit margin trends indicate persistent challenges in converting revenue growth into positive economic returns. A brief improvement in 2019 suggests that conditions or management actions that year temporarily enhanced profitability, but this was not sustained, with losses deepening once more in 2020 and 2021.