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Discovery Communications Q1 Earnings Drop on Investment Costs

Discovery Communications took an earnings hit in the first quarter as modest growth at its domestic and international networks was offset by the timing of investment costs and higher spending on infrastructure and restructuring charges.

Discovery disclosed that it has sold two of its production companies — Raw and Betty — to All3Media, the U.K.-based production conglomerate that Discovery co-owns with Liberty Global. Discovery also said the timing of some equity investments and spending on solar energy projects that will yield future tax savings were a drag on earnings for the quarter.

“Improved ratings across many of Discovery’s key distinctive programs and brands, coupled with strong global distribution growth, led to solid organic growth in the first quarter,” said Discovery president-CEO David Zaslav. “Beyond our linear business, we continue to focus on new strategic partnerships and investments to help drive our multiplatform growth strategy and ensure that we reach our global superfans on every screen.”

Discovery’s revenue for the quarter was up 3% year-over-year to $1.6 billion, fueled by 5% growth at its international networks and 3% at its domestic channels. Net income fell 18% to $215 million.

Advertising in the U.S. grew just 1%, to $405 million, while distribution revenue inched up 5% to $408 million. International networks saw a 9% revenue gain to $447 million. Currency fluctuations and higher operating expenses held adjusting operating income growth to 7%, or $194 million.

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