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Investing.com - Warner Bros. Discovery (NASDAQ:WBD) said it ended its second quarter with more subscribers than analysts had anticipated, as the HBO Max parent said it was making progress in its plan to split into two publicly-traded companies.
The breakup, which was first unveiled in June, will see Warner Bros. separate its studios and streaming service from its weaker television networks, as the group aims to bolster its position as more viewers shift away from traditional cable sources.
In a letter to shareholders, Warner Bros. said the separation was "well underway" and has hit "several milestones" towards completing the change over the last two months.
It flagged that quarterly interest payments will increase by around $80 million to over $500 million as the result of an elevated interest rate on a bridge loan facility the firm took out to fund the split.
Costs related to the deal came in at approximately $250 million in the second quarter, primarily through interest. This impacted quarterly cash flow, which fell by 28% on a reported basis to $702 million in the three months ended on June 30.
A $725 million cash tax payment on the $3.2 billion of debt captured in connection with the offers will also be paid out during the second half, Warner Bros. said.
"We expect to incur one-time transaction and restructuring costs that will impact free cash flows through the closing of the separation, which we will quantify once we finalize the key operating model and separation decisions," the group noted.
Warner Bros. said its studios and streaming unit is "primed to thrive as a nimble, focused, and independent entity," although it flagged persistent headwinds in the operating environment for network television.
Total (EPA:TTEF) subscribers at Warner Bros. came in at 125.7 million during the second quarter, exceeding analysts’ expectations of 124.91 million, thanks to once-again named HBO Max, which features popular shows like "The Last of Us." Adjusted core profit stood at $1.95 billion, topping estimates, on in-line revenue of $9.81 billion.
Shares of Warner Bros. rose in premarket U.S. trading on Thursday.