The Walt Disney Company (NYSE: DIS) today reported earnings for
its third quarter ended June 29, 2024.
Financial Results for the
Quarter:
- Revenues for the quarter increased to $23.2 billion from $22.3
billion in the prior-year quarter.
- Income (loss) before income taxes improved to income of $3.1
billion in the current quarter from a loss of $0.1 billion in the
prior-year quarter.
- Diluted earnings per share (EPS) was $1.43 for the current
quarter compared to a loss of $0.25 in the prior-year quarter.
- Excluding certain items(1), diluted EPS for the quarter
increased to $1.39 from $1.03 in the prior-year quarter.
Key Points:
- In the third fiscal quarter of 2024, we achieved strong
double-digit percentage growth of 19% for total segment operating
income(1) and 35% for adjusted EPS(1).
- Entertainment segment operating income nearly tripled year over
year in Q3, due to significantly improved results at
Direct-to-Consumer and Content Sales/Licensing and Other.
- Entertainment Direct-to-Consumer’s better-than-expected Q3
performance, combined with our profitable results at ESPN+,
resulted in positive profitability at our combined streaming
businesses(1) for the first time and one quarter ahead of our
previous guidance of achieving profitability in Q4.
- The success of Inside Out 2, which became the highest-grossing
animated film of all time, demonstrated the renewed creative
strength of our studios and drove strong outperformance at Content
Sales/Licensing and Other. Surrounding Inside Out 2’s release, the
original Inside Out (2015) helped drive more than 1.3 million
Disney+ sign-ups and generated over 100 million views globally
since the first Inside Out 2 teaser trailer dropped.
- ESPN operating income grew by 4%, while Star India results were
lower versus the prior year, resulting in Sports segment operating
income declining by 6% in Q3. Domestic ESPN advertising revenue
increased 17% year over year.
- Q3 Experiences revenue increased by 2% and segment operating
income decreased by 3%. Segment revenue growth was impacted by
moderation of consumer demand towards the end of Q3 that exceeded
our previous expectations. Despite this demand dynamic, other parts
of the portfolio delivered improved results versus the prior year,
including Disney Cruise Line, Consumer Products and some of our
international sites. While results at Domestic Parks decreased
modestly in the quarter, attendance was comparable year over year
and per capita spending was slightly up.
(1)
Diluted EPS excluding certain items (also
referred to as adjusted EPS), total segment operating income and
DTC streaming businesses operating income (loss) are non-GAAP
financial measures. The most comparable GAAP measures are diluted
EPS, income (loss) before income taxes and segment operating income
for the Entertainment segment and Sports segment, respectively. See
the discussion on pages 17 through 21 for how we define and
calculate these measures and a quantitative reconciliation thereof
to the most directly comparable GAAP measures.
Guidance and Outlook:
- As a result of our strong consolidated financial performance in
the third quarter, and supported by our balanced portfolio of
assets, our new full year adjusted EPS(1) growth target is now
30%.
- We continue to focus on driving incremental cost savings above
and beyond our previously stated target as we deliver on our
strategic priorities.
- We remain on track for the profitability of our combined
streaming businesses to improve in Q4, with both Entertainment DTC
and ESPN+ expected to be profitable in the quarter. We continue to
feel optimistic about our trajectory, with multiple building blocks
for improving margins over the coming years.
- In Q4, we expect Disney+ Core subscribers to grow
modestly.
- At Content Sales/Licensing and Other, we expect profitability
in Q4 to look roughly similar to Q3, and we expect profitability
for the full fiscal year 2024.
- At our Experiences segment, we expect that the demand
moderation we saw in our domestic businesses in Q3 could impact the
next few quarters. While we are actively monitoring attendance and
guest spending and aggressively managing our cost base, we expect
Q4 Experiences segment operating income to decline by mid single
digits versus the prior year, reflecting these underlying dynamics
as well as impacts at Disneyland Paris from a reduction in normal
consumer travel due to the Olympics, and some cyclical softening in
China.
- So far this quarter, we continue to see strong demand at Disney
Cruise Line, although results in fiscal Q4 will reflect pre-launch
expenses for the Disney Adventure and Disney Treasure.
Message From Our CEO:
“Our performance in Q3 demonstrates the progress we’ve made
against our four strategic priorities across our creative studios,
streaming, sports, and Experiences businesses,” said Robert A.
Iger, Chief Executive Officer, The Walt Disney Company. “This was a
strong quarter for Disney, driven by excellent results in our
Entertainment segment both at the box office and in DTC, as we
achieved profitability across our combined streaming businesses(1)
for the first time and a quarter ahead of our previous guidance.
Despite softer third quarter performance in our Experiences
segment, adjusted EPS(1) for the company was up 35%, and with our
complementary and balanced portfolio of businesses, we are
confident in our ability to continue driving earnings growth
through our collection of unique and powerful assets.”
(1)
Diluted EPS excluding certain items (also
referred to as adjusted EPS) and DTC streaming businesses operating
income (loss) are not financial measure defined by GAAP. The most
comparable GAAP measures are diluted EPS and segment operating
income for the Entertainment segment and Sports segment,
respectively. See the discussion on pages 17 through 21 for how we
define and calculate these measures and a quantitative
reconciliation of the measures thereof to the most directly
comparable GAAP measures and why the Company is not providing a
forward-looking quantitative reconciliation of diluted EPS
excluding certain items to the most comparable GAAP measure.
SUMMARIZED FINANCIAL RESULTS
The following table summarizes third quarter results for fiscal
2024 and 2023:
Quarter Ended
Nine Months Ended
($ in millions, except per share
amounts)
June 29, 2024
July 1, 2023
Change
June 29, 2024
July 1, 2023
Change
Revenues
$
23,155
$
22,330
4
%
$
68,787
$
67,657
2
%
Income (loss) before income taxes
$
3,093
$
(134
)
nm
$
6,621
$
3,762
76
%
Total segment operating income(1)
$
4,225
$
3,559
19
%
$
11,946
$
9,887
21
%
Diluted EPS
$
1.43
$
(0.25
)
nm
$
2.46
$
1.14
>100
%
Diluted EPS excluding certain items(1)
$
1.39
$
1.03
35
%
$
3.83
$
2.94
30
%
Cash provided by operations
$
2,602
$
2,802
(7
)%
$
8,453
$
5,064
67
%
Free cash flow(1)
$
1,237
$
1,637
(24
)%
$
4,530
$
1,469
>100
%
(1)
Total segment operating income, diluted EPS excluding certain
items and free cash flow are non-GAAP financial measures. The most
comparable GAAP measures are income (loss) before income taxes,
diluted EPS and cash provided by operations, respectively. See the
discussion on pages 17 through 21 for how we define and calculate
these measures and a reconciliation thereof to the most directly
comparable GAAP measures.
SUMMARIZED SEGMENT FINANCIAL RESULTS
The following table summarizes third quarter segment revenue and
operating income for fiscal 2024 and 2023:
Quarter Ended
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
June 29, 2024
July 1, 2023
Change
Revenues:
Entertainment
$
10,580
$
10,127
4
%
$
30,357
$
31,111
(2
)%
Sports
4,558
4,335
5
%
13,705
13,201
4
%
Experiences
8,386
8,198
2
%
25,911
24,389
6
%
Eliminations(2)
(369
)
(330
)
(12
)%
(1,186
)
(1,044
)
(14
)%
Total revenues
$
23,155
$
22,330
4
%
$
68,787
$
67,657
2
%
Segment operating income:
Entertainment
$
1,201
$
408
>100
%
$
2,856
$
1,208
>100
%
Sports
802
854
(6
)%
1,477
1,484
—
%
Experiences
2,222
2,297
(3
)%
7,613
7,195
6
%
Total segment operating income(1)
$
4,225
$
3,559
19
%
$
11,946
$
9,887
21
%
(1)
Total segment operating income is a non-GAAP financial measure.
The most comparable GAAP measure is income (loss) before income
taxes. See the discussion on pages 17 through 21.
(2)
Reflects fees paid by Direct-to-Consumer to Sports and other
Entertainment businesses for the right to air their linear networks
on Hulu Live and fees paid by Entertainment to Sports to program
sports on the ABC Network and Disney+.
DISCUSSION OF THIRD QUARTER SEGMENT RESULTS
Entertainment
Revenue and operating income for the Entertainment segment are
as follows:
Quarter Ended
Change
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Change
Revenues:
Linear Networks
$
2,663
$
2,872
(7
)%
$
8,231
$
9,073
(9
)%
Direct-to-Consumer
5,805
5,045
15
%
16,993
14,850
14
%
Content Sales/Licensing and Other
2,112
2,210
(4
)%
5,133
7,188
(29
)%
$
10,580
$
10,127
4
%
$
30,357
$
31,111
(2
)%
Operating income (loss):
Linear Networks
$
966
$
1,025
(6
)%
$
2,954
$
3,314
(11
)%
Direct-to-Consumer
(19
)
(505
)
96
%
(110
)
(2,076
)
95
%
Content Sales/Licensing and Other
254
(112
)
nm
12
(30
)
nm
$
1,201
$
408
>100
%
$
2,856
$
1,208
>100
%
The increase in Entertainment operating income in the current
quarter compared to the prior-year quarter was due to improved
results at Direct-to-Consumer and Content Sales/Licensing and
Other.
Linear Networks
Linear Networks revenues and operating income are as
follows:
Quarter Ended
Change
($ in millions)
June 29, 2024
July 1, 2023
Revenue
Domestic
$
2,145
$
2,302
(7) %
International
518
570
(9) %
$
2,663
$
2,872
(7) %
Operating income
Domestic
$
682
$
692
(1) %
International
157
157
— %
Equity in the income of investees
127
176
(28) %
$
966
$
1,025
(6) %
Domestic
Domestic operating income in the current quarter was comparable
to the prior-year quarter due to:
- A decline in advertising revenue attributable to a decrease in
impressions, partially offset by higher rates. The decrease in
impressions was due to lower average viewership.
- Lower affiliate revenue due to fewer subscribers including the
impact of the non-renewal of carriage of certain networks by an
affiliate, partially offset by higher effective rates
- A reduction in programming and production costs attributable to
a lower average cost mix of programming and a decrease in program
write-downs
- Lower marketing costs
Equity in the Income of
Investees
Income from equity investees decreased due to lower income from
A+E Television Networks (A+E) attributable to a decrease in
advertising revenue, higher marketing costs and lower affiliate
revenue.
Direct-to-Consumer
Direct-to-Consumer revenues and operating loss are as
follows:
Quarter Ended
Change
($ in millions)
June 29, 2024
July 1, 2023
Revenue
$
5,805
$
5,045
15
%
Operating loss
$
(19
)
$
(505
)
96
%
The improvement in operating results in the current quarter
compared to the prior-year quarter was due to:
- Subscription revenue growth attributable to higher rates due to
increases in retail pricing and subscriber growth at Disney+ Core
and, to a lesser extent, Hulu, partially offset by an unfavorable
foreign exchange impact
- An increase in advertising revenue primarily due to higher
impressions at Disney+ and Hulu, partially offset by lower rates.
Higher impressions at Disney+ reflected an increase at Disney+ Core
and the benefit of airing the International Cricket Council (ICC)
T20 World Cup on Disney+ Hotstar in the current quarter. The
previous ICC T20 World Cup occurred in the first quarter of fiscal
2023
- Higher marketing costs
- An increase in programming and production costs attributable to
the ICC T20 World Cup and higher subscriber-based fees for
programming the Hulu Live TV service, which were due to rate
increases, partially offset by lower costs for non-sports content
available on Disney+ Core
Key Metrics - Third Quarter of Fiscal 2024
Comparison to Second Quarter of Fiscal 2024
In addition to revenue, costs and operating income, management
uses the following key metrics(1) to analyze trends and evaluate
the overall performance of our Disney+ and Hulu direct-to-consumer
(DTC) product offerings, and we believe these metrics are useful to
investors in analyzing the business. The following tables and
related discussion are on a sequential quarter basis.
Paid subscribers at:
(in millions)
June 29, 2024
March 30, 2024
Change
Disney+
Domestic (U.S. and Canada)
54.8
54.0
1
%
International (excluding Disney+
Hotstar)
63.5
63.6
—
%
Disney+ Core(2)
118.3
117.6
1
%
Disney+ Hotstar
35.5
36.0
(1
)%
Hulu
SVOD Only
46.7
45.8
2
%
Live TV + SVOD
4.4
4.5
(2
)%
Total Hulu(2)
51.1
50.2
2
%
Average Monthly Revenue Per Paid Subscriber for the quarter
ended:
June 29, 2024
March 30, 2024
Change
Disney+
Domestic (U.S. and Canada)
$
7.74
$
8.00
(3
)%
International (excluding Disney+
Hotstar)
6.78
6.66
2
%
Disney+ Core
7.22
7.28
(1
)%
Disney+ Hotstar
1.05
0.70
50
%
Hulu
SVOD Only
12.73
11.84
8
%
Live TV + SVOD
96.11
95.01
1
%
(1)
See discussion on page 16—DTC Product Descriptions and Key
Definitions
(2)
Total may not equal the sum of the column due to rounding
Domestic Disney+ average monthly revenue per paid subscriber
decreased from $8.00 to $7.74 due to the impact of subscriber mix
shifts.
International Disney+ (excluding Disney+ Hotstar) average
monthly revenue per paid subscriber increased from $6.66 to $6.78
due to increases in retail pricing, partially offset by an
unfavorable foreign exchange impact.
Disney+ Hotstar average monthly revenue per paid subscriber
increased from $0.70 to $1.05 due to higher advertising
revenue.
Hulu SVOD Only average monthly revenue per paid subscriber
increased from $11.84 to $12.73 due to higher advertising
revenue.
Hulu Live TV + SVOD average monthly revenue per paid subscriber
increased from $95.01 to $96.11 due to higher advertising
revenue.
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues and operating income
(loss) are as follows:
Quarter Ended
Change
($ in millions)
June 29, 2024
July 1, 2023
Revenue
$
2,112
$
2,210
(4
)%
Operating income (loss)
$
254
$
(112
)
nm
The improvement in operating results was due to:
- Higher theatrical distribution results reflecting the strong
performance of Inside Out 2 in the current quarter. The current
quarter also included Kingdom of the Planet of the Apes while the
prior-year quarter included Guardians of the Galaxy Vol. 3, The
Little Mermaid, Elemental and Indiana Jones And The Dial Of
Destiny.
- Increased TV/VOD distribution results attributable to higher
sales of episodic content
Sports
Sports revenues and operating income (loss) are as follows:
Quarter Ended
Change
($ in millions)
June 29, 2024
July 1, 2023
Revenue
ESPN
Domestic
$
3,908
$
3,708
5
%
International
371
350
6
%
4,279
4,058
5
%
Star India
279
277
1
%
$
4,558
$
4,335
5
%
Operating income (loss)
ESPN
Domestic
$
1,085
$
1,077
1
%
International
5
(27
)
nm
1,090
1,050
4
%
Star India
(314
)
(216
)
(45
)%
Equity in the income of investees
26
20
30
%
$
802
$
854
(6
)%
Domestic ESPN
Domestic ESPN operating results in the current quarter were
comparable to the prior-year quarter due to:
- Advertising revenue growth attributable to increases in rates
and sponsorship revenue
- Growth in subscription revenue due to higher rates
- An increase in programming and production costs primarily
attributable to higher NBA rights costs reflecting contractual rate
increases and costs to air the Stanley Cup Finals in the current
quarter. We have the rights to air the Stanley Cup Finals every two
years.
- Lower affiliate revenue due to fewer subscribers, partially
offset by higher effective rates
International ESPN
Growth at international ESPN in the current quarter was driven
by:
- An increase in affiliate revenue due to higher effective
rates
- Higher programming and production costs attributable to new
soccer rights
Star India
The increase in operating loss at Star India was due to:
- Higher programming and production costs attributable to the
timing of the ICC T20 World Cup
- A decrease in affiliate revenue due to lower effective
rates
- Growth in advertising revenue reflecting the timing of the ICC
T20 World Cup
Experiences
Experiences revenues and operating income are as follows:
Quarter Ended
Change
($ in millions)
June 29, 2024
July 1, 2023
Revenue
Parks & Experiences
Domestic
$
5,820
$
5,649
3
%
International
1,602
1,532
5
%
Consumer Products
964
1,017
(5
)%
$
8,386
$
8,198
2
%
Operating income
Parks & Experiences
Domestic
$
1,347
$
1,436
(6
)%
International
435
428
2
%
Consumer Products
440
433
2
%
$
2,222
$
2,297
(3
)%
Domestic Parks and Experiences
The decrease in operating income at our domestic parks and
experiences was due to:
- Higher costs driven by inflation, increased technology spending
and new guest offerings, partially offset by the comparison to
depreciation in the prior-year quarter related to the closure of
Star Wars: Galactic Starcruiser and cost saving initiatives
- Guest spending growth attributable to increases in per capita
guest spending at our cruise line and theme parks and higher per
room spending at our resorts
International Parks and
Experiences
International parks and experiences’ operating results for the
current quarter were comparable to the prior-year quarter due
to:
- Higher volumes attributable to increases in attendance and
occupied room nights
- Guest spending growth due to higher per room spending at our
resorts
- An increase in costs due to new guest offerings, inflation and
increased depreciation
OTHER FINANCIAL INFORMATION
DTC Streaming Businesses
Revenue and operating income (loss) for our combined DTC
streaming businesses, which consist of the Direct-to-Consumer line
of business at the Entertainment segment and ESPN+ at the Sports
segment, are as follows:
Quarter Ended
Change
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Change
Revenue
$
6,379
$
5,525
15
%
$
18,642
$
16,346
14
%
Operating income (loss) (1)
$
47
$
(512
)
nm
$
(187
)
$
(2,224
)
92
%
(1)
DTC streaming businesses operating income (loss) is not a
financial measure defined by GAAP. The most comparable GAAP
measures are segment operating income for the Entertainment segment
and Sports segment. See the discussion on page 21 for how we define
and calculate this measure and a reconciliation of it to the most
directly comparable GAAP measures.
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $33 million
for the quarter, from $295 million to $328 million, driven by
increased compensation costs and other cost inflation.
Restructuring and Impairment
Charges
In the prior-year quarter, the Company recorded charges of
$2,440 million related to the removal of content from our DTC
services and the termination of certain third party license
agreements for the right to use content primarily on our DTC
platforms (Content Impairment) and $210 million of severance.
Other Income (expense),
net
In the current quarter, the Company recorded a charge of $65
million related to a legal ruling. In the prior-year quarter, the
Company recorded a charge of $101 million related to a legal
ruling, largely offset by a $90 million gain on its investment in
DraftKings, Inc. (DraftKings Gain), which was sold in the
prior-year quarter.
Interest Expense, net
Interest expense, net was as follows:
Quarter Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
Interest expense
$
(509
)
$
(503
)
(1
)%
Interest income, investment income and
other
167
198
(16
)%
Interest expense, net
$
(342
)
$
(305
)
(12
)%
The increase in interest expense was primarily due to higher
average rates, partially offset by lower average debt balances.
The decrease in interest income, investment income and other
reflected the impact of lower cash and cash equivalent balances,
partially offset by a favorable comparison of pension and
postretirement benefit costs, other than service cost.
Equity in the Income of
Investees
Equity in the income of investees was as follows:
Quarter Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
Amounts included in segment results:
Entertainment
$
123
$
174
(29
)%
Sports
26
20
30
%
Amortization of TFCF Corporation (TFCF)
intangible assets related to an equity investee
(3
)
(3
)
—
%
Equity in the income of investees
$
146
$
191
(24
)%
Income from equity investees decreased $45 million, to $146
million from $191 million, due to lower income from A+E.
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
June 29, 2024
July 1, 2023
Income (loss) before income taxes
$
3,093
$
(134
)
Income tax expense
251
19
Effective income tax rate
8.1
%
(14.2
)%
The prior-year quarter loss before income taxes included the
$2,440 million Content Impairment. In the prior-year quarter,
income taxes included a benefit of approximately $568 million
related to this charge. Due to the significance of this charge on
pre-tax results, the effective tax rate for the prior-year quarter
was negative 14.2%. In the current quarter, the Company recognized
a $418 million tax benefit related to prior years’ tax matters
(Income Tax Reserve Adjustments).
Noncontrolling Interests
Net income attributable to noncontrolling interests was as
follows:
Quarter Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
Net income attributable to noncontrolling
interests
$
(221
)
$
(307
)
28
%
The decrease in net income attributable to noncontrolling
interests was primarily due to the comparison to the accretion of
NBC Universal’s interest in Hulu in the prior-year quarter as we
had accreted to the full guaranteed redemption value by December
2023.
Net income attributable to noncontrolling interests is
determined on income after royalties and management fees, financing
costs and income taxes, as applicable.
Cash Flow
Cash provided by operations and free cash flow were as
follows:
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
Cash provided by operations
$
8,453
$
5,064
$
3,389
Investments in parks, resorts and other
property
(3,923
)
(3,595
)
(328
)
Free cash flow(1)
$
4,530
$
1,469
$
3,061
(1)
Free cash flow is not a financial measure defined by GAAP. The
most comparable GAAP measure is cash provided by operations. See
the discussion on pages 17 through 21.
Cash provided by operations increased $3.4 billion to $8.5
billion in the current period from $5.1 billion in the prior-year
period due to:
- Lower film and television production spending and the timing of
payments for sports rights
- Collateral receipts related to our hedging program in the
current period compared to collateral payments in the prior-year
period
- A payment in the prior-year period related to the termination
of content licenses in fiscal 2022
- Payment in the current period of fiscal 2023 federal and
California income taxes, which were deferred pursuant to relief
provided by the Internal Revenue Service and California State Board
of Equalization as a result of 2023 winter storms in
California
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as
follows:
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Entertainment
$
750
$
747
Sports
2
8
Experiences
Domestic
1,953
1,544
International
706
609
Total Experiences
2,659
2,153
Corporate
512
687
Total investments in parks, resorts and
other property
$
3,923
$
3,595
Capital expenditures increased to $3.9 billion from $3.6 billion
due to higher spend on cruise ship fleet expansion and new
attractions at the Experiences segment, partially offset by lower
spend on Corporate facilities.
Depreciation expense was as follows:
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Entertainment
$
503
$
478
Sports
29
54
Experiences
Domestic
1,287
1,431
International
538
503
Total Experiences
1,825
1,934
Corporate
159
153
Total depreciation expense
$
2,516
$
2,619
THE WALT DISNEY COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited; $ in
millions, except per share data)
Quarter Ended
Nine Months Ended
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Revenues
$
23,155
$
22,330
$
68,787
$
67,657
Costs and expenses
(19,801
)
(19,689
)
(59,618
)
(60,748
)
Restructuring and impairment charges
—
(2,650
)
(2,052
)
(2,871
)
Other income (expense), net
(65
)
(11
)
(65
)
96
Interest expense, net
(342
)
(305
)
(899
)
(927
)
Equity in the income of investees
146
191
468
555
Income (loss) before income taxes
3,093
(134
)
6,621
3,762
Income taxes
(251
)
(19
)
(1,412
)
(1,066
)
Net income (loss)
2,842
(153
)
5,209
2,696
Net income attributable to noncontrolling
interests
(221
)
(307
)
(697
)
(606
)
Net income (loss) attributable to The Walt
Disney Company (Disney)
$
2,621
$
(460
)
$
4,512
$
2,090
Earnings (loss) per share attributable to
Disney:
Diluted
$
1.43
$
(0.25
)
$
2.46
$
1.14
Basic
$
1.44
$
(0.25
)
$
2.47
$
1.14
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,829
1,829
1,835
1,829
Basic
1,821
1,829
1,829
1,827
THE WALT DISNEY COMPANY CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited; $ in millions,
except per share data)
June 29, 2024
September 30, 2023
ASSETS
Current assets
Cash and cash equivalents
$
5,954
$
14,182
Receivables, net
12,966
12,330
Inventories
1,984
1,963
Content advances
1,992
3,002
Other current assets
2,597
1,286
Total current assets
25,493
32,763
Produced and licensed content costs
32,799
33,591
Investments
4,632
3,080
Parks, resorts and other property
Attractions, buildings and equipment
73,366
70,090
Accumulated depreciation
(44,720
)
(42,610
)
28,646
27,480
Projects in progress
6,223
6,285
Land
1,172
1,176
36,041
34,941
Intangible assets, net
11,107
13,061
Goodwill
73,914
77,067
Other assets
13,786
11,076
Total assets
$
197,772
$
205,579
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
20,216
$
20,671
Current portion of borrowings
8,060
4,330
Deferred revenue and other
7,336
6,138
Total current liabilities
35,612
31,139
Borrowings
39,524
42,101
Deferred income taxes
6,628
7,258
Other long-term liabilities
10,705
12,069
Commitments and contingencies
Redeemable noncontrolling interests
—
9,055
Equity
Preferred stock
—
—
Common stock, $0.01 par value, Authorized
– 4.6 billion shares, Issued – 1.9 billion shares at June 29, 2024
and 1.8 billion shares at September 30, 2023
58,252
57,383
Retained earnings
49,273
46,093
Accumulated other comprehensive loss
(3,454
)
(3,292
)
Treasury stock, at cost, 42 million shares
at June 29, 2024 and 19 million shares at September 30, 2023
(3,449
)
(907
)
Total Disney Shareholders’ equity
100,622
99,277
Noncontrolling interests
4,681
4,680
Total equity
105,303
103,957
Total liabilities and equity
$
197,772
$
205,579
THE WALT DISNEY COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; $ in
millions)
Nine Months Ended
June 29, 2024
July 1, 2023
OPERATING ACTIVITIES
Net income
$
5,209
$
2,696
Depreciation and amortization
3,705
3,960
Goodwill impairment and impairment of
produced and licensed content
2,038
2,266
Deferred income taxes
(489
)
(899
)
Equity in the income of investees
(468
)
(555
)
Cash distributions received from equity
investees
327
531
Net change in produced and licensed
content costs and advances
1,121
(1,861
)
Equity-based compensation
1,036
861
Other, net
(20
)
(347
)
Changes in operating assets and
liabilities
Receivables
(1,373
)
(744
)
Inventories
(2
)
(120
)
Other assets
74
(64
)
Accounts payable and other liabilities
(814
)
(1,609
)
Income taxes
(1,891
)
949
Cash provided by operations
8,453
5,064
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(3,923
)
(3,595
)
Proceeds from sales of investments
101
458
Purchase of investments
(1,006
)
—
Other, net
(75
)
(122
)
Cash used in investing activities
(4,903
)
(3,259
)
FINANCING ACTIVITIES
Commercial paper borrowings, net
1,377
40
Borrowings
132
70
Reduction of borrowings
(729
)
(1,319
)
Dividends
(549
)
—
Repurchases of common stock
(2,523
)
—
Contributions from noncontrolling
interests
—
719
Acquisition of redeemable noncontrolling
interests
(8,610
)
(900
)
Other, net
(820
)
(737
)
Cash used in financing activities
(11,722
)
(2,127
)
Impact of exchange rates on cash, cash
equivalents and restricted cash
(14
)
174
Change in cash, cash equivalents and
restricted cash
(8,186
)
(148
)
Cash, cash equivalents and restricted
cash, beginning of period
14,235
11,661
Cash, cash equivalents and restricted
cash, end of period
$
6,049
$
11,513
DTC PRODUCT DESCRIPTIONS AND KEY
DEFINITIONS
Product offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered
as a standalone service or together as part of various
multi-product offerings. Hulu Live TV + SVOD includes Disney+ and
ESPN+. Disney+ is available in more than 150 countries and
territories outside the U.S. and Canada. In India and certain other
Southeast Asian countries, the service is branded Disney+ Hotstar.
In certain Latin American countries prior to July 2024, we offered
Disney+ as well as Star+, a general entertainment SVOD service,
which was available on a standalone basis or together with Disney+
(Combo+). At the end of June 2024, we merged these services into a
single Disney+ product offering. Depending on the market, our
services can be purchased on our websites or through third-party
platforms/apps or are available via wholesale arrangements.
Paid subscribers
Paid subscribers reflect subscribers for which we recognized
subscription revenue. Subscribers cease to be a paid subscriber as
of their effective cancellation date or as a result of a failed
payment method. Subscribers to multi-product offerings in the U.S.
are counted as a paid subscriber for each service included in the
multi-product offering and subscribers to Hulu Live TV + SVOD are
counted as one paid subscriber for each of the Hulu Live TV + SVOD,
Disney+ and ESPN+ services. In Latin America prior to July 2024, if
a subscriber had either the standalone Disney+ or Star+ service or
subscribed to Combo+, the subscriber was counted as one Disney+
paid subscriber. Subscribers include those who receive an
entitlement to a service through wholesale arrangements, including
those for which the service is available to each subscriber of an
existing content distribution tier. When we aggregate the total
number of paid subscribers across our DTC streaming services, we
refer to them as paid subscriptions.
International Disney+ (excluding Disney+
Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the
Disney+ service outside the U.S. and Canada and the Star+ service
in Latin America.
Average Monthly Revenue Per Paid
Subscriber
Hulu and ESPN+ average monthly revenue per paid subscriber is
calculated based on the average of the monthly average paid
subscribers for each month in the period. The monthly average paid
subscribers is calculated as the sum of the beginning of the month
and end of the month paid subscriber count, divided by two. Disney+
average monthly revenue per paid subscriber is calculated using a
daily average of paid subscribers for the period. Revenue includes
subscription fees, advertising (excluding revenue earned from
selling advertising spots to other Company businesses) and premium
and feature add-on revenue but excludes Pay-Per-View revenue.
Advertising revenue generated by content on one DTC streaming
service that is accessed through another DTC streaming service by
subscribers to both streaming services is allocated between both
streaming services. The average revenue per paid subscriber is net
of discounts on offerings that carry more than one service. Revenue
is allocated to each service based on the relative retail or
wholesale price of each service on a standalone basis. Hulu Live TV
+ SVOD revenue is allocated to the SVOD services based on the
wholesale price of the Hulu SVOD Only, Disney+ and ESPN+
multi-product offering. In general, wholesale arrangements have a
lower average monthly revenue per paid subscriber than subscribers
that we acquire directly or through third-party platforms.
NON-GAAP FINANCIAL
MEASURES
This earnings release presents diluted EPS excluding certain
items (also referred to as adjusted EPS), total segment operating
income, free cash flow and DTC streaming businesses operating
income (loss), all of which are important financial measures for
the Company, but are not financial measures defined by GAAP.
These measures should be reviewed in conjunction with the most
comparable GAAP financial measures and are not presented as
alternative measures of diluted EPS, income (loss) before income
taxes, cash provided by operations or Entertainment and Sports
segment operating income (loss) as determined in accordance with
GAAP. Diluted EPS excluding certain items, total segment operating
income, free cash flow and DTC streaming businesses operating
income (loss) as we have calculated them may not be comparable to
similarly titled measures reported by other companies.
Our definitions and calculations of diluted EPS excluding
certain items, total segment operating income, free cash flow and
DTC streaming businesses operating income (loss), as well as
quantitative reconciliations of each of these measures to the most
directly comparable GAAP financial measure, are provided below.
The Company is not providing the forward-looking measure for
diluted EPS, which is the most directly comparable GAAP measure to
diluted EPS excluding certain items, or a quantitative
reconciliation of forward-looking diluted EPS excluding certain
items to that most directly comparable GAAP measure. The Company is
unable to predict or estimate with reasonable certainty the
ultimate outcome of certain significant items required for such
GAAP measure without unreasonable effort. Information about other
adjusting items that is currently not available to the Company
could have a potentially unpredictable and significant impact on
future GAAP financial results.
Diluted EPS excluding certain
items
The Company uses diluted EPS excluding (1) certain items
affecting comparability of results from period to period and (2)
amortization of TFCF and Hulu intangible assets, including purchase
accounting step-up adjustments for released content, to facilitate
the evaluation of the performance of the Company’s operations
exclusive of these items, and these adjustments reflect how senior
management is evaluating segment performance.
The Company believes that providing diluted EPS exclusive of
certain items impacting comparability is useful to investors,
particularly where the impact of the excluded items is significant
in relation to reported earnings and because the measure allows for
comparability between periods of the operating performance of the
Company’s business and allows investors to evaluate the impact of
these items separately.
The Company further believes that providing diluted EPS
exclusive of amortization of TFCF and Hulu intangible assets
associated with the acquisition in 2019 is useful to investors
because the TFCF and Hulu acquisition was considerably larger than
the Company’s historic acquisitions with a significantly greater
acquisition accounting impact.
The following table reconciles reported diluted EPS to diluted
EPS excluding certain items for the third quarter:
($ in millions except EPS)
Pre-Tax Income/ Loss
Tax Benefit/ Expense(1)
After-Tax Income/ Loss(2)
Diluted EPS(3)
Change vs. prior-year period
Quarter Ended June 29, 2024
As reported
$
3,093
$
(251
)
$
2,842
$
1.43
n/m
Exclude:
Income Tax Reserve Adjustments
—
(418
)
(418
)
(0.23
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
397
(93
)
304
0.16
Other expense(6)
65
(11
)
54
0.03
Excluding certain items
$
3,555
$
(773
)
$
2,782
$
1.39
35
%
Quarter Ended July 1, 2023
As reported
$
(134
)
$
(19
)
$
(153
)
$
(0.25
)
Exclude:
Restructuring and impairment
charges(4)
2,650
(617
)
2,033
1.10
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
432
(101
)
331
0.18
Other expense, net(6)
11
(5
)
6
—
Excluding certain items
$
2,959
$
(742
)
$
2,217
$
1.03
(1)
Tax benefit/expense is determined using the tax rate applicable
to the individual item.
(2)
Before noncontrolling interest share.
(3)
Net of noncontrolling interest
share, where applicable. Total may not equal the sum of the column
due to rounding.
(4)
Reflects the Content Impairment
($2,440 million) and severance ($210 million).
(5)
For the current quarter, intangible asset amortization was $326
million, step-up amortization was $68 million and amortization of
intangible assets related to a TFCF equity investee was $3 million.
For the prior-year quarter, intangible asset amortization was $361
million, step-up amortization was $68 million and amortization of
intangible assets related to a TFCF equity investee was $3 million.
(6)
For the current quarter, other expense was due to a charge related
to a legal ruling ($65 million). For the prior-year quarter, other
expense, net was due to a charge related to a legal ruling ($101
million), largely offset by the DraftKings Gain ($90 million).
The following table reconciles reported diluted EPS from
continuing operations to diluted EPS excluding certain items for
the nine-month period:
($ in millions except EPS)
Pre-Tax Income/ Loss
Tax Benefit/ Expense(1)
After-Tax Income/ Loss(2)
Diluted EPS(3)
Change vs. prior year
Nine Months Ended June 29, 2024:
As reported
$
6,621
$
(1,412
)
$
5,209
$
2.46
>100
%
Exclude:
Restructuring and impairment
charges(4)
2,052
(121
)
1,931
1.05
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,282
(299
)
983
0.52
Other expense(6)
65
(11
)
54
0.03
Income Tax Reserve Adjustments
—
(418
)
(418
)
(0.23
)
Excluding certain items
$
10,020
$
(2,261
)
$
7,759
$
3.83
30
%
Nine Months Ended July 1, 2023:
As reported
$
3,762
$
(1,066
)
$
2,696
$
1.14
Exclude:
Restructuring and impairment
charges(4)
2,871
(660
)
2,211
1.20
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,569
(365
)
1,204
0.65
Other income, net(6)
(96
)
13
(83
)
(0.05
)
Excluding certain items
$
8,106
$
(2,078
)
$
6,028
$
2.94
(1)
Tax benefit/expense is determined using the tax rate applicable
to the individual item.
(2)
Before noncontrolling interest share.
(3)
Net of noncontrolling interest
share, where applicable. Total may not equal the sum of the column
due to rounding.
(4)
Charges for the current period
included impairments of goodwill ($2,038 million). Charges for the
prior-year period reflect the Content Impairment, severance and
costs to exit our businesses in Russia.
(5)
For the current period,
intangible asset amortization was $1,068 million, step-up
amortization was $205 million and amortization of intangible assets
related to a TFCF equity investee was $9 million. For the
prior-year period, intangible asset amortization was $1,186
million, step-up amortization was $374 million and amortization of
intangible assets related to a TFCF equity investee was $9
million.
(6)
For the current period, other
expense was due to a charge related to a legal ruling ($65
million). For the prior-year period, other income, net was due to
the DraftKings Gain ($169 million) and a gain on the sale of a
business ($28 million), partially offset by a charge related to a
legal ruling ($101 million).
Total segment operating income
The Company evaluates the performance of its operating segments
based on segment operating income, and management uses total
segment operating income (the sum of segment operating income from
all of the Company’s segments) as a measure of the performance of
operating businesses separate from non-operating factors. The
Company believes that information about total segment operating
income assists investors by allowing them to evaluate changes in
the operating results of the Company’s portfolio of businesses
separate from non-operational factors that affect net income, thus
providing separate insight into both operations and other factors
that affect reported results.
The following table reconciles income (loss) before income taxes
to total segment operating income:
Quarter Ended
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
June 29, 2024
July 1, 2023
Change
Income (loss) before income taxes
$
3,093
$
(134
)
nm
$
6,621
$
3,762
76
%
Add (subtract):
Corporate and unallocated shared
expenses
328
295
(11
)%
1,027
854
(20
)%
Restructuring and impairment charges
—
2,650
100
%
2,052
2,871
29
%
Other (income) expense, net
65
11
>(100
)%
65
(96
)
nm
Interest expense, net
342
305
(12
)%
899
927
3
%
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs
397
432
8
%
1,282
1,569
18
%
Total segment operating income
$
4,225
$
3,559
19
%
$
11,946
$
9,887
21
%
Free cash flow
The Company uses free cash flow (cash provided by operations
less investments in parks, resorts and other property), among other
measures, to evaluate the ability of its operations to generate
cash that is available for purposes other than capital
expenditures. Management believes that information about free cash
flow provides investors with an important perspective on the cash
available to service debt obligations, make strategic acquisitions
and investments and pay dividends or repurchase shares.
The following table presents a summary of the Company’s
consolidated cash flows:
Quarter Ended
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
June 29, 2024
July 1, 2023
Cash provided by operations
$
2,602
$
2,802
$
8,453
$
5,064
Cash used in investing activities
(2,350
)
(718
)
(4,903
)
(3,259
)
Cash used in financing activities
(898
)
(1,001
)
(11,722
)
(2,127
)
Impact of exchange rates on cash, cash
equivalents and restricted cash
(31
)
(23
)
(14
)
174
Change in cash, cash equivalents and
restricted cash
(677
)
1,060
(8,186
)
(148
)
Cash, cash equivalents and restricted
cash, beginning of period
6,726
10,453
14,235
11,661
Cash, cash equivalents and restricted
cash, end of period
$
6,049
$
11,513
$
6,049
$
11,513
The following table reconciles the Company’s consolidated cash
provided by operations to free cash flow:
Quarter Ended
Nine Months Ended
($ in millions)
June 29, 2024
July 1, 2023
Change
June 29, 2024
July 1, 2023
Change
Cash provided by operations
$
2,602
$
2,802
$
(200
)
$
8,453
$
5,064
$
3,389
Investments in parks, resorts and other
property
(1,365
)
(1,165
)
(200
)
(3,923
)
(3,595
)
(328
)
Free cash flow
$
1,237
$
1,637
$
(400
)
$
4,530
$
1,469
$
3,061
DTC Streaming Businesses
The Company uses combined DTC streaming businesses operating
income (loss) because it believes that this measure allows
investors to evaluate the performance of its portfolio of streaming
businesses and track progress against the Company’s goal of
reaching profitability at its combined streaming businesses.
The following tables reconcile Entertainment and Sports segment
operating income (loss) to the DTC streaming businesses operating
income (loss):
Quarter Ended
June 29, 2024
July 1, 2023
($ in millions)
Entertainment
Sports
DTC Streaming Businesses
Entertainment
Sports
DTC Streaming Businesses
Linear Networks
$
966
$
736
$
1,025
$
861
DTC streaming businesses
(Direct-to-Consumer and ESPN+ businesses)
(19
)
66
$
47
(505
)
(7
)
$
(512
)
Content Sales/Licensing and Other
254
—
(112
)
—
Segment operating income
$
1,201
$
802
$
408
$
854
Nine Months Ended
June 29, 2024
July 1, 2023
Entertainment
Sports
DTC Streaming Businesses
Entertainment
Sports
DTC Streaming Businesses
Linear Networks
$
2,954
$
1,554
$
3,314
$
1,632
DTC streaming businesses
(Direct-to-Consumer and ESPN+ businesses)
(110
)
(77
)
$
(187
)
(2,076
)
(148
)
$
(2,224
)
Content Sales/Licensing and Other
12
—
(30
)
—
Segment operating income
$
2,856
$
1,477
$
1,208
$
1,484
FORWARD-LOOKING STATEMENTS
Certain statements and information in this earnings release may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, including
statements regarding financial performance, earnings expectations,
expected drivers, including of growth and profitability, outlook
and guidance, including future results, operating income, adjusted
EPS, margins, plans for DTC streaming services profitability and
timing and subscriber growth, and cost savings; value of, and
opportunities for growth based on, our intellectual property,
content offerings, businesses and assets; business and other plans;
expectations, strategic priorities and initiatives, consumer
sentiment, behavior or demand and other statements that are not
historical in nature. Any information that is not historical in
nature included in this earnings release is subject to change.
These statements are made on the basis of management’s views and
assumptions regarding future events and business performance as of
the time the statements are made. Management does not undertake any
obligation to update these statements.
Actual results may differ materially from those expressed or
implied. Such differences may result from actions taken by the
Company, including restructuring or strategic initiatives
(including capital investments, asset acquisitions or dispositions,
new or expanded business lines or cessation of certain operations),
our execution of our business plans (including the content we
create and IP we invest in, our pricing decisions, our cost
structure and our management and other personnel decisions), our
ability to quickly execute on cost rationalization while preserving
revenue, the discovery of additional information or other business
decisions, as well as from developments beyond the Company’s
control, including:
- the occurrence of subsequent events;
- deterioration in domestic and global economic conditions or
failure of conditions to improve as anticipated;
- deterioration in or pressures from competitive conditions,
including competition to create or acquire content, competition for
talent and competition for advertising revenue;
- consumer preferences and acceptance of our content, offerings,
pricing model and price increases, and corresponding subscriber
additions and churn, and the market for advertising sales on our
DTC streaming services and linear networks;
- health concerns and their impact on our businesses and
productions;
- international, political or military developments;
- regulatory and legal developments;
- technological developments;
- labor markets and activities, including work stoppages;
- adverse weather conditions or natural disasters; and
- availability of content.
Such developments may further affect entertainment, travel and
leisure businesses generally and may, among other things, affect
(or further affect, as applicable):
- our operations, business plans or profitability, including
direct-to-consumer profitability;
- demand for our products and services;
- the performance of the Company’s content;
- our ability to create or obtain desirable content at or under
the value we assign the content;
- the advertising market for programming;
- taxation; and
- performance of some or all Company businesses either directly
or through their impact on those who distribute our products.
Additional factors are set forth in the Company’s Annual Report
on Form 10-K for the year ended September 30, 2023, including under
the captions “Risk Factors,” “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” and “Business,”
quarterly reports on Form 10-Q, including under the captions “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and subsequent filings with
the Securities and Exchange Commission.
The terms “Company,” “we,” and “our” are used in this report to
refer collectively to the parent company and the subsidiaries
through which our various businesses are actually conducted.
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, August 7, 2024, at 8:30 AM EDT/5:30
AM PDT via a live Webcast. To access the Webcast go to
www.disney.com/investors. The corresponding earnings presentation
and webcast replay will also be available on the site.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807530027/en/
David Jefferson Corporate Communications 818-560-4832
Alexia Quadrani Investor Relations 818-560-6601
Walt Disney (NYSE:DIS)
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Walt Disney (NYSE:DIS)
Graphique Historique de l'Action
De Nov 2023 à Nov 2024