DISCOVERY, INC. REPORTS FIRST QUARTER 2019 RESULTS

Silver Spring, MD – May 2, 2019 : Discovery, Inc. (“Discovery” or the “Company”) (NASDAQ: DISCA, DISCB, DISCK) today reported financial results for the quarter ended March 31, 2019 .

Operational Highlights

“In the first quarter we delivered a solid start to 2019, as we continue to power people's passions through our loved brands and our owned global IP in genres that nourish audiences around the world,” said David Zaslav, President and Chief Executive Officer for Discovery. “We are a differentiated media company and have the right strategy, assets, brands, and management team necessary to drive additional shareholder value.”

First Quarter 2019 Financial Results

First quarter revenues of $2,707 million increase d 17% on a reported basis compared with the prior year's quarter. Excluding the impact of foreign currency fluctuations ⁽²⁾ , revenues increase d 21% . On a pro forma ⁽³⁾ combined basis, excluding the impact of foreign currency fluctuations, total company revenues decrease d 5% , as a 3% increase in U.S. Networks was more than offset by a 15% decrease in International Networks primarily due to revenues from the Olympics in the first quarter of 2018 and a significant decrease in Other due to the sale of the education business ⁽⁴⁾ .

First quarter Adjusted Operating Income Before Depreciation and Amortization ("Adjusted OIBDA") ⁽⁵⁾ of $1,159 million increase d 63% on a reported basis compared with the prior year's quarter. Excluding the impact of foreign currency fluctuations, Adjusted AOIBDA increase d 67% . On a pro forma combined basis, excluding the impact of foreign currency fluctuations, total company Adjusted OIBDA increase d 21% , as U.S. Networks increase d 17% and International Networks increase d 46% , primarily due to the Olympics in the first quarter of 2018.

First quarter net income available to Discovery, Inc. was $384 million , compared with a loss of $8 million in the prior year's quarter. The improvement in net income was a result of higher operating results primarily driven by the integration of Scripps Networks and to a lesser extent income from equity investments versus a loss in the first quarter of 2018, partially offset by higher tax expenses versus a tax benefit in the first quarter of 2018. Diluted earnings per share ⁽¹⁾ increased to $0.53 due to higher net income. Adjusted Earnings Per Share ("Adjusted EPS") ^(1),(2) , which excludes the impact of amortization of acquisition-related intangible assets, net of tax was $0.87 . Adjusted EPS excluding $10 million, or $0.01 per share, of after-tax restructuring and other charges, and $(22) million, or $(0.03) per share, from a one-time settlement of a withholding tax claim, net of tax was $0.85.

Free cash flow ⁽³⁾ increased to $498 million for the first quarter of 2019 as cash flow from operations increased to $542 million while capital expenditures of $44 million were consistent with the prior year's quarter. Cash flow from operations increased primarily due to the full quarter impact from the integration of Scripps Networks as well as lower cash restructuring charges.

U.S. Networks’ revenues for the first quarter of 2019 increase d 49% to $1,752 million on a reported basis compared with the prior year's quarter. On a pro forma combined basis, U.S. Networks' revenues increase d 3% . Pro forma advertising revenues increase d 4% , primarily driven by an increase in pricing and continued monetization of digital content offerings, partially offset by the impact of audience declines on our linear networks, in part driven by universe declines. Pro forma distribution revenues increase d 4% primarily reflecting increases in contractual affiliate rates and additional carriage on streaming platforms toward the end of 2018, partially offset by a decline in overall subscribers as well as additional revenues from content deliveries under SVOD arrangements in the first quarter of 2018. On a pro forma combined basis, total portfolio subscribers for March 2019 were 4% lower than March 2018 while subscribers to our fully distributed networks were 1% lower.

U.S. Networks' operating expenses increase d to $691 million on a reported basis compared with $522 million in the prior year's quarter. On a pro forma combined basis, total operating expenses decrease d 12% , as costs of revenues decrease d 11% and SG&A expenses decrease d 13% . The decrease in costs of revenues was primarily attributable to content synergies related to the integration of Scripps Networks while the decrease in SG&A was primarily a result of lower personnel costs due to restructuring and the integration of Scripps Networks.

U.S. Networks' Adjusted OIBDA increase d to $1,061 million on a reported basis compared with $652 million in the prior year's quarter. On a pro forma combined basis, Adjusted OIBDA increase d 17% , driven by an increase in revenues combined with a decrease in operating expenses.

International Networks’ revenues for the first quarter of 2019 decrease d 13% to $952 million on a reported basis compared with the prior year's quarter. Excluding the impact of foreign currency fluctuations, revenues decrease d 7% . On a pro forma combined basis, excluding the impact of foreign currency fluctuations, International Networks' revenues decrease d 15% , as a 1% increase in distribution revenues was more than offset by a 6% decrease in advertising revenues and an 81% decrease in Other revenues. The decrease in pro forma advertising revenues was primarily driven by the impact of the Olympics in 2018, partially offset by continued monetization of our digital content offerings. Pro forma distribution revenues increase d primarily due to higher pricing in Latin America, growth in pricing, subscribers and higher digital subscription revenues in Europe, partially offset by declines in Asia primarily due to additional revenues in the prior year quarter from digital licensing. Other revenues decreased primarily due to the impact from sublicensing the Olympics in the first quarter of 2018.

International Networks' operating expenses decrease d to $733 million compared with $961 million on a reported basis in the prior year's quarter. Excluding the impact of foreign currency fluctuations, operating expenses decrease d 19% . On a pro forma combined basis, excluding currency effects, operating expenses decrease d 24% , as costs of revenues decrease d 31% , primarily attributable to the impact of costs related to the Olympics in the first quarter of 2018, while SG&A decrease d 3% , primarily due to higher marketing spending for the Olympics and costs associated with certain channel launches in Asia in the prior year quarter.

International Networks' Adjusted OIBDA increase d 60% to $219 million on a reported basis compared with the prior year's quarter. Excluding the impact of foreign currency fluctuations, Adjusted AOIBDA increase d 79% . On a pro forma combined basis, excluding currency effects, Adjusted OIBDA increase d 46% , primarily driven by the decrease in costs of revenues.

The Other segment saw significant decreases in revenues and Adjusted OIBDA for the first quarter of 2019 primarily due to the sale of the education business.

Corporate and Inter-Segment Eliminations

Adjusted OIBDA for the first quarter of 2019 decrease d 47% on a reported basis compared with the prior year's quarter. On a pro forma combined basis, Adjusted OIBDA decrease d 18% , primarily due to higher professional service fees and higher technology costs.

OTHER ITEMS

Share Buyback Authorization

The Company's Board of Directors has authorized additional stock purchases of up to $1 billion. Under this stock authorization, management is authorized to purchase shares from time to time through open market purchases at prevailing prices or privately negotiated purchases subject to market conditions and other factors.

Play Sports Group

On January 8, 2019 , the Company paid $41 million in cash to acquire a controlling interest in digital cycling platform Play Sports Group Limited, increasing Discovery's ownership stake from 20.1% to 70.7% . The Company recognized a gain of $8 million , which represents the difference between the carrying value and the fair value of the previously held 20.1% equity method investment.

Debt - Senior Notes

On March 21, 2019 , the Company redeemed $411 million  aggregate principal amount of its  5.625%  senior notes that had an original maturity of  August 15, 2019 . The repayment included $5 million  for premium over par on the  5.625%  senior notes and resulted in a loss on extinguishment of debt of $5 million .

UKTV

On April 1, 2019 , the Company announced a series of agreements with BBC, which included a ten-year licensing agreement, a new co-production deal and resolution of the UKTV joint venture in which the Company will take full control of three lifestyle channels - Good Food, Home, and Really. BBC will make payments to the Company totaling approximately $240 million based on exchange rates in effect on April 1, 2019, which includes payment related to the channels acquisition, repayment of a portion of the debt that is currently financed by the Company, and a portion of the cash currently on UKTV's balance sheet. The transaction for the unwinding of the UKTV joint venture is expected to close in the second quarter of 2019.

FULL YEAR 2019 OUTLOOK ⁽¹⁾  

Discovery will provide forward-looking guidance in connection with this quarterly earnings announcement on its quarterly earnings conference call and webcast referenced hereafter.

NON-GAAP FINANCIAL MEASURES

In addition to the results prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) provided in this release, the Company has presented Adjusted OIBDA, Adjusted EPS and free cash flow. These non-GAAP measures should be considered in addition to, but not as a substitute for, operating income, net income, earnings per diluted share and other measures of financial performance reported in accordance with GAAP. Please review the supplemental financial schedules on page 15 for reconciliations to the most comparable GAAP measures.

Adjusted OIBDA and Adjusted OIBDA Excluding the Impact of Currency Effects

The Company evaluates the operating performance of its segments based on financial measures such as revenues and Adjusted OIBDA. Adjusted OIBDA is defined as operating income excluding: (i) share-based compensation, (ii) depreciation and amortization, (iii) restructuring and other charges, (iv) certain impairment charges, (v) gains and losses on business and asset dispositions, (vi) certain inter-segment eliminations related to production studios, (vii) third-party transaction costs directly related to the acquisition and integration of Scripps Networks, and (viii) other items impacting comparability, such as the non-cash settlement of a withholding tax claim.

The Company uses this measure to assess the operating results and performance of its segments, perform analytical comparisons, identify strategies to improve performance and allocate resources to each segment. The Company believes Adjusted OIBDA is relevant to investors because it allows them to analyze the operating performance of each segment using the same metric management uses. The Company excludes share-based compensation, restructuring and other charges, certain impairment charges, gains and losses on business and asset dispositions and Scripps Networks transaction and integration costs from the calculation of Adjusted OIBDA due to their impact on comparability between periods. The Company also excludes depreciation of fixed assets and amortization of intangible assets, as these amounts do not represent cash payments in the current reporting period. Certain corporate expenses are excluded from segment results to enable executive management to evaluate segment performance based upon the decisions of segment executives. Adjusted OIBDA should be considered in addition to, but not a substitute for, operating income, net income and other measures of financial performance reported in accordance with GAAP. Refer to the comments that follow for the methodology to calculate growth rates excluding foreign currency effects.

Effective January 1, 2019, our definition of Adjusted OIBDA was modified to exclude all share-based compensation, whereas only mark-to-market share-based compensation was excluded previously. Over time, the Company has moved to a higher percentage of equity classified awards (in lieu of liability classified awards, which require mark-to-market accounting) under its stock incentive plans and expects to continue this action in future periods. Since most equity classified awards are non-cash expenses not entirely under management control, the Company has elected to exclude all share-based compensation from Adjusted OIBDA beginning in 2019. The revised definition of Adjusted OIBDA will be used by our chief operating decision maker in evaluating segment performance in 2019. Accordingly, prior period amounts have been recast to reflect the current definition.

Adjusted EPS and Adjusted EPS Excluding the Impact of Currency Effects

Adjusted EPS is defined as earnings excluding the impact of amortization of acquisition-related intangible assets per diluted share. The Company believes Adjusted EPS is relevant to investors because this metric allows them to evaluate the performance of the Company's operations exclusive of the non-cash amortization of acquisition-related intangible assets that impact the comparability of results from period to period. Refer to the comments that follow for the methodology used to calculate growth rates excluding foreign currency effects.

⁽¹⁾ Discovery is unable to provide a reconciliation of the forward-looking guidance to GAAP measures as, at this time, Discovery cannot determine all of the adjustments that would be required.

Methodology for Calculating Growth Rates Excluding the Impact of Currency Effects

The impact of exchange rates on our business is an important factor in understanding period-to-period comparisons of our results. For example, our international revenues are favorably impacted as the U.S. dollar weakens relative to other foreign currencies, and unfavorably impacted as the U.S dollar strengthens relative to other foreign currencies. We believe the presentation of results on a constant currency basis (ex-FX), in addition to results reported in accordance with GAAP, provides useful information about our operating performance because the presentation ex-FX excludes the effects of foreign currency volatility and highlights our core operating results. The presentation of results on a constant currency basis should be considered in addition to, but not a substitute for, measures of financial performance reported in accordance with GAAP.

The ex-FX change represents the percentage change on a period-over-period basis adjusted for foreign currency impacts. The ex-FX change is calculated as the difference between the current year amounts translated at a baseline rate, which is a spot rate for each of our currencies determined early in the fiscal year as part of our forecasting process (the “2019 Baseline Rate”), and the prior year amounts translated at the same 2019 Baseline Rate. In addition, consistent with the assumption of a constant currency environment, our ex-FX results exclude the impact of our foreign currency hedging activities, as well as realized and unrealized foreign currency transaction gains and losses. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies.

Selling, General and Administrative Expense

Selling, general and administrative expenses exclude share-based compensation and Scripps Networks transaction and integration costs due to their impact on comparability between periods.

Free Cash Flow

The Company defines free cash flow as cash provided by operating activities less acquisitions of property and equipment. The Company uses free cash flow as it believes it is an important indicator for management and investors of the Company’s liquidity, including its ability to reduce debt, make strategic investments and return capital to stockholders.

Pro Forma Adjustments

The discussion and tables beginning on page 11 compare our actual and pro forma combined results as if the acquisition of Scripps Networks occurred on January 1, 2017. Management believes reviewing our actual operating results in addition to combined pro forma results is useful in identifying trends in, or reaching conclusions regarding, the overall operating performance of our businesses. Our combined U.S. Networks, International Networks and Corporate and Inter-Segment Eliminations pro forma information is based on the historical operating results of the respective businesses as applicable to each segment and includes adjustments directly attributable to the prior year acquisition of Scripps Networks as if it had occurred on January 1, 2017, such as:

1. The impact of the purchase price allocation to the fair value of assets, liabilities, and noncontrolling interests, such as intangible amortization;

2. Adjustments to remove items associated with the acquisition of Scripps Networks that will not have a continuing impact on the combined entity, such as transaction costs and the impact of employee retention agreements; and

3. Changes to align accounting policies.

Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined businesses. Pro forma amounts are not necessarily indicative of what our results would have been had we operated the acquired businesses since January 1, 2017 and should not be taken as indicative of the Company's future consolidated results of operations.

Actual amounts for the three months ended March 31, 2019 include the results of operations for Discovery and Scripps Networks, which was acquired on March 6, 2018.

Certain updates were made to previously disclosed pro forma adjustments as a result of further information identified after May 10, 2018, the date the March 31, 2018 quarterly report on Form 10-Q was filed. These changes impact costs of revenue, depreciation and amortization and restructuring and other charges. The pro forma adjustments discussed above are inclusive of these updates and therefore may not reconcile to previously disclosed amounts.

CONFERENCE CALL INFORMATION

Discovery will host a conference call today, May 2, 2019 at 8:30 a.m. ET to discuss its first quarter results. To listen to the call, visit https://corporate.discovery.com or dial 1-844-452-2811 inside the U.S. and 1-574-990-9832 outside of the U.S., using conference passcode: DISCA.

CAUTIONARY STATEMENT CONCERNING FORWARD_LOOKING STATEMENTS

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties and on information available to the Company as of the date hereof. The Company’s actual results could differ materially from those stated or implied, due to risks and uncertainties associated with its business, which include the risk factors disclosed in its Annual Report on Form 10-K filed with the SEC on March 1, 2019.

Forward-looking statements include statements regarding the Company’s expectations, beliefs, intentions or strategies regarding the future, and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “should,” “will” and “would” or similar words. Forward-looking statements in this release include, without limitation, statements regarding investing in the Company's programming, strategic growth initiatives, and the effects of the Scripps Networks acquisition and related transactions. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

ABOUT DISCOVERY

Discovery, Inc. (Nasdaq: DISCA, DISCB, DISCK) is a global leader in real life entertainment, serving a passionate audience of superfans around the world with content that inspires, informs and entertains. Discovery delivers over 8,000 hours of original programming each year and has category leadership across deeply loved content genres around the world. Available in 220 countries and territories and in nearly 50 languages, Discovery is a platform innovator, reaching viewers on all screens, including TV Everywhere products such as the GO portfolio of apps; direct-to-consumer streaming services such as Eurosport Player and MotorTrend OnDemand; digital-first and social content from Group Nine Media; a landmark natural history and factual content partnership with the BBC; and a strategic alliance with PGA TOUR to create the international home of golf. Discovery’s portfolio of premium brands includes Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, MotorTrend, Animal Planet, and Science Channel, as well as OWN: Oprah Winfrey Network in the U.S., Discovery Kids in Latin America, and Eurosport, the leading provider of locally relevant, premium sports and Home of the Olympic Games across Europe. For more information, please visit https://corporate.discovery.com and follow @DiscoveryIncTV across social platforms.