Ladies and gentlemen, welcome to the Warner Bros. Discovery First Quarter 2025 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers’ 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 and Strategy. You may begin.

Good morning, and thank you for joining us for Warner Bros. Discovery's Q1 earnings call. Joining me today is David Zaslav, President and Chief Executive Officer; Gunnar Wiedenfels, Chief Financial Officer; and JB Perrette, CEO and President, Global Streaming and Games. Today's presentation will include forward-looking statements that we may pursue into the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements may include comments regarding the company's future business plans, prospects, and financial performance and involve risks and uncertainties that could cause actual results to differ materially from our expectations. For additional information on 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. I will turn the call over to David for some brief remarks, after which we will take your questions.

Good morning, everyone. Two years ago, we said, it's not how much, it's how good. And today, that focus on quality is really paying off. Our commitment to high-quality storytelling, powered by the most exceptional creative talent in front of and behind the camera, continues to be the engine that powers Warner Bros. Discovery. That engine has never been stronger, more differentiated, and more important, both here in the U.S. and around the world. Whether it's The White Lotus, The Pit, The Last of Us, a Minecraft movie, Sinners, or the Eastern Gate series internationally, when you look at what's shaping culture today, so much is coming from our studios and reaching audiences on our platforms. These stories aren't just watched but savored. People immerse themselves in them, share them, and return to them. They spark conversation, drive connection, and fuel fandom. And that cultural influence and strength are showing up in our bottom line. On streaming, as you saw in our letter, we delivered another exceptionally strong quarter. Over the last 12 months, we have gained more than 22 million subscribers, and in the first quarter, we gained over 5 million subscribers and delivered $339 million in EBITDA. We are firmly on track to deliver at least $1.3 billion of EBITDA in 2025, up 85% versus 2024, and to surpass our 150 million subscriber goal by the end of next year. What's fueling that success? It's multiple growth levers that provide years of opportunity still ahead, starting with the best stories from HBO, which is delivering the deepest, most consistent storytelling pipeline in its history. It's local language content and local sports that bolster our relevance in every region in the world. That combination makes us really unique. The impact of our stories is then amplified by our increasingly global footprint that still has almost half the world to go. And it's brought to life by a product that has gotten better at enhancing personalization and engagement, but still has a strong roadmap of improvements ahead. On studios, we are also encouraged by the progress in getting back to our $3 billion in EBITDA goal and growing. That's coming from the strength of Warner Bros. Television, the world's leading independent TV studio, which broadens our cultural and commercial impact on the platforms outside of WBD's ecosystem with standout shows. It's also coming from Warner Bros. Motion Pictures, where our strategy of a mix of IP-based blockbusters and compelling new originals is gaining traction and delivering results, as demonstrated by the recent big success of a Minecraft Movie and Sinners. Final Destination, which is launching next week, is trending very strong. Looking ahead, we are excited about the strong slate across all of our studios, starting with DC Studios launching Superman in July. We are wrapping on Supergirl and are deep into production on Lanterns, all part of our 10-year plan to reignite the DC brand globally and drive long-term franchise value. What we have now is a powerful combination of a differentiated, profitable, and growing global streaming service with a world-class studio business, both being supplemented by the meaningful continued cash generation from our global linear networks. Warner Bros. Discovery's global reach, growth, and the demand for our quality content offerings gives us real confidence in our ability to create long-term sustainable growth and shareholder value. With that, we welcome your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Steven Cahall with Wells Fargo. Please go ahead.

Thank you. Good morning. So, you know, first I think there's a lot of industry discussion around your reorganization and some of the optionality that creates for those assets. I think the biggest debate is just the leverage ratio that global networks can handle as we go forward. So I was wondering if you could give us any insights as to what you think a capital structure could ultimately look like on an asset like that at some point, what you think a leverage ratio could be that still preserves or increases the equity value that you've got today, and how you can get there in terms of the EBITDA and cash flow trajectory. And then on extra members, do you have a sense of how big that extra opportunity could be for Max in the US? Is it a few million? Is it significantly bigger? And how do you lean into all the tent poles you have upcoming in order to help capture those as I imagine that drives you toward or even creates some upside to the $1.3 billion in EBITDA? Thank you.

Steve, this is Gunnar, good morning. Obviously, I don't want to speculate on capital structures for hypothetical parts of the company. We are very happy that we were able to get through this reorganization as quickly as we did, the internal reorganization that we announced in December. As we laid out, we believe that we are now properly structured to take advantage of whatever opportunities may arise. David has pointed out how this industry is facing generational change and we believe there is now a lot more transparency for you guys. You'll see that we also issued trending schedules several quarters back, clearly explaining what's going on in the two-division structure that we have implemented, showing the content flows between streaming and studios in that division, etc. So I think we've done a lot of good work here to create transparency and secure optionality, and that's it. I don't think there's any value in speculating about potential capital structures at this point.

Restructuring with these two subsidiaries shapes how we operate the company and provides clear visibility for our shareholders. It allows everyone to recognize that we are the largest content producer and have the biggest production operation worldwide, along with a rapidly growing streaming service. This structure enhances your ability to see our operations. On the traditional business side, we operate globally with free-to-air content, sports, international news, and diverse cable brands, all of which can support and enrich our existing streaming service. This approach reflects our overall business perspective and gives us the flexibility to act swiftly if we choose to restructure.

And then, Stephen, on the extra member, a couple of things to sort of size the opportunity and think about the timing. Remember, right now we've launched only in the US; it's only available on our retail subscriber base, which obviously is a subset of our total sub base. And the messaging is part of the parallel path of the password sharing initiatives that we have, which is very soft messaging that will start getting firmer and more visible to subscribers over the months to come. So in 2025, I think you're going to see some benefits from it. I think it's going to increase and really be a more 12-month to 18-month initiative as it rolls out through more subscriber cohorts here in the U.S. Globalizes later in the year and into 2026. And as the messaging on the password sharing gets more assertive over the course of the back half of the year and really into 2026.

Thank you. And your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead.

Hi, good morning. Thanks. I wanted to ask you about your sports strategy on Max. Understanding that that strategy leverages relationships and licenses that you have through the linear segment. Do you see opportunities to license new IPs going forward? Thanks.

Well, you know, the strategy really differs as we look at the global reach of Max. There are a number of markets where it's part of Max. There are a number of markets where it's an add-on. Having the sports outside the US has been really helpful to us, together with the compelling local content and HBO. It's been an offering that really differentiates us, and we're seeing some meaningful demand. JB, do you want to talk more specifically about the U.S.?

Yes, Peter, we have taken a disciplined approach while experimenting with different models to understand the migration of sports in the U.S. from wholesale to a hybrid or wholesale-plus-streaming model compared to our international operations. Historically, our European sports business has been more akin to our TNT Sports asset in the U.K., operating as an a la carte sports business, which is different from the U.S. In the U.S., we integrate sports content into our two primary entertainment tiers, similar to what we do in Latin America across all tiers. We recognize the value this adds in terms of subscriber acquisition and engagement. However, we must consider the costs associated with these rights, and we are assessing the most effective strategies since it remains challenging to identify a profitable business model in streaming that supports premium sports rights while successfully enhancing those metrics. We plan to continue our smart experimentation as we identify opportunities to utilize powerful sports rights, such as with the Champions League in Brazil and Mexico, but we understand that there is no one-size-fits-all model. We will keep exploring and adapting our approach to ensure both success and profitability.

In the end, sports is a rental business. For us, Superman, Batman, DC, Harry Potter, Lord of the Rings, those are the core equivalents of the NFL to us. We own those assets. Game of Thrones. As we build storytelling content that people love everywhere in the world with characters that they love everywhere in the world. And then we could build out that world, like we're doing with Harry Potter with 10 consecutive years. In the aggregate, that is where the future of Warner Bros. Discovery is as the best storytelling company in the world, with the most extraordinary library and Wizard of Oz to DC and Harry Potter for us to harvest that because one of the advantages that we have is that there's an opportunity to really begin to harvest it. In many cases, we haven't been doing that. And so that is where I think we'll be spending more of our money and being less dependent on sports, which is a rental business.

Thank you.

And your next question comes from the line of Bryan Kraft with Deutsche Bank. Please go ahead.

Hi, good morning, David, you talked about the strength of Max's distinctive programming as a source of competitive advantage. I wanted to ask, first, how is HBO able to turn out so many standout hits like this to do it so consistently? What's the secret sauce there from your perspective? Second, for David or JB, can you talk about how Max is resonating with different demographic groups domestically, particularly the younger consumers? And then lastly, I was wondering if you can give us a sense of how time spent on Max in the U.S. compares to time spent in other markets on MAX, particularly in Europe and Latin America? Thank you.

Thanks very much. Well, first, we have one of the best creative executives, the generational talent with Casey Bloys who's been at HBO for two decades. And he's also built an amazing team with Franny, Amy, Sarah, Nina, and Nancy. This is a group that has been together for fifteen plus years. Their ability to tell stories to partner with great creatives, but they also have a model of quality. When people see that HBO brand, they know that it represents all of that talent. People have for 50 years been coming to HBO for quality content. And this is the strongest HBO has ever been. The idea of it's not how much; it's how good is something we identified that we're not going to flood the zone. We want to be telling the best stories and we want to also be taking advantage of all the great quality content over the years like Game of Thrones and come out with House of the Dragon. We got Euphoria coming up and a real innovation from that team with The Pit, which was a medical procedural. But John Wells and Noah Wyle together with Casey and Sarah and Channing who runs our Warner Bros. Television Group. We've really brought the best creatives back to Warner, and that together with the great talent we have, plus HBO is a different model for storytelling that we do very similar to what when I was at NBC with Must-See TV, whether it's Sunday night or Thursday night or Monday night, it becomes a cultural happening. People on Thursday night wanting to wait a week to see The Pit. And that's part of a philosophy at this company of great storytelling with a shared experience whether it's in the theater and then people can talk about it or people together on Sunday nights watching The Last of Us. That's the core of what we are. And it also, as you saw with White Lotus, by having that experience over two months or four months with The Pit. It also makes stars, and people feel that they really get to know characters in a way that's different from just watching eight episodes in eight hours on a Sunday afternoon. So it becomes part of the culture. More and more that's the future of Max is quality, quality, quality. And that's why I think we're seeing a lot of the growth, and that's why we think we have a great future.

And then on the two questions around engagement in the U.S. in terms of the younger demographic, we see a very strong market for a lot of the reasons that David just described in terms of the topicality, the conversations that people don't want to miss, and the FOMO that people experience. We do well in that younger demographic. And obviously, as you think about our lineup of series, particularly with things like Euphoria coming back, which is one of our youngest skewing and biggest series, and obviously building into the truly four-quadrant Harry Potter down the line. We have a number of series that are attractive to that demographic. In terms of engagement across markets, Latin America is our leader I'd say, with the most complete offering, partly also because that market has multiple pay output deals. So our film offering is most comprehensive, as well as obviously all the great output coming from HBO from the U.S. side. We've been at originals for local originals probably one of the longest in that region in the world. Therefore, Latin America leads the way in terms of engagement; in the U.S., Europe are sort of aligned and a little bit behind Latin America, while Asia Pacific is a smaller piece, largely because, obviously, our content mix there is largely a U.S.-based Hollywood offering. So it's got real appeal, but slightly less engagement than what you see in Europe and the U.S.

And Casey has a home-field advantage. He can just walk down the road in the lot and go into Channing's office with her whole team. Whether it's Harry Potter or The Pit, a lot of the content we have really are two of the best studios. We have a studio for HBO and then we have Warner Bros. TV Studio. Yes, we produce for Apple and Netflix some of their best content, but that's our home field.

Thanks so much. Appreciate it.

Your next question comes from the line of David Karnovsky with JPMorgan. Please go ahead.

Hi. Thank you. Maybe I'll ask on the macro. The release noted no material impact over the last month. Wanted to see if you could dig in a bit on what you're seeing across advertising channels and hearing from your marketing partners and how that informs your view of the coming upfronts. And then for Gunnar, corporate EBITDA was nicely improved versus last quarter and last year. Maybe just walk through some of the items helping there and what should we think of as kind of run rate permanent savings? Thank you.

Thanks. So, yes, look, starting with the macro question, the good news is so far so good. As you would imagine for the past five weeks or so, we've been tracking very closely all the indicators internally and externally. The reality is we're not seeing any impact whatsoever to this point. In fact, starting with advertising, which would naturally be the part of our business that would be most impacted by declining consumer sentiment and maybe slowing GDP growth. I called out some of the factors impacting Q1 and Q2. If you do a like-for-like comparison, everything we're seeing right now, Q2 so far is tracking pretty much exactly in line with Q1 corrected for those items that I called out earlier. So I think that is good news at the same time. We of course look at sort of external projections, and we have a much more diversified portfolio now than we used to have. Advertising obviously would be at risk to some extent. We have the upfront discussions that are probably going to go a little slower, start a little slower this year. At the same time, we see that being offset by pretty strong scatter at this point. And nonetheless, we've managed through turbulent times as a leadership team and we would do the same should the outlook deteriorate in the second half. As you also saw, we did right after the announcement of the tariffs take some precautionary measures, nothing extreme, but we will manage our cost base appropriately for a potentially more turbulent environment here to make sure that we're ring-fencing our financial performance. The corporate cost step down that you saw in the first quarter was a mix. There were some smaller one-time items, but generally speaking, I would expect the corporate cost number to be down year-over-year for the full year. So nothing no trend change there to call out at this point, David.

Thank you.

Thank you. And your next question comes from the line of Rich Greenfield with LightShed. Please go ahead.

Hi, thanks for taking the question. Last quarter, Gunnar, I think you said that there would be a net savings from the NBA in 2026 of several hundred million dollars. I guess, if we just look at Q1 and Q2, it would be great to sort of understand what Q1 would have looked like if you peel back NBA ad revenue and the costs associated with it. I assume there's a net benefit in Q1, but just any way to sort of quantify? And then, as you sort of gave that Q2 cost guide and you said that the cost would be up year-over-year, what would it look like? I assume it would obviously be down without the NBA. But just any way to sort of think about those two issues would be great.

Yes, it would have been significantly lower without the NBA. However, it's important to consider how we've transformed our sports rights portfolio during the NBA discussions. We now have a robust portfolio, and we've successfully renewed our affiliate deals, which play a crucial role in monetizing these sports rights. It's also worth noting that 2025 will be affected by some overlap of outgoing and incoming rights. If you’re looking for an estimate, I would suggest modeling a roughly $300 million cost increase in 2025, with Q2 contributing significantly to that. There will be some challenges in Q3 as well, but starting in Q4, it should gradually shift to a moderate benefit. Furthermore, we anticipate a substantial reduction in sports rights expenses with the NBA exiting in 2026, resulting in a significant decrease in the rises we've seen this year. Regarding your specific question about Q2 without the NBA, I prefer not to quantify that due to numerous influencing factors. However, it's important to remember that the NBA was a highly profitable property for us, particularly in terms of its value in affiliate negotiations, enabling us to renew these deals even without the NBA. Therefore, next year is expected to be significantly better financially in that regard.

Thank you.

Our next question comes from the line of Jessica Reif Ehrlich with Bank of America Securities. Please go ahead.

Thank you. I guess, two questions. First, on direct-to-consumer. You've entered into a number of distribution agreements, mostly wholesale agreements. Of course, a lower ARPU. Maybe you could discuss some of the drivers you have to increase ARPU over time. And coming into the year, streaming consolidation was widely expected. You talked about optionality. Do you believe there's still opportunities to scale further here? And then maybe just a follow-up on the advertising comments. Yes, it's not growing uncertainty, but you've got more tools like particularly in AdTech. So are you coming into the upfront with a different strategy or approach?

Jessica, I'll address the ARPU question. We consistently assess these deals based on ARPU and overall lifetime value, factoring in ARPU alongside churn dynamics. You're correct that we have distribution partnerships with wholesale partners where we may accept a lower wholesale rate but have a higher churn profile, which we analyze based on a lifetime value perspective that benefits the business. Regarding other strategies for ARPU growth, there are several avenues. As previously mentioned, we anticipate some short-term downward pressure on ARPU initially, as we noted in our fourth-quarter call. Remember, our ad-supported SKU has only been available in one market, the U.S., for just over a year, but we've now expanded to over 45 markets and are experiencing strong demand in our gross adds mix, albeit with lower distribution revenue impact. The advertising component of the ARPU calculation is increasing. The positive news is that internationally, demand is strong, and our figures in major markets have grown significantly compared to 12 months ago. This growth will continue, and we expect ARPU to expand over time. On a net ARPU basis from the advertising SKU, we anticipate that the additional member SKU will contribute positively. As we address password-sharing, we expect to attract more subscribers as well. There are still pricing opportunities in some markets where we believe we can adjust upward. Thus, pricing remains a lever for us. Regarding sports and potential upsells, we plan to leverage these in markets like Europe, which will also enhance ARPU. Furthermore, by focusing on engagement and the ongoing product improvements, especially with the ad-supported SKU, we expect engagement to lead to increased time spent, resulting in greater monetization. Those are several strategies we feel optimistic about. David?

Yes. Well, look, across the board, the streaming inventory on Max, we're seeing just real demand and a tremendous amount of value. Coupled with the growth that we are seeing, for instance, one of the really positive developments that we see now, is that in Europe, we are net growing. When you take the decline of the traditional business and then you see the growth of our streaming business and our ad-light product together, we are seeing meaningful growth across Europe. In fact, when you look at all of international, the decline in the traditional business is being outrun by the increase in our subscriber and ad revenue, so that we are net positive there, which is a really meaningful turn for us. The fact that it's substantial in Europe is a powerful sign. In the U.S., we need – we are not there yet. It's not clear that we'll be able to get there. On the upfront, we'll be emphasizing the streaming inventory on Max, which is really coveted. And with what we have coming up on Max, there is a lot of demand, specifically for specific titles to be associated with the quality of content. The fact that it is watched in large groups, which is with their sports and then there is HBO. Then we have our films coming and the ability to affiliate with those films on ad-light.

Our next question comes from Robert Fishman with MoffetNathanson. Please go ahead.

Hi, good morning. Two for you guys, if I can. As you shifted away from the more-is-better streaming strategy, how does the focus on higher quality content change the way you think about the right level of content spending, ad streaming and the overall company? Should we expect content spend to come down? Or is it just a reallocation of those dollars to the bigger bets? It would also be great to hear your updated thoughts on licensing your library and producing originals for third-party streaming services. You mentioned in the investor letter that the Scooby Doo show for Netflix, as one example. How do you balance what should be exclusive to Max? How has that evolved over the past couple of years? Thank you.

Thanks, Robert. Channing's team is doing an excellent job right now with projects like Apple, Ted Lasso, and Presumed Innocent, which we turned into a compelling series with Gyllenhaal and sold to Apple. This has been a very profitable venture for us, along with titles like Shrinking, Bad Monkey, and Abbott Elementary, which we sell to Disney. We pride ourselves on being a high-quality provider, attracting top talent who appreciate the freedom to create content for a variety of platforms. While more content is increasingly coming our way, Channing is overseeing a substantial business. It's vital for us to sell our content to third parties. As we evaluate our titles, we see many that are exclusive to Warner Bros. The key characters that James Gunn and Peter Safran are working on for their 10-year D.C. plan aim to enhance our global asset value, featuring iconic figures like Wonder Woman, Batman, Superman, and Supergirl. These are significant assets that set us apart. The same holds true for Harry Potter, which is why we are deeply invested with JK for the next decade. Today, we are also announcing the release date for our Lord of the Rings movie. We hold some premium global IP that people recognize, like Game of Thrones, which will remain exclusively ours forever as we build major assets and a differentiated global strategy around them. Our motion picture slate is strengthened by these global tentpoles and high-quality originals. Our company is rich in IP, including Hanna-Barbera and Looney Tunes, which gives us access to one of the largest TV and motion picture libraries in the world. This enables us to take properties like Presumed Innocent or Scooby Doo and find opportunities; for example, with Scooby Doo, we can partner with Ted and Netflix to achieve broad market appeal, followed by a Scooby Doo movie, creating a win-win scenario for us. Ultimately, our focus is on leveraging our IP while ensuring that the most significant and differentiating IP will be used to build asset value.

From a financial perspective, there is no significant increase in content spending related to our streaming strategy evolution. We have always stated our ambition for significant growth in both the streaming service and the studio. We will support this growth with an increase in content spending over the next few years, but it will be moderate, without any dramatic changes. Additionally, if we compare our studio numbers today to those from a couple of years ago, we have been increasing the share of Warner Bros.' output that we use internally, which is reflected in our company eliminations. It is important to note that every dollar of intercompany profit eliminated contributes to building asset value. This represents future streaming profit, and we have developed this internal asset significantly.

This concept centers around the idea that it's not about quantity, but quality. We initiated this strategy two years ago, and what you're witnessing now is the outcome of that approach, as we continue to invest in it since consumers are prioritizing high-quality content. We eliminated a significant amount of content during the transition after acquiring the company, which generated some discussion, but it was aligned with our strategy to avoid overwhelming the market. We aim to uphold the HBO brand, focusing on quality as our primary direction, and the marketplace has indicated that there is substantial opportunity in this area.

And that mix shift, Robert, as David said, is really away from kids volume, particularly on the library side, purely and some, obviously, less unscripted and towards more Pay-1 movies, global scripted originals, and select local originals in key markets.

And your next question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Thanks. Good morning. Thanks for taking my question. I want to follow up on the streaming side. Obviously, you're fairly on track, as you mentioned. As you think about longer-term, what are the bigger drivers as you would rank them: subscriber growth, ARPU growth, cost cutting? What should drive that business up into the rise as we go forward? Then on the studio side, you mentioned several times your goal to get back to $3 billion. You talked about your slate, the IP you've got. Help us understand the pacing to kind of get to that number and stay at that number.

On streaming, the positive aspect for us is that there are multiple significant factors at play. First, globalization is key. As David has mentioned, we still have nearly half the world to reach in terms of expanding into new markets. Second, in those existing markets, we are seeing penetration growth. This is partly driven by introducing more affordable ad-supported options to attract price-sensitive consumers. It's also worth noting that at the beginning of the next year, three of the largest markets in Europe—Germany, the U.K., and Italy—will come online, providing a major boost. Alongside globalization and penetration growth, we also expect improvements in average revenue per user, particularly through better advertisement sales and the password-sharing crackdown initiative, which will take 12 to 18 months to fully implement but is anticipated to drive both subscriber and revenue growth through additional memberships. Lastly, content remains the foundation of our success. The compelling stories we have lined up for the next 18 to 24 months are stronger and more consistent than ever. Additionally, we are continually enhancing our product. While we have improved from not good to good, we have a robust roadmap in place that will elevate our service further. Overall, we have several key levers that will contribute to significant growth over the next couple of years.

The final strategy we have been focused on for a while is improving our bundles, aiming for a better consumer experience rather than just competitive pricing. The main opportunity arises when viewers turn on their TVs and are faced with numerous apps, trying to navigate their choices. Our collaboration with Disney to create a bundle in the U.S. that includes Hulu, Disney+, and Max has proven to be a strong offering. As we expand these bundles globally, we are looking for major players that can help drive growth and scale. Bundles generally lead to lower marketing costs and reduced churn. The churn rates we observe with Disney and some of our global bundles are promising. This means we don’t have to extensively market to retain subscribers who come and go. Additionally, having multiple companies marketing the same product makes it more appealing, allowing users to enjoy seamless access without constantly switching in and out. This is a gradual progression. In the end, there will likely be five or six dominant players, possibly with a few regional companies that perform adequately but are heavily reliant on sports rentals. These major players should enhance the consumer experience, and some may even form bundles to create an even more attractive offering. By focusing on solving consumer challenges and delivering high-quality content and storytelling, we believe we can provide significant value. The bundle plays a crucial role in this strategy.

And then Ric maybe on the $3 billion target that we put out for the studio. Again, a reminder that's not guidance for this year, even though we did say that we're expecting to make a very significant step toward that number this year. But two levels to answer that question. One, sort of on the level of the individual business units, there is opportunity everywhere in the studio landscape. Channing and her team have been incredibly successful with TV production. There may be more opportunity as she manages the transition of the business model from a very broadcast-heavy output years ago to a more streaming focused model. Now there's margin and ROI upside there. In the film space, we're starting to see the portfolio strategy come through. David has mentioned this a number of times: the combination of harvesting our own library and IP combined with the right level of original films, the right mix of bigger swings and smaller budget, commercially safer films, etc. We're looking at a blowout second quarter here showing some of the fruits of that. But I don't want to get too focused on that. I do believe we're going to see more on a longer-term basis. The games business, remember last year was really impacted by some misses we had in that space and JV has implemented a pretty significant restructuring of that business and that should be a growth driver over the longer-term horizon here. The biggest point underlying all of this is all the transformational change that we have implemented over the past three years. It starts with a much greater collaboration and coordination and the approach that we take to franchise management, the planning that goes into the rollout of every new IP moment, and the way the entire company rallies behind each new film and each series that we're creating that is going to pay dividends for a very long time to come. We have also revamped every step along the value chain from green light to the monetization and windowing of our content. I have no doubt that all of this is going to provide lasting impact. As I said before, we're not going to see perfect consistency. It's a hit-driven business, but I have no doubt that we're going to see much greater upside and success and much less downside in the inevitable areas where we're going to miss at times. Lastly, we're supporting this growth with investments. I talked about content investments already. We're planning to moderately increase that number every year. But you also saw the CapEx in Q1 slightly up a lot of that is going into the necessary investments in our studio footprint. Again, I think this is a great longer-term outlook, longer-term story for the studio and very short-term we're going to have an absolutely amazing second quarter.

Great. Thank you.

And that’s the time we have for questions. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.