Ladies and gentlemen, welcome to the Warner Bros. Discovery Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Additionally, please be advised that today's conference call 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 now begin. Morning, welcome to Warner Bros. Discovery's Q2 earnings call. With me today is David Zaslav, President and CEO, Gunnar Wiedenfels, our CFO, and JB Perrette, CEO and President, Global Streaming and Games. 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. 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 the company's filings with the U.S. Securities and Exchange Commission, including but not limited to, the company's most recent annual report on Form 10-K and its reports on Form 10-Q and Form 8-K. A copy of our Q2 earnings release, trending schedule, and accompanying slide deck will be available on our website at ir.wbd.com. With that, I am pleased to turn the call over to David. Hello, everyone, and thank you for joining us. When we merged the two legacy companies and launched Warner Bros. Discovery 16 months ago, we did so with the ambition to be the greatest media and entertainment company in the world, and we continue to carry out our attack plan in all areas of the business. When you look back at what we said we would do, we're doing it. We said we were going to reimagine the company for the future and focus on free cash flow and delevering the balance sheet, and we are. This quarter alone, we generated over $1.7 billion in free cash flow, and we're anticipating about the same in Q3. This is the result of the hard work of our teams, who have been bold, decisive, and disciplined. We've restructured our businesses for the future to position them to drive both profitability and long-term growth, the results have been significant. As a further sign of our confidence in our free cash flow capability, this morning we announced a tender for up to $2.7 billion of our short-dated debt. We paid down $1.6 billion in debt in Q2, bringing our total debt retirement before today's tender to $9 billion since the merger. As we've said, we expect to be comfortably below 4 x levered by the end of the year, firmly within the investment grade rating by midpoint next year, and at our target of 2.5x -3x gross leverage by the close of 2024. With our free cash flow and leverage targets in sight, we are better positioned to lean into top-line growth opportunities across the company, and that's increasingly been our focus, starting with direct-to-consumer. We said we were going to build a strong, sustainable direct-to-consumer strategy focused on profitable growth as opposed to chasing subs at any cost, and we are. In fact, we continue to track way ahead of our own financial projections. As we told you last quarter, we expect our U.S. direct-to-consumer business to be profitable for the year 2023, this year, a year ahead of our prior guidance. In fact, our global direct-to-consumer business was roughly break even in Q2 and modestly EBITDA positive for the first half of this year. Our U.S. direct-to-consumer business is generating healthy EBITDA, which is helping to offset international losses, even with the product development costs and sizable marketing campaign associated with the launch of Max. The migration to Max has gone exceedingly well, with the overwhelming majority of subscribers in the U.S. successfully transferred. While we have seen some expected subscriber disruption, we have experienced lower than expected churn throughout this process, and by all measures and third-party metrics, the consumer experience is top-notch. The most important metric at this stage, only months into our launch, is the amount of time people are spending watching our content. We're seeing early and encouraging signs of stronger engagement. They're not only watching for longer, they're also exploring new genres: adventure and discovery, true crime, home improvement, and other nonfiction content. The mix of blockbuster originals from HBO, together with the nourishment and great personalities found on discovery+ content, makes for a very compelling content proposition. Truly something for everyone. We're preparing to launch Max in markets around the globe over the next year plus. There are significant opportunity internationally in markets we have yet to attack, importantly, the platform now has full capability to deliver live programming. We'll have more to say about that soon. While Max will be a cornerstone of our company's growth, we also see great potential across a number of our other businesses. One is gaming. We're the only company among our peers scaled in gaming. Next up is Mortal Kombat 1, the highly anticipated new title in the acclaimed 30-year franchise, set for release next month. This comes on the heels of the success of Hogwarts Legacy, which is still the biggest game of 2023. There's more planned, including the launch of Hogwarts Legacy on the Nintendo Switch in November, just in time for the holidays. More broadly, we are positioning our gaming business to be a much more strategic piece of our IP and consumer engagement puzzle. We're investing accordingly. At Warner Bros. Discovery, we're one of the largest makers and sellers of content in the world. It's quality content people want to watch. We had an industry-leading 181 Emmy nominations, including 127 for HBO and Max, the most of any network or platform. As a critical supplier of some of the most highly resonant television series, we are adding incremental asset value to our world-class portfolio. As we window that content around the globe, we expect to continue to see a tailwind of growth in our production business. Likewise, we have real ambition for the future of our motion picture business in the wake of the creative tour de force and global cultural phenomenon that is Barbie. While the studio's performance has been challenged in recent years, and they've clearly under-earned their potential, we are taking meaningful steps with respect to the creative direction of both Warner Bros. Pictures Group and DC. A key facet of this strategy will be to lean into some of our great underutilized storytelling IP. It's been 10 years since we made a standalone Superman movie and 9 years since the last Lord of the Rings feature, for example. For many years, the secret to Warner Bros.' profitability was tentpole films. They'd make two to three of them together with a slate of new original content. That was the winning formula. We too believe in the power of tentpoles, featuring great IP recognized by people everywhere in the world, our core strength, and we intend to get back to doing what we know works. While we've still got lots to do, we're very optimistic about the growth potential of this business. The culmination of what we're doing at both our film and television studios is further bolstering what is already among the industry's biggest film and TV libraries. This asset offers a wealth of opportunity in terms of feeding our own platforms as well as others. It's a mainstay of our business to create great content and window it through, creating value in each window. As you would expect, a lot of analysis and strategic discussion goes into these decisions. In some cases, we'll want to keep premium content exclusively on our platform for a very long time. In other cases, we may sell it to third parties, and we don't lose anything by growing the pie. The fact is, licensing some library content to other SVOD platforms, like Netflix or Amazon, as part of a co-exclusive agreement, is just smart business. We're expanding our audience while maximizing the value of the asset and providing more revenue streams. That is our job, to optimize the windowing to get the best possible return on investment. We're also a global leader in sports, including great sports rights from many of the top leagues in the U.S. that in many cases run through 2028 and beyond. We have the best digital and social sports platform for younger fans in Bleacher Report. We have significant digital rights in the U.S. that we're not currently deploying, but plan to in the future. That has a real chance to create meaningful strategic value. We've had some good success in Europe and Latin America with layering sports into streaming with various business models. This experience is informing our view on how to best deploy these sports rights here in the U.S. Our recent venture with BT in the U.K. is a great example. Having merged BT Sport with Eurosport U.K., what is now called TNT Sports, is available on both linear and streaming and bundled with discovery+, our current streaming entertainment product in that market. We believe there's significant opportunity in the streaming space for sports, and we look forward to leaning into this incremental growth avenue. Underpinning all of the work we are doing is our strong commitment to operating Warner Bros. Discovery as one company. Consider Barbie. Early this year, we created an attack plan for the summer of Barbie in anticipation of the launch of the movie, which broke records and is now approaching $1 billion in global box office. Over the last six months, every area of the company has played a part in promoting this great film. From the four-part series, Barbie Dreamhouse Challenge on HGTV, which premiered in the U.S. to 4 million viewers, and was then broadcast across 146 countries. To Food Network's Barbie-themed Summer Baking Championship, to Turner Sports' sneak peek of the film during the NBA Eastern Conference Finals. It has truly been a one company effort. This is one of the big differentiators and super strengths of Warner Bros. Discovery, where a property or title can benefit from eventizing it across our global platforms. We're able to put the full weight and power of all of our diverse media assets, domestically and globally, behind it to drive awareness and excitement, and the result is truly unmatched. Of course, in light of the cyclical and secular headwinds facing the industry, we are working through some challenges. With respect to linear, the fact is we have a uniquely different hand, one that we believe makes us more resilient. On any given night, we reach an average of one-third of all cable viewers, and it's a great platform for driving our brands and products, as we saw with promotions for Max, Barbie, and Shark Week. Our ability to make unscripted content quickly, inexpensively, and tailored to viewers' preferences is also a key differentiator, and we believe this optionality provides us with greater longevity and sustainability. At the same time, we've worked really hard on driving efficiency and productivity, enhancing our margins, recognizing that we need to do that because the overall business is facing secular decline. That said, it's still generating real, meaningful free cash flow that we are able to use to fund growth. While the linear business is being further challenged by the soft ad sales market, we do see cause for optimism. We've nearly completed the U.S. upfront, and our volume is up, and our price levels are consistent with prior year. A very good result in a tough market. One more thing before turning it over to Gunnar. At Warner Bros. Discovery, we're in the business of storytelling. Our goal is to tell great stories, stories with the power to entertain, and when we're at our best, inspire. With stories that come to life on screens, big and small. We cannot do any of that without the entirety of the creative community, the great creative community, without the writers, directors, editors, producers, actors, the whole below-the-line crew. Our job is to enable and empower them to do their best work. We're hopeful that all sides will get back to the negotiating room soon, and that these strikes get resolved in a way that the writers and actors feel they are fairly compensated, and their efforts and contributions are fully valued. With that, I'll turn it over to Gunnar, and he'll take you through the specifics of the quarter. Gunnar? Thank you, David. Good morning, everyone. We have been hard at work at WBD, much of our focus over the past 15 months has been on driving thoughtful efficiencies, merger-related and otherwise, and on implementing a cash flow mindset across the whole company. Our second quarter results demonstrate the fruits of that labor. Our disciplined transformation efforts have not only been a key factor in our ability to drive financial outcomes, but they have also made us ever more confident in the strategic vision we presented early on following our merger. Simply put, we have begun to conduct our business fundamentally differently, so much of what we identified very early on as near and long-term potential, we are beginning to realize. These are durable performance improvements born out of true change, we see a lot more opportunity. To that end, adjusted EBITDA grew 23% in Q2, marking the second consecutive quarter of meaningful year-over-year adjusted EBITDA growth. Year-to-date, adjusted EBITDA is now up more than $600 million, despite a persistently challenging macroeconomic backdrop. We have accelerated the delivery of our transformation initiatives where appropriate, and have already delivered more than $2 billion in incremental cost synergies thus far this year. This has allowed us to offset the impact of the market challenges and grow profits, while at the same time funding many foundational investment opportunities. Our transformation team is still very much focused on generating new initiatives, and based on the successful implementation I am seeing and the size of the funnel, I am confident that we'll achieve $4 billion in total synergies much sooner than previously thought, and now see a clear path to achieving $5 billion or more through 2024 and beyond. Our second quarter free cash flow of over $1.7 billion is strong proof of these efforts. Clearly, it was a healthy number and nicely ahead of our expectations. I am incredibly proud of this result, not only because it allows us to continue to quickly delever, but perhaps more importantly, I'm excited because this outperformance is coming through across a number of components of our cash flow statement. I view this as true cash focus becoming evident across the company. Key factors of the outperformance were: Number 1, slightly better than expected adjusted EBITDA. Number 2, improvements across virtually all elements of our working capital and other below-the-line items, part of a very long runway of opportunity that we're beginning to chip away at. Number 3, the closing of the gap between content cash spend and amortization, partly due to shifts in the timing of productions and partly as a result of implementing our new content strategy initiated last year. Number 4, modest cash savings from the impact of the WGA and SAG-AFTRA strikes, which we estimate were in the low $100 million range during the quarter. We also absorbed $200 million of cash restructuring and integration-related expense during the quarter, in line with our expectations. We repaid over $1.6 billion of debt, $1.1 billion of the term loan, and over $500 million of notes. As you saw, we launched a tender offer this morning for up to $2.7 billion of notes that are maturing through the first half of 2024. Our net leverage came down significantly this quarter and is now at 4.6x. Consistent with our capital allocation policy, we remain focused on debt paydown and have a clear path to net leverage nicely below 4x at the end of the year, and reiterate our expectation to achieve target leverage of 2.5x-3x gross by the end of 2024. Turning now briefly to the segments, which I will discuss, as always, on a constant currency basis. Starting with DTC. I'm very encouraged with the results at effectively break-even EBITDA, quite a bit better than we expected, notwithstanding the significant investments in the development and marketing of our new Max platform in the US. Q2 nicely demonstrates the underlying traction and efficiency from the integration of legacy DTC operations and organization. I do want to call out why we saw growth across all three revenue streams. Content was the standout, helped by the timing of licensing deals. While selling content to third parties has been and will be a core element of our company-wide operating model, we would expect some smoothing out of content licensing in the second half of the year. We saw a sequential net subscriber loss of 1.8 million in Q2. As expected, trends were impacted by overlapping subscriber bases between Max and discovery+. Expected churn from the end of some key tentpole series, such as The Last of Us and Succession, and wholesale declines, including the unwinding of some very low ARPU international wholesale distribution deals that were struck under the prior strategy that prioritized subscribers over ARPU, profitability, and value. With respect to the overlapping subscriber base, we did see several 100,000 subs churn off during the quarter, meaningfully less than we had anticipated. While we do expect to see some more elevated churn on discovery+, we also see engagement patterns consistent with what we saw prior to Max launch, making us optimistic that our strategy to keep offering these two products was the right one for customers and for our business. Our streaming team really did an outstanding job with this transition. We continue to see traction on the streaming advertising opportunity, supported by gains in ad-light subscribers, early initiatives on HBO and Max Originals, and increased engagement. While the overall advertising market remains soft, we see the streaming and advertising opportunity well positioned to benefit from secular tailwinds over the long term. This is particularly true against the backdrop of the enormous value of some of our iconic shows for advertisers, who in the past had no access to this inventory. We remain focused on further scaling this segment of our offering, and the relaunch of Max will certainly be a driver, both here in the U.S. and later abroad. I am proud of the meaningful strides we made in the first half of the year and see D2C as an important contributor to total company profit growth year-over-year in the second half. Turning to studios. The studio's performance has clearly been inconsistent. Our box office results in Q2 underperformed our expectations, which weighed on financial results. It's ironic to have to say that, given how incredibly successful Barbie has been, impacting Q3, of course, not Q2. Unpacking this a bit, overall content revenues declined 25% due to: Number 1, the slate, as I mentioned, as well as the timing of production of certain TV series and fewer CW series orders following the Nexstar transaction. Number 2, lower internal sales to networks and D2C, in part resulting from the more disciplined content investment and programming approach we've implemented, such as exiting direct-to-Max movies or certain scripted series on linear, for which we felt ratings did not justify the investment. Please note, these lower revenues are offset in lower eliminations on the group level, but impact the segment-level revenue. Number three, finally, in gaming, the LEGO Star Wars game was released in the second quarter last year, which created a tough comp for this year. Looking ahead, we're naturally delighted with the performance of Barbie thus far, which is now approaching $1 billion in global box office, and we're excited about its prospects through its remaining monetization window. For the remainder of our feature films this year, as well as Warner Bros. television productions, release dates and performance expectations are naturally fluid given the ongoing strikes, and we will evaluate our options and update the market accordingly. It is possible we will see greater variability against our forecast. Turning to networks, advertising decreased 13%. As we called out last quarter, we face tough comparisons as we did not have the NCAA Final Four and championship games this year. Although we did have the Stanley Cup finals for the first time, the net impact of these two sporting events was an approximate 200 basis point headwind. Adjusting for this, we did see underlying sequential improvement. I would characterize the broader tone of the marketplace thus far in Q3 as similar to that of Q2, certainly here in the U.S., while international markets are broadly a touch stronger. As David mentioned earlier, we are making strong progress on our upfront deals. Key call-outs from my perspective are: Number 1, linear volume expected to be up, with pricing on balance pretty consistent with the prior year. Number 2, D2C volume is up more than 50% in a marketplace in which CPMs were positioned to drive scale for us as much as for the broader market. While visibility overall remains limited and the scatter market inconsistent, we expect continued modest sequential improvement through the end of the year and forecast global networks' advertising revenues will decrease in the high single-digit range during the second half of the year, with Q4 sequentially better than Q3, which is overall meaningfully worse than our forecast from earlier in the year. Distribution revenues decreased 1%, a modest improvement versus last quarter, as we continue to be pleased with the pricing and tiering of our networks and renewals, representative of their importance to both traditional and virtual bundles. Before wrapping up the segment discussion, I'd like to offer an update on the AT&T SportsNet. I am very pleased to say that we have been working diligently with the respective leagues and teams to formulate a plan to exit the RSN business in a manner that minimizes the disruption to teams and their fans. We expect each of the networks will be sold or operation seized by the end of the year. While we've positioned these to operate at adjusted EBITDA breakeven, this business generated nearly $400 million of revenues in 2022 and skewed heavily towards distribution revenues. As these networks are sold or wound down over the next few months, we expect a modest impact to Q3 distribution and advertising revenues, with a more meaningful impact in Q4 and into 2024. Turning to guidance and our outlook for the year, let me start with our most important financial metric, free cash flow. For Q3, I expect us to again generate free cash flow in the $1.7 billion ballpark, reflecting similar underlying trends as in Q2, with sequentially larger savings from the strikes, as well as the success of Barbie, notwithstanding the roughly $900 million of semiannual interest payments. Based on this outlook, the health of the underlying free cash flow drivers and further opportunities in the pipeline, I see full-year free cash flow in the range of $4.5 billion-$5 billion. This also assumes cash restructuring and integration-related costs for this year of roughly $1.2 billion, which is a $200 million more than our prior expectations. For adjusted EBITDA, I am now assuming we'll settle towards the low end of our target range of $11 billion-$11.5 billion. The key drivers for the final outcome will be centered around ad sales, D2C profit growth, and contributions from the studio segment. Let me provide some puts and takes. First, the timing and magnitude of a potential ad market recovery continue to be the most important driver of upside and downside to our results. Second, the D2C segment has been a driver of our year-over-year EBITDA improvement, and we expect that to continue, helped by efficiency gains and top-line benefits. We see segment EBITDA losses of no more than $200 million for the full year of 2023. Third, uncertainty in the studio segment has increased with the dual strikes. This may have implications for the timing and performance of the remainder of the film slate, as well as our ability to produce and deliver content. While we are hoping for a fast resolution, our modeling assumes a return to work date in early September. Should the strikes run through the end of the year, I would expect several hundred million dollars of incremental upside to our free cash flow guidance and some incremental downside for adjusted EBITDA. I take a step back, notwithstanding the factors influencing the broader landscape, I am more and more convinced that the dedicated work of the leadership team and efforts throughout the company, marked by a meaningful shift in mindset about how to manage this company, is starting to pay dividends. I believe our financial results this quarter speak volumes about this change. I am very confident in the trajectory of our delevering and debt paydown, the benefits of which will increasingly allow us to turn our dedication and focus to support further growth initiatives to ensure long-term, sustainable, and profitable growth ahead. With that, I'd like to turn the call back to the operator and take your questions. Thank you. If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. One moment, please, for your first question. Your first question comes from the line of Vijay Jayant with Evercore ISI. Your line is open. Good morning. This is Kutgun Maral on for Vijay. Thanks for taking the questions. One on M&A and one on the synergies. First, on M&A, based on commentary from your peers, it seems like there might be a willingness from some to reshape the media landscape a bit, and that certain linear or maybe even streaming assets could swap hands. From your end, it seems like there's a lot of comfort in getting to your leverage targets. The synergy capture machine is firing on all cylinders. Free cash flow should ramp going forward. Of course, the second anniversary of the merger's close is not too far away. Can you talk a bit about your latest views on M&A, and what's your appetite from a strategic or financial lens? On synergies, Gunnar, can you expand on your comments earlier a bit and help us understand where this increase to $5 billion is coming from? How should we think about the timing flow-through in 2023 and 2024? Should we expect this $1 billion upside will mostly be reinvested in the business? Are there any changes to the total cash costs to achieve that we should be mindful of as we think of free cash flow over the coming years? Thank you. Thanks. Let me just start by saying, the team has really worked hard the last 16 months to restructure this business for the future, to build a business that, as a real storytelling company, where we can continue to, to invest our meaningful free cash flow to serve all of our diverse businesses. The delevering that we're doing now, which is, which is really accelerated and is accelerating, is, is, is a key element of making this turn. We've already started to focus on each of our businesses now for growth. We like the businesses that we have. We have a diverse set of assets, global reach, great tentpoles that have been underused that we could now get into, whether it's Harry Potter or Lord of the Rings, the whole DC plan for the next 10 years. So we feel very good about our hand, and our focus now will be finish the delevering, which we've made the turn on now and is clearly in sight, and focus on our own growth, which, which we think we give the same attention to and the same rigor. Gunnar? Yeah, touching on synergies, the headline here is, as David has said so many times, we have completely changed the way we're running business here. This is not about synergies. This is not about integration. It's just a fundamental shift in mindset that continues to come through. Again, you saw the free cash flow number in the second quarter. I'm just amazed by the results, and it's coming through everywhere. There, as I said, there was a small strike impact here, but without the strike, it would have been a $1.6 billion number instead of a $1.7 billion number. I'm pointing this out because it's not one or two things that, you know, stick out here. It's, it's cash coming in everywhere, across the P&L and then, below the line. As I said, a minute ago, we've, we've achieved the $2 billion of incremental value capture with our transformation initiative. I do see $5 billion or more, and again, as, as we've said before, a lot of that is gonna hit in 2024 and beyond. We're still in the early innings of many of our systems transformations. I, you know, pointed this out before, we're rationalizing 260 systems across the company. All of that is, is still in the pipeline. To your point, where is this coming from? It's the same point that I've made in the past. It's really just looking at what's in the system, and we have a very significant cushion in terms of the overall savings amount tied to all the initiatives that the company is working on. I'm just looking at how those are flowing through the implementation milestones, and I have full confidence now that we're gonna get $5 billion or more. We'll continue. Again, this is not a, an integration exercise. It's a transformation of the entire operating model for the company. Yes, we're gonna be reinvesting some. We actually have reinvested some. If you look at the numbers, I said $2 billion have flown through in the first half of the year. We've obviously not grown profits by $2 billion. We've used some of that to offset the, the tougher, macro environment, and we've used some of it to, you know, fund the investments, everywhere in the company. That's great. Thank you both. Your next question comes from the line of Kannan Venkateshwar with Barclays. Your line is open. Hi, thanks. Maybe one question on free cash flow? I mean, the cash flow numbers are obviously very impressive for the quarter, as well as the guidance for Q2 through Q3. Gunnar, could you help us understand the working capital tailwinds, I mean, the sources of those? As you look beyond this year, to what extent can you keep harvesting that cash flow? As you get to next year, you obviously have the cash cost going down of integration, and then you have interest costs going down, but then you have offsets potentially in the form of advertising or, you know, programming costs going up and DTC getting back to growth. Could you talk about those trade-offs as you go look beyond this year in terms of free cash flow growth drivers, and what they could look like in 2024? Thanks. Sure. Let me start with the sources. I quickly went through them in my prepared remarks earlier. Again, the most important point is it's coming in across the entire cash flow statement. Kannan, we have talked about this in the past. Cash was never an objective in three quarters of this company. So when we went in and looked at, you know, the enormous amount of, you know, uncollected receivables, the enormous delays in even sending out invoices, the willingness to just, you know, pay our suppliers before even payments are due, it was just never a focus area. The discussion of, you know, a 10% margin business or project, is that a good project? Could be, but it could be a bad project if it takes three or four years to get the cash in after you deploy the capital. Those are all factors that are reflective of a mindset shift across the company. Importantly, I do also wanna point out 'cause we sometimes get the question on the securitization facility. We've, we've, we've said a number of times we're not intending to make that a major driver of free cash flow. It hasn't been a factor this quarter or year to date. Again, we're not expecting this to be a major driver. It might fluctuate on a quarter-by-quarter basis, but it's not included in a positive or negative way in any of our guidance. Looking beyond 2023 into the future, you're asking the question, you know, how is this going to develop from here? I do think that we have multiple bites at the apple ahead still from a, from a working capital perspective. We're really just getting started, and we're really still working with an incomplete instrumentation from a systems perspective. There's, there's a lot more for us to do. You've also gone through a number of the underlying positive drivers here. Cost to achieve is going to come down and cook. I realize I, I forgot to answer your question. We had guided to $1.1 billion-$1.5 billion in cost to achieve. We're gonna be, you know, as we said before, probably closer to the upper end of it, but $1.2 billion of that is gonna flow through this year, and then it's, it's gonna come down. Over time, interest is, is gonna come, is gonna come down, and CapEx is gonna come down. We, we have a slightly elevated CapEx level as part of our transformation, focus here, putting new systems in place, supporting, you know, JB's development, you know, the Max platform, et cetera. That's gonna be a, a, a positive driver as well. We'll see, you know, how we do on the P&L. Again, we've put ourselves in, in, in position to really get behind, you know, all three of our businesses. We'll update you as we get closer to 2024. There's definitely enormous opportunity. I do not view this as sort of, you know, a, a, a one-time bump. We're changing the way we're operating the company, and we're changing the cash generation profile of this company. By the way, fully in line with what we've always said, longer term, we should be operating at a 60% cash conversion rate. Thank you. Your next question comes from the line of Brett Feldman with Goldman Sachs. Your line is open. Thanks for taking the question, and, and thanks for some of the help in terms of how to think about DTC segment, EBITDA, as we move ahead. I was hoping we could spend a little time talking about how we should be thinking about revenue in that segment. In particular, the key puts and takes around the net ad volumes as you sort of move past the U.S. launch and start to move into international markets. I'd also be curious for your updated thoughts on, you know, the balance between driving growth through pricing and ARPU versus focusing on volume. Thanks. Okay. Well, let me start maybe, and then, and then, pass to JB. We. As I laid out a minute ago, I do think that advertising for our D2C platform is a massive opportunity. I mean, you see that we're growing advertising 25% in the quarter, on the platform, and that is in a, in a, in a challenging market environment. In fairness, we haven't really started prioritizing this. As I laid out, for the first time ever, advertisers are gonna have access to, you know, some of the best shows in, in, the entire landscape, and we're opening that up. We've got the, the technology in place, and it's definitely going to be a growth priority, especially since we know that in, in, in many cases, we can generate higher ARPUs, on the ad light, platform or, or offering than on the, on the ad free, for, from ad free subscribers. Yeah, I mean, I think that to add to Gunnar's comments, I think we look at it as multiple levers as we go, into 2024. Just picking up where Gunnar left off, the ad opportunity, we're just starting in the upfront. It was a huge driver, of our, of our success in the upfront, and so that will start to kick in further. We just started in February, as you know, with putting advertising units in our most highly valued, most premium content in terms of HBO and some of the legacy, HBO library series. So that's, we see advertising as a driver. We see ARPU as a driver. We've risen- we've, you know, bumped prices up internationally and in the U.S. over the course of the last nine months in almost every market. We've launched the ultimate tier, which we've seen very healthy pickup here in the U.S., which is also incremental ARPU for us, and so that's an opportunity. I think engagement, as David mentioned in his prepared remarks, we've seen very positive initial trends on greater engagement, which is a precursor and a leading indicator to future churn, which is obviously something that is probably number one on our bull's-eye of things we're trying to attack and lower, which will help us. Obviously on the net add side, as we roll out internationally and as we get the platform rolled out and as we lean to even more content offerings, as David alluded to, potentially in the live space, we think there's incremental opportunity to drive subscribers and, more importantly, revenue growth. Thank you. Your next question comes from the line of John Hodulik with UBS. Your line is open. Great. thanks, guys. you know, recent press reports suggest that ESPN is, is gonna go direct in, in 2025. I think it's sort of the first time we have a, a potential sort of date for that. I mean, David, do you see that as a sort of meaningful change in the, in the TV landscape? Then as it relates to your own sports po- sports portfolio, you know, you talked about TNT in, in Europe. I mean, any update on the timing of adding sports and news to your, to your streaming offering, and whether it's the timing or the sort of method of which you do it, I mean, do you foresee it just being folded in with the Max offering, or could you potentially see a sort of a separate offering that could be bundled with your current Max offering? Thanks. Thanks, John. First, when it comes to our sports rights, domestically and globally, you know, taken as a whole, we're money good. We have good deals with here in the U.S. and around the world that provide real value to us. One of the elements of those deals is that we own the digital rights to our sports. We have the ability for no incremental cost to put that content on our platforms. We're doing it in Europe. We're doing it in different ways. In some cases, we're doing it as an incremental tier, and in some cases, we're putting it on the entire platform. We've been at it now for about 1.5 or 2 years, and it's pretty compelling. You know, I've talked about news and sports as artillery and a real, a real opportunity for us. We'll be coming to you guys soon. We've been working this summer very hard. Number one, we wanted to get this platform right. We wanted to do no harm. Let's get a transition. There was a fair amount of overlap, and we got the transition. The platform is working exceptionally well. Consumers are very happy. Engagement is up. One of our theses of, of having, you know, how well this overall mix of content will work directionally is very, it looks like it's working. More than 20% of the, of the viewership is going to some of the more diverse content in different time periods. We still have a lot of work to do. We're early on, but news and sports are important. They're differentiators, they're compelling, and they, they make these platforms come alive. That's, you know, if you're on an SVOD platform and something is going on in the world, and you could see it, it, it has that platform makes that platform really alive. You will hear from us on that soon. Great. The ESPN Direct, something? You know, I, I think how everybody determines- we're focused on how we're gonna use our sports domestically and globally to create more shareholder value and stronger economics, and help the leagues, who all are very interested in reaching more people, more demographics. So that's our focus. You know, in addition, as you know, we have Bleacher, which is House of Highlights, are a huge funnel for us and a big opportunity, and we're, we're focused on how we use that in tandem because it is the largest platform for people under 30 in sport. Okay, thank you. Your next question comes from the line of Jessica Reif with Bank of America. Your line is open. Oh, thanks. Just on film, maybe just to go a little deeper. I mean, Barbie was so outstanding. You know, the lessons learned from having original IP and, you know, like, brilliant marketing, you know, how does this shape your film strategy going forward? Can you talk about the impact to Max when a hit film hits the platform? I guess, also in, in kind of the studio segment, but you talk about selling to third parties, which obviously makes a lot of sense. Have you seen any change in demand given the strikes, or can you just talk about overall demand for, for your content? Well, thanks, Jessica. Barbie is, Barbie is really important for us because which we think one of the big unlocks of value is running this as one company. We started having each of the businesses, we meet together every week, and all the creatives we meet together every week. We first got behind House of the Dragon, and we had the dragons going across, across the bottom of all 30 channels and across the baseball field in the playoffs. Having our analysts, we got them the content in advance, and they talk about it. We did The Last of Us. This idea of supersizing by using the fact that we reach 30% or 40% of America on a, on a given night, that all of our platforms globally can have an impact, we saw it with The Last of Us. We brought the entire company together on Hogwarts Legacy and supersized it. We're not doing it for everything. We're trying to figure out what are the strategic assets, then we did it on Max. We're getting better at it. We're just getting started. You know, this is such a diverse set of amazing assets, that how do we use them to help each other? How do we use them also, that, that we don't have to go out and spend money when we already have huge marketing platforms that we could use on our own? Using, you know, having Barkley and Shaq talk about something that they already love, is often more powerful than running a commercial. It's important for the confidence and the culture of the company that we can get behind these assets in a unique way. We're a very unusual company with the assets that we have, and it starts to build our muscle memory and the idea that this can work. You know, this idea of, of Barbie summer, and then every week, what is everyone around the table gonna do? You know, the cakes were pink on Food Network. We turned the fields pink across Europe. You know, it of course, it started with an amazing movie by Greta and Margot going around the world. It starts with great content, obviously. This but the fact that we can supersize it uniquely, globally, is a big deal for us. I think it'll we're gonna let we really believe in the motion picture window. Let this movie go to the motion picture window, play it up, build up that brand, then have it go into PVOD. Take it through these windows of economics that have worked forever, and we think work extremely well, and then put it on Max. When it goes on Max, we think it'll have a very good impact, and that'll be in the fall. JB? Yeah. I mean, Jessica, as you know, films, obviously, and movies continue to be a very important part of the Max offering. I should remind people that in the U.S., obviously, we're particularly more reliant on the Warner slate. Outside of the U.S., we are a multi-studio service still, including the Warner slate, but films are incredibly important. I will say, what we've seen so far is, you know, obviously, we sort of benefit on Max in both ways. Even the titles that don't necessarily perform as well as we wanted to them in the box office, by the time they get to Max, because fewer people have seen them and they are newer to more people, they do well. The bigger titles, like we had in Batman last year or Dune when it came to the service, and we expect the same of Barbie, that do incredibly well, people want to re-see. It continues to be incredibly important part of the SVOD business. Look, the, the key for us is, as we, as we have accelerated the delevering now and made the turn, that we focus on growth. Focus on growth will be, we now have command and control for each of, each of our businesses, and we're gonna give the same rigor and focus on, on how do we drive growth across each of our businesses? One of those key initiatives is one company. How do we, how do we use the unique set of assets that we have, that no one else has globally, to drive growth? You know, that's, that's what we're continuing. We're starting much more to focus on growth, and you'll see it, and we'll be talking more about it. The content licensing, look, we have, we have one of the, one of the best TV and motion picture libraries in the world. As if you look at our overall, the overall economics, I think we're, we're actually below the last couple of years in terms of what we're selling. If the strike continues, there may be more demand. We're always looking to maximize. We're hoping this strike gets settled as soon as possible. It's important. It's important the, that, that we get going, that we get back to work doing, you know, doing what we love, and we're hoping that both of these strikes get resolved soon. That's our focus. Thank you. Your next question comes from the line of Ben Swinburne with Morgan Stanley. Your line is open. Thanks. Good morning. David, y- you've been through lots and lots of cycles, advertising cycles in particular, in your career, and I'm, I'm wondering how you would describe the current environment? Experienced. You know, so I guess, I guess the question is, I, I think about your Jack Welch story from, you know, all these years talking about ratings going down and advertising going up, and whether there's any concern in your mind that we maybe linear TV has reached that point. The corollary would be with Max, it would seem like you have a great opportunity to sort of move some of that linear money over to D2C, and I'm wondering if you're, you know, optimistic that you can kinda capture that one for one. It's sort of a bigger picture advertising question, but we'd love to hear your thoughts. Thanks, Ben. Look, the, the market is. It improved a little bit last quarter, and we think, you know, it feels like it's improving a little bit, this quarter. We're seeing some more improvement, not, not anything great, but we're seeing, seeing some more meaningful improvement outside the U.S. This is unusual. You know, in my, you know, 35 years, you know, I think a lot of us expected that there would be that we'd see a meaningful recovery in the second half of the year, and we haven't seen it. You know, we've needed to figure out how to make up for that. You know, we just came out of an upfront that is encouraging, at least for us. We're seeing mid-single increase on the sports side. We, w- we got price increases on, with some of our affinity networks. Some of these networks are really important to advertisers, and we pro- we're still doing a lot of original content, which makes us unique. Some of our smaller networks were, you know, slightly down. Max was the star. I mean, a big star. As JB said, you know, and some of this content, you know, the, the greatness of it- of, of HBO and, and Max, all that content, that we have 127, you know, Emmy nominations. The idea that you can get in front of Succession, that you can, you know, that you, that you can get in front of the, the highest quality content for the first time, and it's very uncluttered. It's one spot right for now on the front end of it, some of the older content, you know, is, is, is limited. We're seeing really good pricing. You know, we can't say one for one. We need to build up Max for now. You know, there's a, there's a huge demand for it. We're gonna be pushing as we look at growth everywhere, we're gonna be pushing now for how we reduce churn and, and grow Max. It's very helpful to us that we have a significant digital footprint. We have a really strong product in Max. For us, we can't predict what's gonna go on with the linear business, but we have a lot of command and control, as I talked about earlier. The viewership on our platforms are actually quite strong. It's just that they're older. You know, there's, there's a load of people still loving and watching our content, and most of our content now is going over to Max. They're watching Diners and Dives, and then we're getting-- we're monetizing it again, you know, on, on, to, on all-- to all of our subscribers on our ad tier, and around the world. We have that symmetry. We need to build up the other side, we've been very aggressive, and we will continue to be, about driving the margin. We're aware that there's a decline in the traditional business, and we're fighting to keep that free cash flow, and we'll pull every lever we can. Thank you, David. Your next question comes from the line of Michael Morris with Guggenheim. Your line is open. Thank you, guys. Excuse me. Good morning. I wanna ask one about the strikes and one about the international business. First, on the strikes, David, you know, from the outside, it does feel like the two sides are very far apart. I, I, I'd love to hear if you could characterize, you know, how far apart you feel that the sides are. You know, recognizing that, that you're being negotiated on behalf of, but, you know, your interests are obviously very much at stake here. I, I'd love to hear just sort of your thoughts on how far apart the sides are, and how influential you feel like you can be on, on, bringing sides together. Second, on the international business, you made constructive comments about the opportunity there. Obviously, your international business has a pretty big mix of brands and partnerships, licensing arrangements. Can you maybe talk about the strategic vision here? Is your ambition to have, you know, one strong single brand over time, similar to the way Netflix is structured? Maybe more tactically, what are some of the milestones or initiatives over the next 12 months that you're looking to achieve? Thanks, guys. Thanks so much. Well, look, on, on the strike, I'm very focused on it because this is our business. This is all we do. And, and it's critically important that everybody, the writers, the directors, the actors, the producers, the below-the-line crews, you know, everyone needs to be fairly compensated, and they need to feel valued and feel that they're fairly compensated. This in, in order to do their best work, and that we have to focus on getting that done. You know, I'm hopeful that it's gonna happen soon. I'm gonna you know, I think all of us in this business are very keen to figure out a solution as quickly as possible. We, we are in some uncharted waters in terms of of, of the world as it is today and measuring it all. So I think in good faith, we all gotta fight to get, to get this resolved. It, it needs to be resolved in a way that the, the creative community feels fairly compensated and fully valued. Then, Michael, as it relates to international, certainly on the streaming side, we, we will be moving to one unified, consistent brand with the launch of Max over the next 12 months, with a rollout plan for LATAM, EMEA, and then APAC. Absolutely over the course of sort of the next 12 months, that's, that's the roadmap and the plan we're on. I think the second piece is we're obviously excited as we think about content mix, particularly in an environment where, to David's, point about the strike, we do have great original productions happening outside the U.S. as well, both for Max as a platform as well as our local networks, and that content will feed Max as well. So this mix of powerful global IP and global content coming largely out of the U.S., as well as local content produced by our local teams in market, particularly in Europe and LATAM, that mix, to drive penetration of Max outside the U.S., we think is very powerful. Then on top of that, we have obviously, as David alluded to earlier, our sports. As we think about Europe, in particular with the Olympics in coming home to Europe next summer, will be a great launch platform for us in EMEA. Next question. Your final question comes from the line of Philip Cusick with JP Morgan. Your line is open. Hi, guys. Thanks for squeezing me in. Congrats on Barbie. I'm excited for Shaq and Charles to discuss a Barbie-Superman team-up. That'll be great. You know, following up, two things. Following up on John's question, it sounds like NHL is coming to Max, and we should think about Max as the path for more of your Turner Sports over time. How does that impact Max pricing? Can you put those sports on and, and keep prices around this level, or do you think we need a substantial increase to get there? And then second, on lower DTC churn in the quarter, was that driven by I think you mentioned, what's the remaining discovery+ HBO overlap, that sort of latent churn, and what do you see in the pace of that consolidation going forward? Thank you. We think it's a real asset, all the sports rights that we have. We have a real strategic plan that we're finalizing, and we'll take it to you guys and be very clear about exactly how we're gonna use news and sports in on our platforms and to build value for the future in the near term. [Jean-Briac]? Yeah. I mean, I think as David alluded to earlier, in sports, we have a mix of models today across. Largely in Europe, it is priced in a incrementally priced tier. In LATAM, we have some sports bundled, a mix there as well. We have some local football or soccer in a separately priced tier. We have Champions League in Mexico and Brazil, priced within the entertainment offering. I think generally our view is. Sports is such a premium offering with a very focused and passionate fan base, that generally, the model will require some way to find need to find incremental value to get out of it. So exactly how that comes to market, we will have more to say later in the year. Generally, our view is that it needs to be monetized incrementally, let's put it that way. As it relates to the overlap, I think as we said publicly before, we had about 4 million global overlapping subscribers between discovery+ and HBO Max at the time, with a, you know, a large portion of that in the U.S. In Gunnar's remarks, he talked to the fact that we've now seen several hundred thousand come out of that in the U.S. You know, we will continue to presumably to see some further tailing off of that overlapping sub base, but it has been materially less than we expected. That's the, that's the story on the overlap. Can I follow up quickly on the, on the Max side? Do you think that CNN would also require incremental value, or do you think that could be integrated, sort of, on a regular product? We, yeah, we're gonna talk about news and sports. We'll be back to you soon on that. You know, one of the things you're also seeing with us is we're winding out some low ARPU deals that internationally that we just looked at, we just said, "That's not who we are. Let's get out of those deals." There has been a focus to say, "Let's focus on profitability. Let's focus on really good subs, real value, the economics that we get, the ability to nourish our audience and build on that, those economics. That's our future. Let's get out of these deals that were bargain basement and providing very little ARPU or value. Makes sense. Thanks, David. This concludes the question and answer session, as well as today's conference call. Thank you all for joining. You may now disconnect your line.