Ladies and gentlemen, thank you for standing by, and welcome to the Discovery, Inc. third quarter 2021 earnings conference call. At this time, all lines are in a listen-only mode. After the conclusion of the speaker's presentation, there will be a question-and-answer session. Also, please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Andrew Slabin, Executive Vice President, Global Investor Strategy. Sir, you may begin. Good morning, everyone, and welcome to Discovery's Q3 earnings call. With me today is David Zaslav, our President and Chief Executive Officer, Gunnar Wiedenfels, our CFO, and JB Perrette, President and CEO of Discovery Streaming and International. Before we start, I'd like to remind you that today's conference call will include forward-looking statements that we make pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements include comments regarding the company's future business plans, prospects, and financial performance, as well as statements concerning the expected timing, completion, and effects of the previously announced transaction between the company and AT&T relating to the WarnerMedia business. These statements are made based on management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from our expectations. In providing projections and other forward-looking statements, the company disclaims any intent or obligation to update them. For additional information on important factors that could affect these expectations, please see our Form 10-K for the year ended December 31st, 2020, and our subsequent filings made with the U.S. Securities and Exchange Commission. With that, I'd like to turn the call over to David. Good morning, everyone, and thank you all for joining us. This continues to be an exciting and busy time here at Discovery across a range of business initiatives and strategic planning for the next year and the years ahead. I'm very pleased with our focused performance and strong operating discipline as we simultaneously ramp up our integration planning, strategic reviews, and approach ahead of the WarnerMedia merger. We are increasingly enthused about the transformative opportunity ahead by bringing together these complementary assets, talented creative leaders and employees all around the globe. This morning, I'll provide some brief commentary on Q3 operating performance and update you on the progress we are making as we work toward the close of our transaction and integration of the businesses. Gunnar will then take you through additional puts and takes on the quarter. Very briefly on Q3, it was a solid quarter all around. Subscriber growth for our direct-to-consumer platforms picked up nicely post-summer, and we added a healthy three million paying subscribers around the globe, reaching a total of 20 million subscribers. We've seen continued growth thus far in Q4. We were able to deliver this growth as well as driving double-digit growth in both advertising and distribution revenues while converting a healthy amount of OIBDA to free cash flow. This positions us nicely above our guidance of at least 50% conversion this year, and we see free cash flow is tracking to exceed $2.1 billion for the full year. That's after funding very significant investments in our discovery+ rollout. Additionally, and importantly, we have had the opportunity to refine some of our transaction leverage assumptions after examining WarnerMedia's draft carve-out financials. Though we took a conservative approach initially while modeling the pro forma transaction, we now expect our net leverage at close to be at or below 4.5x versus the 5x that we noted in May. We are currently tracking below the 4.5x. This is predominantly based on estimated contractual adjustments to working capital and to a lesser extent, an improved outlook in our operating performance. Accordingly, we now see a path to reducing leverage to around 3x meaningfully sooner than what we articulated in May. More on this shortly from Gunnar, but this points to a stronger financial footing than we had anticipated as we stand up the merged company and accelerate the pace to delever, supporting our ability to make focused investments in growth initiatives even without any asset sales. On the regulatory front, echoing John Stankey's comments on the AT&T call, we are well on track for a mid-2022 close and are engaged in the typical regulatory filing process in jurisdictions around the globe, including our planned filing with the SEC of a preliminary draft of our merger proxy expected out in late November. The transformative upside from the merger is, of course, the global direct-to-consumer opportunity. While we appreciate some of the questions that a number of you have asked regarding clarity and specifics regarding the product, investment, and go-to-market roadmap, it is still premature for us to provide details given where we are in the ongoing regulatory review process. That said, having conducted further operational and strategic diligence, I can share with you some broad strokes around what underpins our confidence and enthusiasm in our global go-to-market action plan. First, it's all about the content. From the start, under one roof will be a combination of two companies whose common culture of creative excellence, iconic characters, and franchises will result in a differentiated competitive offering. I believe the biggest and most compelling menu of IP for consumers in the world. Spanning comedy to true crime, kids and family, lifestyle to adventure, drama to documentaries, news and sports, and of course, sci-fi and superheroes. I believe the most complete and balanced portfolio offered in one service in the world. Secondly, we view our ability and commitment to tactically invest in our content portfolio as a critical strategic driver, building upon our respective long-tenured track records of producing relevant and complementary programming around the globe. This should help to make our service uniquely global and local at the same time. Third, given the breadth of our content offering, we expect the combined service will appeal broadly to all demographics, young and old, with strong male and female genres. Again, very complementary, such that our global total addressable market should be on par with the biggest streaming service. Assessing the overlap in respective subscriber bases, at least here in the U.S., we believe less than half of discovery+ subscribers are also HBO Max subscribers, which with the right packaging, provides a real opportunity to broaden the base of our combined offering. With our global appeal, infrastructure, and local market capabilities, our international roadmap is very much still untapped and provides meaningful upside over the coming years. Lastly, our ability to drive revenue and ARPU positions us well for long-term growth, particularly given our plans to market with a lower-priced ad light service starting off in the U.S. and later in key international markets. A meaningful distinction from some competitors, where we see an opportunity to drive value. We gain confidence in this strategic direction from our experience with ad monetization on discovery+ in the U.S., where advertisers covet the incremental reach demos, targetability, and product flexibility, and pay premium rates to address this audience, helping make this tier our highest ARPU offering. The opportunity to scale an ad light offering represents one of the most significant upside drivers for the company long term, while offering a compelling value to more price-sensitive consumers and will benefit from Discovery's depth in local ad sales infrastructure and teams around the world to help monetize. It's quite clear that the winners in streaming are and will be those companies that can provide consumers with the best quality stories, the most appealing content choices, personalized and simple products, and all at a great value. We expect our highly complementary combination will drive such a winning value proposition and will be reflected across key operating metrics over time. A few words on the linear side of the house before turning over to Gunnar. As we think about what can be achieved in terms of bringing great networks and brands together under one roof, the analogy to Scripps is a valuable benchmark, and we believe the opportunity is far greater here, both on costs and advertising revenue potential, ultimately to better support our core linear business and more broadly the entire traditional ecosystem. This, I believe, is one of the least appreciated elements of this transaction. Consider, with Scripps, the platform we created in aggregating female demos, the bedrock on which we launched Premiere, our product that offers advertisers the unduplicated reach of a broadcast network across all of our primetime originals at significantly more efficient CPMs than broadcast. We can take that advertising platform to the next level by weaving in sports, scripted news, and male-oriented programming together with our existing core competencies. It's a true win-win, generating significant revenue upside to us with improved options, efficiency, and savings to our advertising partners by replicating the reach of a broadcast network at better value. Cost synergy opportunities are significant. We draw upon the expertise of our transformation office, which since our merger with Scripps Networks in 2018, continuously challenges our management team and me to refine and transform how we conduct and manage our organization from top to bottom around the globe. Nothing is sacred and no stone is unturned. With Scripps, we ultimately captured more than $1 billion in cost savings, representing about 35% of all non-content expenses and about three times our original synergy target before we stopped attributing incremental savings to the merger. A large chunk of the cost synergy opportunity that we have already conveyed speaks to the best practices and tailwind in place from the integration of Scripps. It's a great starting point. As we refine and integrate global ops, enterprise tech, corporate functions, real estate, direct-to-consumer infrastructure and tech, and streamline efforts across duplicative functions like SG&A and marketing spend. A process that we see broken down into three distinct waves over the next few years. We approach $3 billion in cost saves as a tangible and achievable goal, especially against the combined company that should spend around $35 billion this year and growing from there. Stepping back for a moment to reflect on our direct-to-consumer pivot. Nearing a year since discovery+ launched, I'm proud of what we have accomplished under the leadership of JB and the world-class team we have assembled over the last few years. We continue to learn a great deal, challenge ourselves, sharpening our focus and gaining perspective for the next leg of our direct-to-consumer journey with WarnerMedia and HBO. As we've noted recently, we continue to refine our discovery+ plans, taking a more thoughtful and tactical approach to investing in the product. Doing so in ways that also support our plans for the combined company after we close the transaction. For example, we are moving forward in priority markets such as Canada, Italy, Brazil, and the U.K. Some of which are where HBO Max hasn't announced plans, or in some cases, has indicated that they cannot launch in the near to medium term for contractual reasons. As you heard from John, Jason, and the team on their earnings call, HBO Max continues to aggressively move forward with their global expansion plans, most recently in LATAM and last week in Europe. We look forward to closing the transaction so that we can coordinate and maximize our marketing, technology, and content spend for the enhancement of the combined effort. Until such time, we continue to roll out new and exciting content to entertain and sustain our subscribers around the globe. Our metrics look great. Roll to pay remains near 75% globally. Churn, particularly in the U.S., continues to look strong and approaching peer group lows. While App Store ratings are firmly at the top. While monetization and engagement continue to exceed our expectations. All of which helps to solidify our discovery+ base as we endeavor to roll into and formulate a more comprehensive and broader offering with HBO Max. In closing, this is an exciting and dynamic time for us as we plan our next steps, and we are as eager to share them as we know you are to hear them. We expect that will be in short order. While the opportunity for course capture and enhanced efficiency is both tangible and material, our North Star, our right to play, will be in achieving long-term, sustainable financial growth resulting from the combination of these two great content companies, helping to nurture our important linear presence while driving global scale across our direct-to-consumer platform, anchored by as rich and relevant a portfolio of creative franchises anywhere in the world. I'd now like to turn it over to Gunnar, after which JB, Gunnar, and I will be happy to answer any of your questions. Thank you, David. Good morning, everyone, and thank you for joining us today. Reiterating David's comments, I'm pleased with what the Discovery team has achieved since the discovery+ Analyst Day not even a year ago. Over that time, we have added 15 million paying direct-to-consumer subscribers globally, finishing the third quarter with 20 million paying D2C subscribers. Since the start of our discovery+ journey, we have launched in over 25 new markets, notably the U.S. and the U.K., and most recently, Canada and the Philippines, with Brazil to come over the next few weeks. At the same time, we have continued to drive growth in markets like Poland, the Nordics, Italy, and India, where we doubled down on our direct-to-consumer efforts with a renewed and expanded content offering. Our Next Generation Revenues finished the third quarter with $425 million for the quarter or a $1.7 billion annualized run rate, with global D2C ARPU of approximately $5 and $7 blended discovery+ ARPU in the U.S. Again, supported by our over $10 ARPU for the discovery+ Ad Light product, which continues to monetize very well. Investment losses for the quarter were in the low $200 million range, slightly better than our guidance from last quarter. We expect investment losses more or less in that range in the fourth quarter as well. As always, we maintain a disciplined approach with respect to investing in direct-to-consumer initiatives. As both David and I have noted over the last few months, it is through this lens that we view the opportunity ahead, both leading up to the merger and beyond. We are very focused on nourishing our existing subscriber base with an increasing content offering and new product features. At the same time, you should expect us to be guided by a rigorous analysis of customer lifetime value and subscriber acquisition costs to determine our marketing spend for new sub additions. Now I'd like to quickly review our reporting segments. Starting with the U.S., third quarter advertising revenues increased 5% year-over-year. Pricing was healthy versus last year, driven by scatter pricing that was up 40% year-over-year. Additionally, we continued to see strong demand for our discovery + Ad Light product, which contributed to the growth in the quarter. This was partly offset by weaker audience delivery year-over-year, some of it attributable to the Nielsen panel issues, as well as the lapping of our very strong performance last year during the pandemic. Furthermore, some of our networks have lost share to the strong sports calendar this year. While scatter pricing is still very healthy in Q4, up 30%-35% over both upfront and last year, the overall tone in the market is a bit more subdued than the last few quarters as clients work through the constraints in the global supply chain. Though there is slightly less visibility as a result, we are very pleased with how our portfolio is positioned based on the strength from the upfront and contribution from direct-to-consumer. Distribution revenues increased 21% year-over-year, largely due to the continued growth of discovery+, as well as linear affiliate rate increases, in part helped by successful renewals with DirecTV, Verizon, Hulu, and Altice so far this year. As disclosed in our earnings release, pay TV subscribers to our fully distributed linear networks declined by 3% year-over-year, while total portfolio linear subscribers declined 4%, excluding the impact of the sale of our Great American Country network last quarter. Turning to international, which I will, as always, discuss on a constant currency basis. International advertising increased 26% versus last year as the global advertising marketplace continued to recover from the pandemic. We also benefited from the Olympics in Europe across our linear and digital platform. Although, as we've noted in the past, advertising for the Olympic Games is less consequential in Europe as compared to the U.S. All of our international regions, including many of our key markets like the U.K., Germany, Sweden, Norway, Spain, Australia, New Zealand, and Mexico, were up meaningfully compared to last year, as well as compared to 2019. We see momentum continuing into Q4, even as needless to say, the year-over-year comps get tougher from here on out. International distribution revenues grew 6% during the quarter, primarily due to the growth in direct-to-consumer subscribers, which have nearly tripled over the past year across our footprint outside the U.S., in part aided by Olympic signups. Turning to operating expenses, total company OpEx increased 50% during the quarter or 17% excluding the Olympics, for which the overall OIBDA losses were in line with our guidance of around $200 million for the quarter. We continue to focus on driving efficiency in our core linear networks, and we remain on track to reduce core linear OpEx in the low- to mid-single-digit percentage range for the year. Turning to some housekeeping items. Net income for the quarter was $156 million or $0.24 per share on a diluted basis. A couple of items to note. First, we recognized a $0.12 per share non-cash gain from the $15 billion of notional interest rate hedges that we recently implemented to mitigate interest rate risk for future debt issuances to finance the cash portion of the WarnerMedia transaction. The hedges provide additional security and visibility towards our overall cost of deal-related debt financing, which is now trending better than our initial expectations. A final note on this, as the derivatives do not qualify as hedges for accounting purposes, we are required to report the changes in fair market value on our income statement, which could result in some additional variability to our net income until the WarnerMedia transaction closes. We will of course call this impact out each quarter. Second, the impact of PPA amortization during the third quarter was $0.30 per share. Adjusted for the above, EPS would have been $0.42 per diluted share. Our effective tax rate during the quarter was 15%, and we continue to expect the full year effective book tax rate to be in the mid-teens range. For cash taxes, we continue to anticipate a rate in the high 20% range for the year, excluding PPA amortization, though this is subject to change as we are carefully monitoring ongoing tax legislation. We expect FX to have roughly a -$15 million year-over-year impact on revenues and a -$10 million impact on AOIBDA in the fourth quarter. Now, turning to free cash flow and our leverage. We generated $705 million of free cash flow in the quarter. Obviously, a very strong conversion rate of AOIBDA, notwithstanding the continuing investments we're making, as well as the return to normalized content production levels. Year- to- date, our AOIBDA to free cash flow conversion rate is over 60%. With a few months left in the quarter, we see free cash flow topping $2.1 billion for the full year, and clearly ahead of our 50% conversion guidance. To expand on a point that David made earlier, we now expect our net leverage to be at or below 4.5 x by the time we close the WarnerMedia merger. Over the past few months, having had the opportunity to dig further into WarnerMedia's draft carve-out financials and with better visibility on estimated working capital, in conjunction with our better P&L and pre-cash flow performance, we now believe that we will have a healthy amount less net debt at closing than originally anticipated. While naturally, these metrics are preliminary and a function of working capital at close, we now do expect to be in a position to reduce leverage to 3x meaningfully sooner than what we stated in May. Our long-term target net leverage range for Warner Bros. Discovery remains at 2.5x-3x. As we work towards closing the WarnerMedia transaction in mid-2022, we have redirected our experienced integration and transformation office to hit the ground running. As we refine our strategic review and integration plans and as we develop our synergy capture plans further, we are as enthusiastic as ever about the prospects of combining these two world-class portfolios and franchises. With that, we look forward to sharing a lot more in due time. For now, I'd like to turn the call over to the operator to start taking your questions. Thank you, sir. We will now begin the question-and-answer session. As a reminder, if you wish to ask a question, simply press star then the number one on your telephone keypad. Once again, that is star one on your telephone keypad. Your first question is from the line of Doug Mitchelson from Credit Suisse. Your line is now open. Doug? Mr. Doug Mitchelson, your line is open. Okay. Sorry, David. He only responds when he's addressed as Mr. Doug Mitchelson. Okay. Sorry, Doug. You know what? 100 earnings seasons, I still can't figure out the mute button. Look, David, I appreciate the update on the merger and the lower debt leverage. Can you talk about the content vision for the combined company and how that's evolving? I guess, it's kind of a three-part question, David. The first is Warner Bros. investing enough now in content under AT&T while they're sort of focused on the merger? You know, how are you thinking about how much content spend should be to win in global streaming versus how much the companies are, you know, spending today? Do you have visibility on what Warner's making that's gonna be coming out in late 2022 and 2023 and 2024 since movies in particular, you know, is a two- to three-year cycle. Any thoughts on that would be helpful. Thank you. Thanks, Doug. First, this is something that John Stankey and I talked about as we created this vision together of this company being what we believe is the best media company with the greatest and most comprehensive content offering. As part of that, we're spending more money on content and leaning in, and WarnerMedia is spending more money on content and leaning in. We both committed to do that to keep both of our ecosystems nourished and strong and growing. When and if the deal gets approved, then we come together. We'll come together with strength. You see that with on the Warner side where we're cheering them on with the success of Dune around the world with Ann and Toby on that side, and Casey Bloys having an incredible run at HBO with Succession, White Lotus, Hacks, Mare of Easttown. It's just if you look at the culture and the impact of that content together with the extraordinary library they have, us leaning in on our side with more original content. You know, for us, we're also spending a lot more on the international side to get ready. We think that's a strategic advantage. When you look at the content, you know, we think, you know, in terms of the demographics that we will appeal broadly to every demo. I mentioned this, but we're very strong with women. That's a particular strength of Discovery, where during many quarters, we're the leading media company in America for women, together with length of view of women watching our channels, whether it's Food or HGTV or Oprah or ID, and TLC, and that's continuing. In addition, we look around the world, it's not just local content, but we're the leader in sports in Europe. We have sports in Latin America, and CNN is the leader in news with the most compelling news brand around the world. One of the few global, maybe the only global news service that has the kind of resources around the world in news gathering. As we go out and build this service and make this offering, and I do think it's the best content wins, there's a great product in Netflix in entertainment. There's a great product with Disney, with Chapek is building, with entertainment. We think we have a comparable product, maybe even more diversely attractive in entertainment. But on top of that, we also have sports, which we're using in Europe and learning a lot from. In markets like Poland, where we're doing news and sports together with broad entertainment and nonfiction, we're finding, you know, real meaningful traction and real reduction in churn. I think we have a lot to learn, but we have a terrific product, and we're working on our go-to-market. We have brought on an old friend of mine, who I've known for 15 years, one of the most talented people I think in the business. He's busy with a lot of other things, but we do have a commitment now that Kevin Mayer, who built Disney+, will be in the chair with as a consultant with JB and I and Bruce and Gunnar and the whole team. As we've already built, as we've talked about a go-to-market strategy, we're gonna be honing that. Kevin has a big brain. He's learned a lot about this. We've learned a lot in Europe and with discovery+. We've been at it for a long time, but he had a lot of success at Disney. He's super excited about getting in the car with us and helping us with everything that he's learned, a lot of knowledge about windowing, about how different pieces of content, whether it's movies, perform. We're anxious to get in a room with Anne and the team at Warner. I was there last week meeting for the first time with Anne's whole team, but they're super smart over there. We think adding Kevin to the overall team is going to be helpful to us. Off we go. You know, who's got the best menu? I think we got the best menu. Doug, just one point I would add, obviously, so we scrutinize sort of each other's investment plans as part of the deal discussions. As we said before, all the financial guidance that we've given around the deal is always assuming a pretty significant step up in content investments over the coming years. Great. Thank you both. Your next question is from the line of John Hodulik from UBS. Your line is now open. Okay, guys, thanks. A couple of quick questions on advertising. Obviously, a lot of sort of trends going into the fourth quarter. You got the step up from the upfront, but potentially some slowdown from supply chain issues. Dave, is there any way that you guys could sort of characterize what you see going forward on that side and maybe break out what you're seeing in terms of the linear business versus the D2C business? Thanks. Sure. Well, I would just start with this is the most successful upfront that I've seen in my career. I think from an industry perspective, it is up 20%, and it was very materially bigger upfront for us because of Premiere and because of the length of view and the certain advertisers wanting to be aligned with the brands that we have and the characters that we have. I think it's a big helper to us that we had a very strong upfront. There are supply chain issues. There are port level issues. We're still seeing that there will be material growth in advertising. You know, we can't predict what's gonna happen in the future. As I've said before, I saw a lot of people in the mid-1990s saying that it's the end of broadcast television. It may be a transition away from a lot of the younger demo being on there, but we see huge numbers. You know, we're not getting credit for it, but I think one of the reasons why the ad market was up so much for us is the advertisers know there's a massive audience over 55 watching Food, watching HGTV, watching Discovery Channel, watching Investigation Discovery, and they get those. Right now, they get them for free. We talked about in the upfront, a number of us in the industry independently were out there trying to get credit for that. I think that the linear platform is here for quite a long time, and there'll be ups and downs on advertising. Advertisers, they find it's very effective to be in linear video, much more effective than others. Then we have the complement of discovery+, which is just, you know, a huge driver for us in terms of the demo complements and attractiveness. Now, Gunnar. I don't really have a lot to add to that, Dave. I mean, we're feeling very good about our position, the upfront, the continued contributions from D2C. But I did want to point out a little less visibility, and for the known reasons. We'll be growing very healthily in the fourth quarter, I believe, from today's perspective. Great. Thanks, guys. Your next question is from the line of Jessica Reif Ehrlich from Bank of America. Your line is now open. Hi. Thanks. I have two questions. On the integration, I appreciate all the comments you did make. What is the most challenging areas? One area of opportunity, and you've actually gone through it at Discovery already in waves. You know, on your technology stack, on your tech stack, can you talk about you know, you transitioned off of oh my God, the Major League Baseball, BAMTech, sorry, off of BAMTech, created your own. So as you look at combining with HBO Max, like what are the challenges and what are the ultimate benefits and cost savings? Then a second question, David, you said in your prepared remarks that you can make acquisitions without asset sales. I'm just wondering what pieces do you think you're missing in the combined company? Okay. Let me start by saying, look, I don't think we're missing anything, and the first thing we're gonna do is look to drive all the tremendous assets and the differentiated IP and the great library and local content that we have, pull it all together and go to market. We think we have something quite strong. I'm just making the point that there will, given that we're gonna be delevering quicker, given the fact that we will be much lower levered than expected, that over time, as others are struggling, that there'll be an opportunity for us to look at IP and to see where we need more help, if we need more help. On the integration side, we're really lucky. We got two big tentpoles here. Well, one is Gunnar will be the CFO of this company. He's done an exceptional job. He led the initiative with Scripps, where we said we'd be less than 3.5 x levered two years later, and we did it in less than a year. We said we'd deliver $350 million, and we delivered over $1 billion. All of that was just cost, not revenue synergy. He came up with these targets and is quite confident in those targets. Gunnar will be kind of the lead horse. He'll talk to it. You know, we have a very experienced team here. Bruce Campbell and JB and Adrian and I have been together for 25 years. We're looking forward to bringing in some incredibly talented people at Warner. When we acquired Universal, JB was the one for Bob Wright and for Jeff Immelt that ran the integration of that entire transaction. You know, which was cable, movies, theme parks, with over 146 work teams and work groups, and did a magnificent job on that. We're fully deployed. You know, there's a lot that we can't do now, but Gunnar, why don't I pass it off to you and JB? Yeah. I'll let JB comment on the tech part of your question, Jessica. Again, I mean, from the perspective of challenges, again, as I've been saying from the very beginning, we've taken a conservative approach to this. We're very well aware of the size of the checks that we're writing here for this combination, and we have been, you know, careful with our assumptions. All the work that we've done since gives me more and more confidence in our ability to deliver our output against these synergies. As David said, and as I said earlier in the prepared remarks, you know, doing more work now, having, you know, transparency into albeit, you know, draft carve-out financials for the WarnerMedia carve-out group. As I said, the cash payment is gonna be a significantly lower one from today's perspective. You know, that gives us a better starting point from a leverage perspective. As we said earlier, you know, this sort of below 4.5 x leverage that we're seeing right now is, to a large extent, driven by working capital adjustments. To some extent, it's also driven by our current performance, both for the P&L and the free cash flow, you know, being above what we assumed in our conservative agency model that we based our first communication on. Again, it's early still. You know, we obviously still can only do so much until we have regulatory clearance. As we said, the team is up and running. Simon Robinson, our Chief Transformation Officer, and his team fully redirected at this now so that we'll be able to hit the ground running, and I think we're in very good shape. You are, you know, pointing out obviously one of the key questions here with the tech platforms. JB, why, you know, why don't you give a perspective on how we're looking at that? Yeah. Jessica, it's obviously a big opportunity for us. We look at it as a one where we're undergoing right now essentially an audit of both platforms. I don't think necessarily the decision is a monolithic one. You know, we look at these as multiple different modules that make up all the different components of both their and our tech platforms. We have a lot of experience, as you mentioned, in terms of the effort and the work and the discipline required in re-platforming either one to the other, you know, in one direction or the other. That decision we haven't made yet, but we're undergoing obviously a significant diligence process to underscore which is the best in class on both, and it may be a little bit of a combination of those depending on certain modules in the platform that we may apply. We think it's actually a great opportunity because Rich and Jason and the team on their side have obviously spent a lot of time and are investing a lot in upgrading their tech platform as we speak. We've obviously spent a lot of time and a lot of money doing the same over the course of the last 12 to 18 months. As the two groups come together, we will have essentially a choice of a what we think will be an incredibly attractive kinda tech buffet that we will look to bake the best of both to decide how we move into a common platform going forward. Jessica, maybe just one. If you could follow up. Yeah. No, I just wanna clarify one thing, Jessica, 'cause if I understand your question correctly, you were referring to acquisitions. That's nothing that we said in our prepared remarks. Just to clarify, we're not anticipating or planning for any acquisitions at this point. No, David was really clear. It just gives you opportunity. Just JB, I just wanted to follow up on the, you know, does it take a long time? You've gone through this, as you said already, you know, with BAMTech. Can you just talk a little bit or give us any color on what the cost savings will be from combining and what the benefits are from having one platform? Well, there will be meaningful cost savings from combining into one platform. I think there also will be meaningful consumer benefits from combining into one platform. I think the other thing to keep in mind is, you know, part of what in David's comments about us being more disciplined and tactical at this stage of phasing further rollouts of discovery+, for example, is also a view towards we may be able to more quickly in markets where we may not have launched discovery+, to be able to more quickly fold the content offering into a joint platform at that stage versus having to re-platform two existing platforms in a market into one. I think speed to market will be a variant of both, you know, where we have and haven't launched, number one. Number two, while we the final decisions on exactly which parts of the tech platform we migrate to will influence how long it takes us to get there. Remember that there may be two phases to this, where there may be an initial phase which allows for more of a quick bundling of services, and a second phase which eventually allows for obviously a common service on one tech platform. That's a timeline and evolution certainly, Jessica, that we'll talk to you more in detail as soon as we can give you more color. Maybe if I can add one thing, Jessica. Again, what we said when we first announced this deal was, remember, there's roughly $6 billion in technology and marketing spend between the two platforms, and we're assuming growth. We've brought together two companies with significant expansion plans. A lot of that spend is by its nature, a fixed cost, relatively independent of the subscriber number. Obviously, there's you know, streaming related costs et cetera. But a lot of it is fixed. There's a huge opportunity to completely sort of deduplicate that spend base. To JB's point of multiple waves, especially on the marketing side, I have no doubt that we will out of the gate, sort of even in the first phase before fully aligning tech platforms, we'll be able to get a lot of leverage out of the combined marketing spend. Thank you so much. Your next question is from the line of Alexia Quadrani from JP Morgan. Your line is now open. Just a couple of questions if I can. How do you think about growing sort of local content, following the success you've seen by others, you know, with that strategy? Secondly, really on the news side, is it better to have sort of standalone news streaming service in your opinion or, you know, combine it with entertainment streaming? Thanks, Alexia. You know, one of the real advantages of Discovery is for 20 years we've been in market with local teams selling locally, producing local content throughout Latin America, throughout Europe. In Europe, we expanded into free-to-air in a number of markets where we're the equivalent of NBC or CBS, and some markets we're the equivalent of like NBC and CBS combined. You know, in Northern Europe and Poland, we're quite big with a number of free-to-air channels in Italy and Germany. We have a library that's meaningful in each of those markets. We have, you know, a lot of data on what people are watching. We have a good sense of what kind of content they're looking at on the direct-to-consumer platforms because we've been at it for a long time. We also have sports in Europe, and we've tried a lot of things. Some haven't worked out as well as we'd expect, and that's a good thing because we've learned that sometimes packaging the sport independently doesn't work as well as packaging it more broadly. A number of sports together reduces the churn significantly, makes the appeal higher when you put sports together with entertainment, together with nonfiction. We came out with the Olympics. We had 1 million-plus signups for the Olympics. We continue to learn. That's a good thing. We're continuing to invest, learn and grow. That's what John and Jason and Anne and the team is continuing to do on a parallel basis independently. As we come together, we'll all be smarter. You look at what people thought about windowing, just as a student of this in the meetings I'm having. What's the right windowing strategy? What works best for a direct-to-consumer product? Is it better to have to build up a movie in the theater and then bring it? Is it stronger on the platform if it goes day-and-date? Is it stronger if it goes day-and-date at $30 versus free? There's a lot that we are learning just as observers, and there's a tremendous amount that Jason has learned, and Anne, and that Disney has learned, and that the industry has learned. One of the great benefits for me is I have this ability to really listen. Also, this has been a great experiment in how people are consuming content. You know, when people come on for a movie, you know, or series, what's the reaction? A lot of what is on the Warner side, I haven't seen because, you know, at this point we can't see it. The general industry knowledge and trends are things that we're noting aggressively and we're learning from. You know, we're continuing to experiment in Europe. On the news side, we've been experimenting ourselves. In Poland, we went independent. Now we're packaging it together. I think it's gonna. It is probably gonna depend on the market, and it depends on the offering. We have a very strong service in Poland, and it's been very helpful to us. We're you know, we're one of the leading voices in the market, and we have a 24-hour news channel there that's quite compelling. We don't know what the right answer yet, but having news and sports, you know, the more people go to a direct-to-consumer product, the lower the churn. The more time they spend, the lower the churn. That's why we're so excited about how much time people are spending with discovery+, you know, which has a library that's being broadly viewed. The idea that people spending hours on that product and the churn is low is encouraging for what bodes for the combination of the two. If you could put news or sports and people also go regularly for that, it's another reason to have the service. It's another reason to value the service. It's another reason not to churn out of the service. Disney has been very effective in doing packaging of services where you don't put them together, bundling. You know, that's the current plan right now for CNN as we've read about it. It's exciting, and we'll look and see. Thank you very much. Your next question is from the line of Kutgun Maral from RBC Capital Markets. Your line is now open. Good morning, and thanks for taking the questions. I wanted to ask about DTC investments for standalone Discovery and then drill in a bit on the deleveraging comments. First, given the deal, it clearly makes sense to take a more disciplined approach to your DTC strategy. I assume this will drive some near-term financial benefits. Can you provide a bit more color on the DTC investment levels going ahead? I know you called out the low $200 million range for Q3 and Q4. You know, where are you seeing some opportunities here? Is that a good quarterly run rate through deal close, or can the losses continue to maybe narrow given the strong top-line trends? Just second, the accelerated path to deleveraging post-deal close is very encouraging. Is there any more color you can provide on the drivers for both Discovery standalone, where you continue to deliver robust free cash flow, and then on the pro forma outlook? Just Gunnar, it's fantastic to hear about your continued role here, and I know you provided a lot of details already, but any more specifics on the improved pro forma leverage targets, particularly if there's an updated view on pro forma EBITDA, given maybe some minor asset sales from the WarnerMedia side? Thanks. Great. Thank you, Kutgun. Let me start with the delevering piece here and give a little more color. Again, there are two things that we have updated. One is sort of our model of how we look at pro forma combined, you know, financials for the company. Number two is just flowing through our current performance. That's, by the way, a link to your first question as well, because we're just doing a lot better, and we're generating a lot more free cash flow than what we anticipated half a year ago. If you take a step back, you know, the challenge here is that WarnerMedia is not a standalone company but is a carve-out group. We obviously made certain assumptions about what the balance sheet of that company and carve-out group would look like but had to wait for some still draft carve-out financials to get full confidence in the financial setup of that combined entity. Accordingly, you know, what we put into our model and what I presented to rating agencies for the rating discussion was a conservative model not fully flowing through certain adjustments, the most important one of which is the working capital adjustment. We have always talked about the $43 billion as subject to adjustments, and that's the working capital adjustment. From today's perspective, that looks like it's gonna be, you know, $4 billion-$5 billion lower in terms of, you know, what the net payment is gonna be with an impact on the net debt balance that we're gonna start this company with. Then that has obviously a very significant impact on leverage. The second thing, though, is, you know, about 25% or 30% of this improvement here is just driven by our, you know, better operating performance, obviously better AOIBDA improves the denominator of that leverage equation, and that's developed very nicely as well. I do wanna caveat this. You know, as we said, right now looks below 4.5 x. This number is gonna move around with working capital. What's not gonna change in my view is the very significantly increased confidence that I have in our ability to very, very quickly delever below the 3 x and to very quickly get us into the long-term comfortable leverage target range. Again, the other point I want to keep pointing out is we have already, because I've got a lot of questions on this, we have already anticipated very significant reinvestments in our business case. To your first question on the D2C investments, and I'll let JB talk about some of the opportunities a little more because we do have, you know, obviously, the Olympics coming up and, you know, market launches kicking in here. You're right in general. We've always looked at, and we'll continue to look at capital allocation through the lens of risk and return. The return side is almost, you know, fairly easy in this space because it's just the relationship between customer lifetime value and subscriber acquisition costs. It is fair to say that I've, you know, asked the marketing teams to give us a little more cushion between the two in order to, you know, manage some of the uncertainties as we go into the scenarios for next year. You're right. We should see lower investment losses, especially if you keep in mind that at the beginning of next year, we're starting to comp against the very significant investments that we made in the first quarter of 2020 as we launched the U.S. product. At the same time, I also do wanna point out we're continuing, and as David said it, we're continuing to really nourish the existing subscriber base that we have. We're continuing to invest in content in a significant way. Keep that in mind as well. Over the next few quarters, you will continue to see content expense coming up. We're also continuing to invest in technology and product features, but just a little less focus, I would say, in the mix on necessarily driving for every last subscriber. JB? Yeah. The only other thing I'd add, Gunnar, is obviously as we approach the deal term, not surprisingly, many of the partners that we work with internationally, that have been a great part of our success, and that you've heard us talk about, are also asking the fair questions about how much money and how much effort they should put behind, you know, launching in new markets as we go into 2022, given questions about the future brand, the future product offering, et cetera. We are getting the same questions from partners, which is totally legitimate and sort of that is making us, you know, in some cases rethink when is the right time to launch. A lot of that is largely those things are being pushed off, is a pushing off of marketing and in some cases content expense to later, when we have a better view of what the combined product will look like. We can come back to our partners with a more definitive sense of when and what we will be launching together. That's great. Thank you both. Your next question is from the line of Rich Greenfield from LightShed Partners. Your line's now open. Thanks for taking the question. A few months ago, WarnerMedia left the Amazon Channels platform. I think they've joined sort of Disney, Netflix, Hulu, even Apple TV+. Basically, just looking at the D2C subscriber business and wanting to be in a fully direct relationship versus sort of a wholesaling relationship with Amazon. I think that sort of puts Discovery, Viacom, and Starz as sort of the three largest players on Amazon Channels. I guess, yeah, I'd love to get sort of, David, your perspective, big picture, how you think about the puts and takes of Amazon, whether going fully independent is something you can see in Discovery's future, or whether you think companies like WarnerMedia, Disney have made a mistake not working with Amazon Channels? I'd just be curious how you think about that. Just lastly, I couldn't tell from your commentary, are you planning on keeping Warner HBO Max and discovery+ separate? Was that sort of the bundling comment you were making, or is that decision of integration still not made? That would be helpful on both lines. Thanks. Thanks, Rich. We have a go-to-market strategy that we feel we've built. I think having Kevin Mayer in the passenger seat with JB and Bruce and I, and eventually with the Warner team, with all of his knowledge and expertise, having built and driven Disney+ globally, I think, you know, will help to finalize and fully inform our strategy. Given where we are in the regulatory process, we're just not ready at this point to share all that with you guys. We will. We expect to, and we will soon. JB? Yeah. I mean, Rich, on the channel store question, the reality is they've obviously been a very good partner of ours on Discovery side. We're well aware that, as you said, HBO is taking a different position. I think, the three questions that we'd have that we are waiting to engage further with the HBO side is, number one, we have found so far that there's the question about these channel stores bringing in a different customer base than what we might be able to address directly, is an ongoing question. We've certainly seen some good incremental subscriber growth coming from that channel store ecosystem, and how much of that is cannibalistic versus what we could do direct or not is an ongoing set of analysis that we have going. Obviously, we wanna compare notes with the HBO team at the right time. That's a question, 'cause ultimately we wanna try and get our product out to as many consumers on whatever platforms as necessary. The second is the data element and the customer relationship, which I think is a little less known. I think as some of the Amazon executives have talked about publicly now, we do have access to customer information as part of our relationship. That's an important differentiator that doesn't make this just a sort of traditional anonymized channel store relationship, but where we actually have customer information on the channel store consumer. That makes the equation a little bit different. You overlay those two things. We say, you know, the third thing is obviously we wanna have more engaged conversations with the Warner team and look and see whether the strategy that they're following today or the strategy that we're following today makes sense for the combined. The North Star will be two things, which is ultimately how do we get the product in front of more consumers in aggregate and how do we do it in a financially strong way? If we think we can deliver still get the customer relationship but get in front of more people with the right economics, I think it's one that we will certainly remain very open to. We haven't made a decision definitively, but we are, we're remaining very open, and we'll certainly. That'll be part of the story when we come back to you, Rich and the team. We'll tell you more about it at the right time. Very helpful. Thank you. Your next question is from the line of Steven Cahall from Wells Fargo. Your line's now open. Thanks. Maybe, Gunnar, thanks for the color on the lower leverage and the expectation for the merger. You also mentioned that you're having some pretty encouraging conversations raising the debt. So I'm just wondering, you know, if that's gonna come in a little cheaper. I think you gave some steady state guidance of around 3x for the combined company initially and getting there in about two years. Should we assume that you get there a little more quickly just 'cause you're gonna be starting from a lower base, or is it more that you'll just have a bit more flexibility starting from that 4.5x or below? And then, you know, maybe one for JB on discovery+ and NextGen. Is it logical for us to assume maybe just a little bit slower pace of net adds going forward as you take a more focused approach and sort of avoid stepping into places where HBO is strong and be a bit more selective? If that is the case, I'm wondering if there's some free cash flow benefit to that near-term strategy just 'cause SAC expense runs a little bit lower. Thank you. Great. Yeah, Steve. I'll start with the flexibility. I mean, as I said, in my prepared remarks here, I am very convinced from today's perspective that we're gonna hit that upper end of our target range of 3x earlier than we originally mentioned. It is the 2.5x-3x range that I wanna see going forward. To your question about, you know, flexibility, we don't need flexibility because our deal model already assumes very significant, you know, reinvestments and further investments in building out, you know, the D2C product and growing content expenses over the five-year term here that we have modeled. Clear answer is yes. Very hopeful that we will be, you know, hitting that upper end of this 2.5x-3 x range earlier. Regarding raising debt, again, we've mentioned the $15 billion hedge that we have put on. You know, pretty much in line with what I said earlier about the conservatism in our initial model, the answer is yes, there is some room. We have obviously, you know, taken some conservatism as well as we modeled out our interest rates. We've locked in, you know, very attractive rates with this $15 billion hedge program. Again, you know, don't want to make any promises. It still will be some time before we implement the financing, but a good part is hedged now. We'll have to monitor, you know, the spreads as well. But I believe that we're in a very comfortable position relative to what we put out in the original statement and in our deal models. Before I hand it off to JB for the subscriber outlook here, you know, the financial part of that question is, you should absolutely assume, you know, further free cash flow performance here as we move forward. I do want to have the balance sheet in the best possible shape as we come up on closing the deal. As I said earlier, I now explicitly guide it to at least $2.1 billion of free cash flow, so a significantly higher conversion than what we went into the year with and what we guided at the beginning of the year. That’s all part of our ambition here to be disciplined and get this balance sheet in perfect shape. JB? Yeah. I think consistent with what Gunnar just said, we should assume obviously we're continuing to obviously push and see good growth in the markets where we're in, and we'll be launching our newest market in Brazil here over the course of the next two weeks. We're excited about that, and we still see healthy growth out of those markets. We're spending at levels, to Gunnar's point, that we think are reasonable without leaning too far in. The sort of slightly more conservative fact LTV ratios that we're spending at, plus the slowdown in some of the new market launches as we go towards the end of the year and into 2022 does mean that the net adds numbers will be a little bit slower than they might have been in the past. Great. Thank you. It may be worth just Rich. I realize we didn't hit Rich's second question about the bundling clarification. I think David and my point on the bundling was purely that in, back to Jessica's question about the tech rollout, it will take a bit of time, no question, to come to one platform. While that process is underway, there will be opportunities in a much quicker fashion, closer to day one to potentially do some very creative bundling propositions. That is an interim strategy, not a long-term strategy, I think, at this point, is what we'd say. This will be your last question from the line of Ben Swinburne from Morgan Stanley. Your line is now open. Thanks. Good morning. I think the release noted renewals with DirecTV and Verizon during the quarter. I'm just wondering if you guys could give us a little bit of color on, you know, sort of the key takes there and whether you see healthy affiliate fee growth coming out of that or any changes in packaging. If the merger impacted how you approach those deals, given, David, you made that point that, you know, bringing the Turner networks in is a real, maybe underappreciated asset and part of this transaction. That's my first one. I just wanted to come back, David. You know, there's obviously a lot of focus on the merger and including your management team that you're putting together. Congratulations on bringing Kevin on board. Is that... I don't know how much you can say, but is there hope that that converts from a consultancy to an employeeship? I'm just curious if he's still going to remain Chairman of DAZN, which I think is at least in some regard, a competitor to you guys in Europe. Thanks a lot. Thanks. Len Blavatnik is a very old friend, and he worked with me and Kevin Mayer in providing the opportunity for us to get a good amount of Kevin Mayer's time. You know, he's fully committed to Len and DAZN, and he's doing some other things as well. You know, he's driven down all these paths, and he's a great entrepreneur, and he's got a number of really exciting things he's doing and working on. This is one of them. I think he's gonna be really helpful to JB Perrette and I and Bruce Campbell. He's having a great time doing what he's doing, but he's super excited about kind of really coming in and giving us the full scope of his experience and brain on everything he's seen and learned. You know, working with Len has been a good thing. I think he's seen and learned more about Europe and sports. I think that's exciting. The team at Warner and the way they're growing, the knowledge, the capability there, the attack plan that they have is really impressive. You know, Andy Forssell, super strong. You look at the strength of that product, you look at the strength of our product. I think we got a lot of really good people. You've seen through our history with Scripps that we're really about who are the best people. I think we're gonna be able to build a really strong team, and bring in some outside experience as well. It's really encouraging how well they're doing. What we're learning along the way, and that's a big help to us. On the affiliate side, Gunnar, you could fill in some more. I think we reached deals that were very favorable for us. On the carriage side, very strong. I think it's win-win. They wanna commit to carry all of our channels. This whole idea that a bunch of our channels were gonna get dropped, that never happened. They're good value. I don't say that with great glee. When you look at the overall package and the viewership, you know, we're a great value, and they're making a lot of money selling advertising on our services. It went very well for us with meaningful increases and real security, and I think it went well for them in continuing to get really good products. In terms of how do we, you know, how does this align with Warner? Has nothing to do with it. You know, we're operating as an independent company, and we're operating on the strength of the channels that Kathleen Finch and Nancy have been building here with Discovery and Oprah and Food and HGTV. It's we've been over-delivering. People love our stuff. It's just a reinforcing of this narrative that despite the fact that the world is changing, that we were able to get deals with some of the toughest and strongest and most knowledgeable distributors on very favorable terms with strong carriage commitments, you know, as we make this transition together. I think that's it's a very good sign for the two sides. Gunnar, anything to add? No, I mean, you know, just obviously the caveat that we don't control the subscriber trends, so that's always, you know, when we have as much visibility into that as many of you on the call here. I'm very pleased with, you know, the distribution team's, you know, successes this year. We've gotten so many questions about sort of the outlook and, you know, we just continue to go through deal after deal after deal with very encouraging results, so. Great. Thank you. Thank you for joining us today. With that, this concludes today's conference call. Thank you for attending. You may now disconnect.