# Warner Bros. Sales Fall on Loss of NBA, Weak Film Slate

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 6 Aug 2026, 28 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/06ba7259-de8d-4160-8db8-b49e01158e14/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses earnings from Warner Bros Discovery and Fox. Warner Bros. Discovery Inc. reported a drop in sales due to the loss of National Basketball Association rights and a movie lineup that compared poorly with last year. Fox Corp reported adjusted earnings per share for the fourth quarter that beat the average analyst estimate. In separate news: Britain's antitrust watchdog and culture minister decided against escalating scrutiny of Paramount Skydance Corp.'s takeover of Warner Bros. Discovery Inc. -Mandeep Singh, Global Head of Tech Research for Bloomberg Intelligence, discusses Alphabet’s recent departures. Alphabet Inc.'s Google is concentrating its artificial intelligence leadership at its Mountain View, California, headquarters to gain momentum in the accelerating race against Anthropic and OpenAI. Koray Kavukcuoglu has been appointed to run Google's AI research and operations, while Demis Hassabis has stepped back from day-to-day operations to become chairman of Google DeepMind and Alphabet's Chief Scientist. -Jody Lurie, Bloomberg Intelligence Credit Analyst, discusses earnings from Hertz and Six Flags. Hertz Global Holdings Inc. beat Wall Street’s earnings estimates, a boost for the struggling rental car company following an unusual debt-raise maneuver and a warning of weakness in the used-vehicle market. Six Flags reported net revenue for the second quarter that missed the average analyst estimate. -Michael Halen, Bloomberg Intelligence Senior Restaurant and Foodservice Analyst, discusses earnings from Burger King. Burger King’s US sales surged last quarter, with comparable sales jumping 8.5% in the three months through June 30. The chain has invested in advertising, restaurant remodels, menu upgrades, and extra training since 2022 to reverse an earlier sales slump, and has launched marketing stunts and limited-time offers. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
[0:10] Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
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[0:17] Speaker 1: Business App. Listen on demand wherever you get your podcasts,
[0:21] Speaker 1: or watch us live on YouTube.
[0:24] Speaker 2: We are an earning season, and right now the big
[0:26] Speaker 2: media companies are taking their turn publishing their latest results.
[0:30] Speaker 2: Warner Brothers coming out with numbers. The sales declined after
[0:33] Speaker 2: it lost the NBA rights, but I don't know that
[0:36] Speaker 2: it matters that much given that this is a company
[0:38] Speaker 2: being absorbed by Paramount eventually potentially, Yes, right now that's
[0:43] Speaker 2: kind of on hold, but the thinking is that it
[0:45] Speaker 2: will be. Fox also came out with the results. The
[0:48] Speaker 2: World Cup was.
[0:48] Speaker 3: Certainly a good thing for that company. Let's begin.
[0:51] Speaker 2: Getha rang and Athen she is our analyst on US Media,
[0:54] Speaker 2: joining us from Princeton, KEITHA. Of the results that came out,
[0:58] Speaker 2: what gets your attention?
[1:00] Speaker 4: Yeah, I mean you pointed out Warner Brothers Discovery. Yes,
[1:04] Speaker 4: you know, the earnings, as you said, Scarlett, and rightly
[1:07] Speaker 4: so is definitely the sides the side show for the moment.
[1:10] Speaker 4: But I think you know things could change very quickly,
[1:12] Speaker 4: and you know, it could be the main piece here
[1:15] Speaker 4: because we're really looking at a company, and I think
[1:17] Speaker 4: everybody now is kind of thinking of what happens if
[1:20] Speaker 4: the Paramount sky Dance deal falls through. And you know,
[1:24] Speaker 4: we know that the merger agreement terminates on June fourth
[1:27] Speaker 4: of twenty twenty seven, and if Paramount sky Dance can't
[1:30] Speaker 4: get its act together and can't like settle out of court,
[1:33] Speaker 4: there's a very high probability that they actually lose this
[1:36] Speaker 4: trial and then they are in really bad shape. But
[1:39] Speaker 4: Warner Brothers Discovery actually is doing a lot to improve
[1:42] Speaker 4: its fundamentals. We saw some pretty decent results at least
[1:45] Speaker 4: on the streaming side of the business as well as
[1:48] Speaker 4: you know, on the TV network side. Yes, the loss
[1:50] Speaker 4: of the NBA definitely hurt them, but it also helped
[1:53] Speaker 4: them on the expense side, because you know, the EBITDA
[1:56] Speaker 4: declines that we saw, we were seeing something like, you know,
[1:59] Speaker 4: twenty five thirty percent ebidetic clients last year. Those really
[2:03] Speaker 4: moderated now to around four to five percent. So there
[2:06] Speaker 4: was some good news there as well. And then as
[2:08] Speaker 4: you pointed out, for Fox, of course, huge quarter there
[2:11] Speaker 4: with advertising. But again, the bigger story for Fox is
[2:14] Speaker 4: also it's pending deal for Roku, so a lot of
[2:17] Speaker 4: MNA stuff kind of overshadowing the fundamentals here.
[2:20] Speaker 5: And I saw that Fox so they're not going to
[2:23] Speaker 5: reopen the NFL negotiations until, you know, towards the end
[2:25] Speaker 5: of the twenty twenty nine season. And I know there
[2:28] Speaker 5: was some pressure maybe to do something sooner because the
[2:31] Speaker 5: NFL knows that they can get a big increase in rights.
[2:33] Speaker 5: What's what's the status there?
[2:35] Speaker 4: Yeah, So you know, this was always a huge, huge
[2:38] Speaker 4: downside risk for Fox. Pauls. I think, you know, just
[2:42] Speaker 4: by them kind of you know, kicking the can down
[2:45] Speaker 4: the road. This it's a huge sigh of relief, I
[2:47] Speaker 4: think for investors because Fox was very, very heavily exposed
[2:50] Speaker 4: to the NFL. You know, we ran some numbers and
[2:53] Speaker 4: we thought that if the NFL actually did manage to
[2:56] Speaker 4: secure a big rights increase, that would pressure Fox ebit
[3:00] Speaker 4: about thirty to forty percent almost just because of the exposure.
[3:04] Speaker 3: So this definitely, yeah, really.
[3:06] Speaker 4: Helps kind of the investment case and gives them a
[3:08] Speaker 4: lot of breathing time, if you will, to figure out
[3:11] Speaker 4: everything with Roku.
[3:13] Speaker 2: You know, we talk a lot with Randall Williams, he's
[3:15] Speaker 2: our Business of Sports reporter, about the possibility of a
[3:18] Speaker 2: strike for the MLB season at some point because of
[3:22] Speaker 2: the discussion on some kind of salary cap if that happens, Gita,
[3:27] Speaker 2: who's most exposed, Who among the big media companies will
[3:30] Speaker 2: be most exposed? And is it as bad as we
[3:31] Speaker 2: think it is, because, I mean, the MLB is not
[3:33] Speaker 2: the NFL. There are so many games that the MLB
[3:36] Speaker 2: plays as opposed to you know, trust the limited number
[3:39] Speaker 2: of games for the NFL.
[3:41] Speaker 4: Yeah, there's definitely you know, some overhang, Scarlett, but as
[3:45] Speaker 4: you pointed out, not a whole lot of exposure from
[3:48] Speaker 4: the national side, on the national TV right side. Remember,
[3:51] Speaker 4: the MLB has a lot more local TV rights exposure.
[3:55] Speaker 4: You know, it used to be the case with the
[3:58] Speaker 4: r A sense of course that that business has been
[4:01] Speaker 4: in secular decline. But yeah, some exposure definitely for for
[4:05] Speaker 4: Warner Brothers, Discovery, with the Turner Networks, for Fox. But
[4:08] Speaker 4: I think all of it can be mitigated with you know,
[4:11] Speaker 4: the presence of other sports programming.
[4:13] Speaker 5: Did Warner Brothers with this earnings at least did they
[4:15] Speaker 5: comment on the pending deal with Paramount. Did they give
[4:18] Speaker 5: you any color as to how this might play out.
[4:21] Speaker 4: I mean, it was all just really boilerplate commentary. They said,
[4:24] Speaker 4: you know that they are hopeful that the deal closes,
[4:27] Speaker 4: but you know, I think at the same time, they
[4:30] Speaker 4: do very much realize that, you know, things could go south,
[4:34] Speaker 4: and I think David Zaslav is definitely prepared for that contingency. Remember, Paul,
[4:38] Speaker 4: if if the deal doesn't go through next June, they
[4:42] Speaker 4: do collect a nice, big fat check for seven billion
[4:45] Speaker 4: dollars apart from, of course, the six hundred and fifty
[4:47] Speaker 4: million dollar ticking fee that goes into effect on October first.
[4:50] Speaker 2: Right, and that would be Paramount guidance paying for it
[4:53] Speaker 2: in you know, a lot of that backed by Larry Ellison.
[4:56] Speaker 3: When it comes down to it.
[4:58] Speaker 2: We did hear though, that the you K regulators have
[5:01] Speaker 2: approved the Paramount Warner Brothers deal. Does that move the
[5:05] Speaker 2: needle at all, Gita or is it just.
[5:06] Speaker 3: A duck in a box?
[5:08] Speaker 4: Not at all, Scarlett. Really, the biggest thing right now
[5:11] Speaker 4: for the Warner Brothers and the Paramount deal are the
[5:14] Speaker 4: you know, the the twelve state ages who have filed
[5:18] Speaker 4: a motion to basically block this merger, and it looks
[5:21] Speaker 4: like the judge everything seems to be kind of favoring
[5:24] Speaker 4: the courts right now. So so Paramount, is it really
[5:27] Speaker 4: in a difficult situation at this point, Ken the I've been.
[5:30] Speaker 5: Trying to read up on this, But is there any
[5:32] Speaker 5: type of out of court settlement that Paramount could get
[5:36] Speaker 5: that would be still preserve the merits of the deal
[5:39] Speaker 5: while you know, satisfying these states.
[5:42] Speaker 3: Yeah, it's it's really a double ed sword.
[5:44] Speaker 4: So you know, if we listen to Rob Bonta, who is,
[5:48] Speaker 4: you know, the age in California, he really seems to
[5:52] Speaker 4: not be favoring a settlement. Structural remedies are always possible, Paul,
[5:56] Speaker 4: But then, as you pointed out, does that then get
[5:59] Speaker 4: Paramount the six billion dollars in synergies that they've promised.
[6:03] Speaker 4: It's really going to be a very very tough road.
[6:06] Speaker 4: The obviously, Paramount doesn't want to give up any of
[6:09] Speaker 4: its assets. They want to get away with as few
[6:12] Speaker 4: structural remedies as possible, but they might have to, you know,
[6:15] Speaker 4: actually end up selling a big portion of the TV
[6:18] Speaker 4: network's business or maybe even some of the studio assets.
[6:22] Speaker 2: So GITA operationally, then Warner Brothers Discovery, paramount S Guidance
[6:27] Speaker 2: have to continue to move forward as independent companies, right,
[6:30] Speaker 2: Like they can't really can they do a lot in
[6:32] Speaker 2: terms of you know, looking at operations and seeing where
[6:35] Speaker 2: their synergies or they just have to continue as is.
[6:39] Speaker 4: Yeah, so they are continuing as is, and actually ironically
[6:42] Speaker 4: they both are doing kind of okay, just kind of
[6:44] Speaker 4: given the situation. So Paramount, what we saw in their
[6:48] Speaker 4: results was they actually posted pretty strong profits and a
[6:51] Speaker 4: lot of that was driven by the synergies with the
[6:54] Speaker 4: sky Dance transactions. So what we saw and what really
[6:56] Speaker 4: I think surprised even the street, was that if you
[6:58] Speaker 4: looked at the TV network business, we've seen margins of
[7:01] Speaker 4: about twenty five percent just with all of those synergies
[7:04] Speaker 4: in the business, you know, they kind of took that
[7:06] Speaker 4: up to almost thirty five percent. So there's obviously a
[7:09] Speaker 4: lot of cost savings to be extracted, which is really
[7:11] Speaker 4: what the street is banking on with the whole Warner
[7:13] Speaker 4: Brothers Discovery transactions, since they've outlined about six billion dollars
[7:17] Speaker 4: in cost savings on the Warner Brothers side as well.
[7:19] Speaker 4: We saw again, you know, they're managing their decline in
[7:22] Speaker 4: the TV networks business pretty well. Streaming has been an
[7:25] Speaker 4: absolute standout scarlet. They've really really made fantastic progress when
[7:29] Speaker 4: it comes to profitability. You know, they posted margins of
[7:32] Speaker 4: about seventeen percent, and remember their long term target is
[7:35] Speaker 4: twenty percent, so they're really in pretty good shape. The
[7:37] Speaker 4: studio is a little bit of an up and down,
[7:39] Speaker 4: but we do have a pretty exciting line up. I mean,
[7:41] Speaker 4: we have Done coming a little bit later this year,
[7:43] Speaker 4: and then of course the Digger with Tom Cruise, which
[7:45] Speaker 4: is you know, expected to do really well, so that'd
[7:48] Speaker 4: be interesting.
[7:49] Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
[7:56] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[8:00] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[8:03] Speaker 1: Auto with the Blueberg Business app. Listen on demand wherever
[8:06] Speaker 1: you get your podcasts, or watch us live on YouTube.
[8:10] Speaker 5: Let's get back to the tech space, because why not.
[8:12] Speaker 5: You can't stay away from tech very long because that's
[8:15] Speaker 5: what's driving the bus here. I noticed at Google, which
[8:19] Speaker 5: some people call Alphabet, they've had some changes in some
[8:22] Speaker 5: of their AI management ranks. I was told by a
[8:27] Speaker 5: guest from Franklin Templeton, who does a lot of this
[8:29] Speaker 5: tech investing. Don't worry. It's okay. He's not going to
[8:32] Speaker 5: be wandering far. But I want to talk to man
[8:34] Speaker 5: Deep Sing because he knows all the tech stuff. Yes,
[8:36] Speaker 5: he does work intelligence. Man Deep, we had some looks
[8:39] Speaker 5: like some management changes at the all important AI business
[8:44] Speaker 5: within Alphabet. Tell us what's going on there and whether
[8:47] Speaker 5: investors should be concerned.
[8:49] Speaker 6: Yeah, these are a couple of high profile departures after
[8:54] Speaker 6: you know, recently, I believe four weeks back, there were
[9:00] Speaker 6: a couple of other names that had departed. One went
[9:03] Speaker 6: to open Ai. So the fact that Google is losing talent,
[9:07] Speaker 6: I mean, these are people who have been there for
[9:09] Speaker 6: very long. It's definitely not a good sign if you
[9:13] Speaker 6: ask me. And plus their model release has been delayed.
[9:17] Speaker 6: So the Gemini three point five version model pro one
[9:21] Speaker 6: has been delayed, and from what we have gathered, the
[9:25] Speaker 6: Gemini four is most likely going to get delayed. So
[9:29] Speaker 6: this is a race about the models. And if you're
[9:32] Speaker 6: not releasing a frontier model, and Anthropic and open Ai
[9:37] Speaker 6: keep creating all the news about how their models can
[9:40] Speaker 6: have you know, any system out there that's definitely feels like,
[9:47] Speaker 6: you know, Google is missing at least the model lead
[9:50] Speaker 6: right now, and it could change, but to my mind,
[9:54] Speaker 6: this is not a positive and I think the stock
[9:58] Speaker 6: reflected that sentiment.
[10:00] Speaker 2: So we hear that they're going to really centralize their
[10:05] Speaker 2: leadership to California that kind.
[10:07] Speaker 3: Of is the seat of everything, even though we know that,
[10:10] Speaker 3: is it?
[10:11] Speaker 2: Larry Pager Surrey Brinn, who's been moving to outside of California.
[10:14] Speaker 3: Florida, I don't know, Nevada, Nevada. Yeah, he went to village. Yeah, yeah,
[10:19] Speaker 3: exactly Incline.
[10:20] Speaker 2: Village, which is basically California, but just across the border.
[10:23] Speaker 2: What does that say about California as the center of
[10:28] Speaker 2: tech talent and how whatever efforts you want to make
[10:32] Speaker 2: to try to decentralize that to spread it out to
[10:34] Speaker 2: other places, maybe lower cost places.
[10:36] Speaker 3: It's it's kind of a fool's errant, isn't it.
[10:38] Speaker 1: Yeah?
[10:39] Speaker 6: And look right now, it feels like anthropic and open
[10:43] Speaker 6: AI are getting the big names when it comes to
[10:47] Speaker 6: you know, the folks who are actually training these models,
[10:51] Speaker 6: and you know the scaling laws that are driving all
[10:55] Speaker 6: the development. So from that perspective, I mean, Google is
[10:58] Speaker 6: still pretty large firm and they've got you know, folks
[11:02] Speaker 6: all over but there was a time when Google and
[11:04] Speaker 6: Meta used to be the magnet for the top talent.
[11:08] Speaker 6: It feels like right now it's Anthropic and open Ai,
[11:14] Speaker 6: and the departures kind of suggest that. I mean, even
[11:18] Speaker 6: though Google has a lot going for them in terms
[11:20] Speaker 6: of infrastructure, the TPUs and all those are positives, but
[11:25] Speaker 6: when it comes to the model race, I mean, that's
[11:27] Speaker 6: why Mark Zuckerberg spent millions to form that superintelligence unit
[11:33] Speaker 6: with fifty people, but fifty of the smartest people and
[11:36] Speaker 6: still Meta doesn't have a model that is comparable to
[11:40] Speaker 6: the Frontier lab. So it is a very hard problem
[11:43] Speaker 6: to solve in terms of catching up to the frontier
[11:46] Speaker 6: and I feel once you slip, it will get hard.
[11:50] Speaker 2: So just to follow upon that, if you don't come
[11:52] Speaker 2: out with the frontier model and you have this talent,
[11:54] Speaker 2: is it just a matter of time before that talent
[11:56] Speaker 2: then goes to open Ai Nthropic out of frustration that
[11:59] Speaker 2: they're not making more concrete progress.
[12:01] Speaker 6: I mean, it sounds like, especially with Jeff Dean and
[12:04] Speaker 6: a couple of guys that left, you know this week,
[12:09] Speaker 6: there was an element of frustration, and that's been the
[12:12] Speaker 6: case with Google since the chatchipt days they invented the transformer,
[12:16] Speaker 6: Why weren't they the first ones to release a product?
[12:19] Speaker 6: So it keeps coming back with this management team. It's like,
[12:23] Speaker 6: you're not releasing new products fast enough. And yes, they
[12:28] Speaker 6: have to defend that search business, which is the cash cow,
[12:31] Speaker 6: which is what feeds everything. So I can see both sides,
[12:35] Speaker 6: but when it comes to talent, they'll go to the
[12:38] Speaker 6: place where they see, you know, a lot happening in
[12:40] Speaker 6: terms of new products, model development, and so maybe Google
[12:44] Speaker 6: is being conservative on the model side for a good reason.
[12:48] Speaker 6: They have to defend search.
[12:49] Speaker 5: I think what we're all coming to appreciate more is
[12:51] Speaker 5: this stuff's expensive to do this stuff now and Google's
[12:55] Speaker 5: out today with a twenty five billion dollar bond off.
[12:57] Speaker 3: Yeah, they can reach capital.
[12:59] Speaker 2: Snap the fingers.
[13:00] Speaker 3: Yeah, Heaven like the Anthropics.
[13:02] Speaker 5: And the opening as so the world. I mean, at
[13:04] Speaker 5: some point they got to start hitting the capital markets,
[13:07] Speaker 5: I would think.
[13:08] Speaker 6: I mean, the interesting anecdote here is a lot of
[13:12] Speaker 6: Google's cloud revenue comes from Anthropic running their workloads on Google.
[13:18] Speaker 6: In fact, Entropics models are even trained on Google TPUs,
[13:22] Speaker 6: so Google is the infrastructure provider for Entropic. But at
[13:26] Speaker 6: the same time, they are competing at the model there.
[13:29] Speaker 6: So it is kind of quite intertwined when you think
[13:33] Speaker 6: about this race, and it's very concentrated. But I don't
[13:37] Speaker 6: think Google cares about it being expensive.
[13:39] Speaker 2: Yeah, before we let you go, there is a viewer
[13:42] Speaker 2: I should say, a listener question for you today. It
[13:45] Speaker 2: has to do with Advanced micro Devices, which is hired
[13:47] Speaker 2: today by about one point eight percent, but it did
[13:49] Speaker 2: plunge about seven percent after its latest set of results.
[13:52] Speaker 3: How come AMD stock fell flat.
[13:54] Speaker 2: When it reported earnings after the market clothes on Tuesday.
[13:58] Speaker 2: What's your read on those results? I investors reacted negatively.
[14:03] Speaker 6: I mean right now when we hear about how supply
[14:07] Speaker 6: constrained the market is. And you know, we keep seeing
[14:10] Speaker 6: with Nvidio's numbers every time they report, they just beat
[14:14] Speaker 6: and raise in a big way. With AMD, we didn't
[14:17] Speaker 6: see that big beat and rais and that's how the
[14:20] Speaker 6: whisper numbers are always higher. You see the reaction with
[14:24] Speaker 6: Sands today, Sock is down. They had phenomenal growth quarters.
[14:28] Speaker 6: So that's where you know, expectations and even the consensus
[14:32] Speaker 6: numbers are much lower when you compare to what the
[14:36] Speaker 6: companies are measured against and Indy had a good quarter,
[14:39] Speaker 6: but then it wasn't something to wow, you know, and
[14:42] Speaker 6: have that snap positive reaction.
[14:45] Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
[14:52] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[14:56] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[14:59] Speaker 1: Auto with the Work Business Up. Listen on demand wherever
[15:02] Speaker 1: you get your podcasts, or watch us live on YouTube.
[15:06] Speaker 5: Hurts Global they put out some numbers that beat Wall
[15:09] Speaker 5: Streets estimates six flags. Their shares are down as a
[15:12] Speaker 5: water park operator reported revenue for the quarter that missed estimates.
[15:16] Speaker 5: Let's break it down with Jody Louri. She's a senior
[15:19] Speaker 5: credit analyst of Bloomberg Intelligence. She follows all these leisure companies.
[15:23] Speaker 5: Let's first start with Hurts because I am a gold
[15:26] Speaker 5: member at Hurts Global.
[15:28] Speaker 3: I'm proud of it.
[15:29] Speaker 5: I'm proud of it. Yes, what's going on? It hurts Jody.
[15:33] Speaker 7: I mean, those are the priorities ball so's the thing
[15:38] Speaker 7: that's interesting about Hurts is that they were very optimistic
[15:41] Speaker 7: on their call. They talked about franchising as the next
[15:45] Speaker 7: new endeavor, next big thing, how it was going to
[15:48] Speaker 7: really help the company sort of get better margins and
[15:52] Speaker 7: be similar to how the hotels do franchising or asset
[15:55] Speaker 7: late models. But what's so interesting about it is when
[15:59] Speaker 7: you set the bar so low on a company, it's
[16:02] Speaker 7: very easy to beat expectations. We a few weeks ago
[16:06] Speaker 7: wrote a few pieces on the company that were less
[16:10] Speaker 7: positive in terms of just the path forward to liquidity
[16:14] Speaker 7: and to the ability to sort of execute on this
[16:19] Speaker 7: turnaround that they're doing.
[16:22] Speaker 2: So talk a little bit about the unusual way that
[16:25] Speaker 2: they're going to achieve this turnaround because they had a
[16:29] Speaker 2: debt raise, but they also sold shares that allow people
[16:33] Speaker 2: to short it. I didn't quite understand it, but bottom line,
[16:37] Speaker 2: they needed money.
[16:39] Speaker 3: Right Scarlett.
[16:40] Speaker 7: It was not the most attractive of situations. It basically
[16:44] Speaker 7: pushed unsecured holders down further in the capital structure, and
[16:48] Speaker 7: it's a convertible note that is senior, and then also
[16:54] Speaker 7: had that ability that people could hedge or they could
[16:57] Speaker 7: short it. They weren't actually receiving any of the proceeds
[17:00] Speaker 7: from issuing additional shares. They only received a nominal amount
[17:05] Speaker 7: of money from the banks that did the offering, and
[17:08] Speaker 7: so that was that was one of those situations that
[17:11] Speaker 7: you kind of scratch your head and you say, okay,
[17:13] Speaker 7: about a year ago, the company's equity actually did really
[17:16] Speaker 7: well because you had a few activists involved in the company,
[17:19] Speaker 7: and at that time they could have in theory issued
[17:21] Speaker 7: equity and gotten some money for it. Here they were
[17:24] Speaker 7: doing it for free. Now, what's sort of interesting about
[17:29] Speaker 7: Hurts is that they've done a few senior convertible bond
[17:33] Speaker 7: offerings over the past year and a half years. And
[17:37] Speaker 7: the capital.
[17:38] Speaker 4: Structure is just ugly.
[17:39] Speaker 7: It's not one that makes you write home to mom about.
[17:43] Speaker 5: So I'm looking at the capital structure that's it's definitely ugly.
[17:46] Speaker 5: So and there's really no cash flow with no EBIT thought. Here,
[17:49] Speaker 5: they used to crank out three four billion dollars of
[17:51] Speaker 5: EBI thought per year, now just a couple of hundred.
[17:55] Speaker 3: What happened.
[17:57] Speaker 7: What didn't happen? Pop So in twenty twenty two, we
[18:01] Speaker 7: sort of said that twenty twenty two was the best
[18:03] Speaker 7: it was going to be for both Hurts and Avis,
[18:06] Speaker 7: and they hit peaks in terms of even that generation.
[18:10] Speaker 7: And that was a combination of coming off of the
[18:12] Speaker 7: pandemic of people revenge spending, of them being able to
[18:17] Speaker 7: access use vehicles at such a rate that was more attractive,
[18:21] Speaker 7: and also they had significantly reduced their fleets at an
[18:27] Speaker 7: attractive rate, and Hurts had come back from or structuring.
[18:31] Speaker 7: Now after twenty twenty two, they both said, oh, let's
[18:35] Speaker 7: give some money back to shareholders by way of buybacks,
[18:38] Speaker 7: and after that.
[18:40] Speaker 3: It's gotten worse and worse.
[18:41] Speaker 7: Now Hurts of course had a couple of hiccups. They've
[18:45] Speaker 7: definitely been a little bit more experimental than Avus and
[18:48] Speaker 7: in terms of what they've tried to do to right
[18:49] Speaker 7: side the business or attract customers attract investors. One of
[18:54] Speaker 7: them was when they bought into Tesla and Evs and
[18:57] Speaker 7: they didn't understand that if your visiting a national park
[19:01] Speaker 7: in Wyoming, you're not necessarily comfortable having a Tesla, So
[19:05] Speaker 7: having a lot of Tesla's in your fleet might not
[19:07] Speaker 7: necessarily sit nicely with people, and so you had that.
[19:12] Speaker 7: Now fast forward, they're well past that. But they brought
[19:15] Speaker 7: in a new CEO and probably what you'd say is
[19:17] Speaker 7: the eleventh hour of needing this help. And while they
[19:21] Speaker 7: guide for positive Ebidad this year, I would sort of
[19:24] Speaker 7: argue that the path to get there is a little
[19:26] Speaker 7: bit tenuous, particularly when they're dealing with auto recalls when
[19:31] Speaker 7: they're dealing with just these sort of hiccups that are unexpected.
[19:35] Speaker 2: Yeah, I know a lot of people who actually bought
[19:38] Speaker 2: used Tesla's from Hurts Okay because they needed to get
[19:41] Speaker 2: rid of or trim down their fleet. Jody, before we
[19:44] Speaker 2: let you go, we got to ask you about six Flags,
[19:46] Speaker 2: the amusement park company, the water park operator. They reported results.
[19:50] Speaker 2: The stock is down eighteen percent. What are you looking
[19:54] Speaker 2: at from a credit perspective?
[19:57] Speaker 7: The scarlet. What's so interesting that six Flags is is
[20:00] Speaker 7: it definitely struck a little bit more positive tone in
[20:04] Speaker 7: my view when you look at the company on a
[20:07] Speaker 7: same park basis. By that we mean is that they
[20:09] Speaker 7: got rid of eight parks, so they sold seven and
[20:11] Speaker 7: they closed one last year, and so stripping out those
[20:14] Speaker 7: parks that aren't operating, it actually was relatively positive. Now,
[20:18] Speaker 7: there are caveats that, for instance, the adjusted EVADAD numbers,
[20:22] Speaker 7: they had a lot of non cash buybacks. There are
[20:24] Speaker 7: non cash add ins that somehow appeared out of nowhere
[20:27] Speaker 7: that they didn't have last year. And so you say, okay,
[20:31] Speaker 7: were those just sitting there and they were waiting for
[20:33] Speaker 7: a time to kind of plug them in I'm not
[20:35] Speaker 7: quite sure, but I think more importantly, they know they're
[20:40] Speaker 7: at a time when they can sort of see a
[20:43] Speaker 7: path forward. But I think the expectation is that with
[20:47] Speaker 7: the Canada wildfires, with consumer health being a little bit rocky,
[20:52] Speaker 7: that the sort of positives that we saw in second
[20:56] Speaker 7: quarter might not necessarily be sustainable. But from a liquidity perspective,
[21:00] Speaker 7: if they did buy some additional time with their debt
[21:02] Speaker 7: issuance earlier this year, and with the fact that they're
[21:05] Speaker 7: able to meet their Georgia Park put payment which comes
[21:10] Speaker 7: to in a year or in January, I should say so,
[21:14] Speaker 7: there are some bright spots to it, but I think
[21:16] Speaker 7: it's really early stages, and so as a credit anast,
[21:19] Speaker 7: they still can't sit comfortably with the name. But I
[21:22] Speaker 7: do see a scenario when they could get there. Now.
[21:25] Speaker 7: Four times net leverage target is a little bit far fetched,
[21:29] Speaker 7: something we've heard before from prior management, and not something
[21:32] Speaker 7: we see anytime soon.
[21:34] Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
[21:41] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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[21:55] Speaker 5: We had some restaurant and numbers come out. Restaurant brands say,
[21:59] Speaker 5: it'll own a whole bunch of different brands like Burger King,
[22:03] Speaker 5: Tim Hortons, Popeyes, all kinds of brands there, and they
[22:06] Speaker 5: reported some numbers that kind of beat estimates. So some
[22:08] Speaker 5: pretty solid numbers there. I think Burger Can actually did
[22:12] Speaker 5: well as well. Michael Haylen joins his senior restaurant and
[22:15] Speaker 5: food service analysts for Bloomberg Intelligence. Hey, Mike, talk to
[22:17] Speaker 5: us about food restaurant brands. What did you What do
[22:20] Speaker 5: we learn about the restaurant business today?
[22:23] Speaker 3: Yeah, it was a good report.
[22:24] Speaker 8: You know, Burger King US, you know, had a great
[22:28] Speaker 8: comp high cycle digit comp Man, they're doing a really
[22:31] Speaker 8: nice job. They are taking to share in service business
[22:35] Speaker 8: here in the United States. International, which has been very
[22:40] Speaker 8: strong for this company for for quite some time, continues
[22:43] Speaker 8: to do really well with you know, just newer restaurants
[22:48] Speaker 8: and less competition overseas. But you know, Tim Hortons was
[22:54] Speaker 8: about flat. You know that that that chain has done
[22:57] Speaker 8: really well in Canada for the last two years and
[22:59] Speaker 8: now it's it's it's lapping some difficult comparisons, and so
[23:03] Speaker 8: the street might have liked to see a little bit
[23:05] Speaker 8: better result there, and Popeyes continues to struggle.
[23:09] Speaker 6: So as we see.
[23:11] Speaker 8: Quite often with these multi brand companies. You know, not
[23:16] Speaker 8: all chains are firing at firing at the same time,
[23:21] Speaker 8: but you know, generally with the Burger King and International
[23:25] Speaker 8: doing well, and then with the refranchising of Burger King,
[23:29] Speaker 8: restaurants here in the United States are seeing some pretty
[23:31] Speaker 8: good ebadam margin expansion. So I'd say overall, it's a
[23:34] Speaker 8: pretty good report.
[23:35] Speaker 2: And of course I like the restaurant brands ticker it's QSR,
[23:38] Speaker 2: short for quick service Restaurants. Michael, How do Burger King
[23:43] Speaker 2: zumbers in particular compare against McDonald's, which came out with
[23:46] Speaker 2: results earlier this week and we're kind of disappointing to
[23:49] Speaker 2: the point where they needed to change leadership as well.
[23:54] Speaker 8: Yeah, and I think there's there's when you see McDonald's
[23:57] Speaker 8: slow that tends to help other QSR chains. But you know,
[24:02] Speaker 8: I would suggest most of this gain here at Burger
[24:05] Speaker 8: King is due to the changes that they've made over
[24:09] Speaker 8: the last few years. Patrick Doyle, chairman of the board,
[24:13] Speaker 8: You know, brought into this chain some years ago and
[24:17] Speaker 8: has done a really good job of mentoring the management
[24:21] Speaker 8: team and helping them turn that business around.
[24:25] Speaker 6: You know.
[24:26] Speaker 8: You know, one thing I thought was interesting that McDonald's
[24:29] Speaker 8: mentioned on their call was that they need to get
[24:31] Speaker 8: more families back in the stores. And you know, it
[24:35] Speaker 8: sure seems like they mentioned that because Burger King seems
[24:39] Speaker 8: to be taking some share there. They pointed out how
[24:42] Speaker 8: strong hids meal growth was over the last year, and
[24:47] Speaker 8: so Burger King really seems to be firing all cylinders here.
[24:51] Speaker 8: There was a lot of opportunity to improve the quality
[24:54] Speaker 8: of the stores, which they're doing with the remodels, to
[24:57] Speaker 8: improve the quality of the product, which they've done with
[25:01] Speaker 8: the Whopper, and you know, now they're really focused on
[25:04] Speaker 8: the operations and getting people in and out of the
[25:06] Speaker 8: store quickly.
[25:07] Speaker 3: Okay, speaking of Burger Joints.
[25:10] Speaker 2: Yesterday, Starboard Value CEO Jeff Smith was on Bloomberg Deals,
[25:14] Speaker 2: telling Danny Berger exclusively that the firm has built a
[25:17] Speaker 2: new stake in Shakeshack and he described himself as probably
[25:21] Speaker 2: the biggest single shareholder in the company active shareholder, describing
[25:26] Speaker 2: it as a great undervalued brand and kind of what
[25:28] Speaker 2: he wants to see, is more franchising domestically you've been
[25:32] Speaker 2: looking at Shakeshack.
[25:33] Speaker 3: Is this something that can be done quickly?
[25:37] Speaker 8: No, this is something This is really interesting because you know, hey,
[25:42] Speaker 8: I would say this is not the standard activist playbook.
[25:46] Speaker 8: The playbook is typically find a management team that's been underperforming,
[25:50] Speaker 8: replace them, and get the core business running more effectively
[25:56] Speaker 8: before you start to accelerate growth.
[25:59] Speaker 5: Right.
[25:59] Speaker 8: And so we see a chain here with with some
[26:02] Speaker 8: some headwinds and some issues, and that isn't part of
[26:05] Speaker 8: their formula this time.
[26:06] Speaker 6: Right.
[26:07] Speaker 8: They hired Rob Lynch at Papa John some years ago
[26:11] Speaker 8: when they were involved in that stock.
[26:13] Speaker 3: So that's that's the first.
[26:14] Speaker 8: Thing that was kind of interesting. The second part is
[26:16] Speaker 8: franchising is a completely different muscle. Right. This is not
[26:20] Speaker 8: something that you can just you know, you wake up
[26:22] Speaker 8: one day and decide to do and people just line
[26:26] Speaker 8: up in open stores, right Like, this is a completely
[26:29] Speaker 8: new muscle. It's a relationship and a marketing business. They're
[26:32] Speaker 8: going to have to hire corporate corporate team members to
[26:37] Speaker 8: actually grow this business. And then it's not something that's
[26:40] Speaker 8: going to hit the P and L for eighteen months, right,
[26:42] Speaker 8: So it takes about that long to get restaurants approved, permitted, approved,
[26:49] Speaker 8: and built, you know. And so this is a really
[26:54] Speaker 8: curious investment in our view, because who knows what the
[26:57] Speaker 8: restaurant in business is going to look like eighteen that's
[26:59] Speaker 8: right from now when this catalyst actually starts to kick.
[27:02] Speaker 5: In thirty seconds, Mike, when is In and Out Burger
[27:05] Speaker 5: are gonna be public?
[27:08] Speaker 8: Last I've heard is that that is not what they
[27:12] Speaker 8: want to do.
[27:13] Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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