DIS - Earnings call 1 2024 | The Walt Disney Company

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Operator

Good day and welcome to The Walt Disney Company's First Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Executive Vice President, Investor Relations. Please go ahead.

Alexia Quadrani

Good afternoon. It's my pleasure to welcome everybody to The Walt Disney Company's First Quarter 2024 Earnings Call.

issued website minutes at was available and release our on www.disney.com/investors. press about ago XX is Our Today's call presentation is the transcript made as being on call. webcast, and as available first a the quarter website earnings our will be well all after replay and

Hugh Financial Joining and Officer. call Executive today's Vice Executive for Bob Iger, Senior me Chief President Disney's are Officer; Johnston, and Chief

and some from Bob Hugh, of questions. comments happy take we'll Following to your be

to Bob started. turn the call So with that, to let me over get

Robert Iger

Alexia, Thanks, afternoon, and everyone. good

ago, X to corner our the demonstrates Just value growth an return quarter to we turned And year outlined and and ambitious entered a strong creation. sustained past have plan performance a this period new of we shareholder era.

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results, number steps that start deeper dive me by let we forward. important a making represent into Before announcements significant and our of exciting

network destination lineup its ESPN the Saban sports a sports icon streaming one-stop we option joint a stand-alone professional launching will direct-to-consumer together a Coach sports digital streaming later lineup create service exciting into now release feature-length stake robust Epic new as this of relationship today. ESPN anything in leagues joins upcoming Games, we acquiring thrilled to we're to we'll of This creating as sequel entertainment together embarking fall. November, of We're equity and is part entering the yesterday theatrical and hugely an including be a new will with Nick college ESPN's the that channels declared a that stock the the share a sports. content marketplace also program assets, First, major with a Bros. animated And popular to as a Discovery be Oh, very from universe and franchises has which a all available Fox Disney's of small sports adding releases. We're XXXX, year. dividend be Warner with in new an to excited in the available companies' full Moana, on brings all these launching share this $X to and commentator that on-air with venture and fall joining offering suite also additional of features, Board beloved brands billion and announced a an more in share will buyback Disney's innovative games combined brings one pleased unlike that thing. Fortnite. And fiscal to I'm 'XX. groundbreaking with and

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our share January. The pay strength confidence to of that And already and plan position declared the us fiscal company begin has dividend year. dividend dividend last higher Board next semiannual shareholders and XX% our this by a in since to billion the paid also current be $X paid path first targeting to shares pleased our month. I'm XXXX, for to the to Our in fiscal ahead repurchasing in be the led to time Board we last will July that start versus authorized

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Hugh Johnston

looking on we us. opportunities goal earnings as joined flow with with our execute Disney ago. cash consistent months forward Bob company, this I to our partner the about more more learned strategy of over am to excited Bob. significant ahead free Thanks, And about growth. the and I team I of delivering X little and management continuing incredible a the long-term I'm the

the with are items results. of experiences prior $XXX certain $X.XX, ongoing first and operating across work share increased operating points, we're quarter very the pleased diligent business all quarter's over And per versus each segments nicely, operating increased margin savings year. year and operating operating reductions. XXX and as businesses throughout the revenue grew this quarter. to financial both income excluding SG&A basis and other in Fiscal at Both the by domestic XX% and reflecting in efficiency by across We prior earnings increased versus ESPN diluted segment strong and evidenced in pricing the due by our first realization expense cost driving part direct-to-consumer, enterprise the expense our million to of income

first saw markets Moving partially and with well offset by operating international as domestic gave the income in domestic direct-to-consumer. from net in At temporary a nearly to was to versus and offerings higher sequentially quarter the promotion. the to revenue bundled the which, QX. million net products. segment. lower growth driven income due driven churn X.X advertising significantly $X.XX primarily continued quarter. Domestically, versus at favorability. Hulu to Operating of core revenue. global our expense by in decreased given increased in launch prior subscription million in as Entertainment from adds price as million certain sequentially the recent the operating our line Disney+ $XXX tier QX, end we improvement year our in by than better versus earnings more significant the increases. primarily year by million, reminder, subscribers the strong by as the Those $X.XX increased ad call improved Disney+ prior were increased and than additions results by due by about and X.X by the in uptick $XXX prior prior the the churn core QX guidance company to guidance, price versus quarter doubled last well versus increases ARPU driven by first summer has as over And income impacts by by expected direct-to-consumer subscribers stand-alone the by benefiting XX%, quarter entertainment, QX, first

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Alexia Quadrani

Instructions] we're And [Operator the you. first that, question. for with operator, ready Thank

Operator

comes [Operator Stanley. Instructions] first question Morgan Today's from Swinburne with Ben

Benjamin Swinburne

wanted lot You start, with a tonight. guys I you on news you to maybe about had that. to chew for led of us sports Bob, since asking

-- what ESPN, a the Can all obviously You put sort Disney of we they was just you're you How expense different for and financially year. products are update guys priorities different for And your think and having shareholders conversations. about of us market what you of of strategically? on do going for of how are is whether context success between into wondering if on with channels that really, us I address in and the thinking this lot it an flagship, parts sort we what sport? new package, kind had about these and X? And growth have kind

slight like guys It seems quarter. guided you think I to you're with on last overall growth program. track your in savings 'XX

would be So any appreciated. to update that

Robert Iger

matter Ben. me sports to you fan of has no cliches Permit effectively always as the to know, the Thanks, serve sportsman throw is. where couple ESPN aimed way. a your But

you both are announced the steps and an advertiser's where really today's obviously is shape, Sports we that today in for environment linear been some that continue and the to ESPN finished and just ratings And a continue think more got to competition, think take sports, fact lot and just delight. good in 'XX still that so time in taking we've TV, people's rise. about at specifically doing you all that. And aimed challenges when of you've that will about we

kind be been why You and what ESPN. part goal have they successful organizations have sports distributors sports was. and with to that advertisers feel to which reaching has fans is in partnered effectively, They're of their or of and leagues consider ESPN primary

As for is saying direct-to-consumer multichannel the of, looking step. that of step, ESPN spending serve obviously future, to and mindful the them we there. a two, media. we second have so. This we're people first their We've state And look are for that inevitable been it's direction was partners one, and the in really a not to time the taking were long time ecosystem; basically money do to effectively a where their with you

actually been has which ago, quite years some ESPN+ successful. launching was step first The

finding multichannel, tier to equivalent step via app. second basically of partners a sports-centric The is these the distribute

how those with fans of channels be there big we them a that so us modern well. fat rather in doing satellite And part is ecosystem than preserving step So up that are as that's a fit and likely now will a next of and another integrated price the people except who and personalization, chance capabilities. one, doing a high have tell that number you some I with bring immersive, gives that say we're this, to of will a cable have very with Discovery This out and will probably sports-centric partners. serving than we deep ultimately bring way customization a will very this with And will Two, very, Time relationship it's no people in it feature obviously of announced this we'll signed Warner cost. Disney+. a more And to with basically again, -- the who ESPN with didn't a kind because there television. be today at that degree features that sales multichannel want it which know bundle. Two, or big point we're of be of sports to and case, will into way betting, own, stats those Turner that of Three, to app, Obviously, this, sports have, into progression. for flagship. do engage this fantasy, arm that August we're it that left for will but have can't launch on out right multichannel combination never all and its app-based. ecosystem. The or a are ultimately creating not it fans. I have 'XX, they longer Hulu be because one merchandise it attractive all bundled step Fox are such obviously that with after is we'll or integrated dive more in

be with the and will leagues. migration in simple. advertisers about it of maintain be further except But how basically that think us, how much our own talked the That will -- attractiveness in sports to this fans I and We ESPN general position ESPN with its have be, would to bundled ESPN's sports in be it haven't and really affinity success for will services.

Hugh Johnston

Right. cost take the I'll side, Ben.

expenses Net obviously You're slight looking back expenses deliver the committed momentum team well guidance first growth right, We in reinvest relentlessly versus to of should in terrific slight was the And past, growth no coming previously. is least do said in cost the talked the year-over-year. the about as have previously to business bottom guidance the drive in at change to operating out on we've management which as opportunities in what the operating We further quarter. line. as continue as for growth we savings, margin cost that both well to, growth we we to year-over-year. momentum have

Operator

Our Nathanson today from Michael question with comes MoffettNathanson. next

Michael Nathanson

for the to Hulu does you, long-term stopped wondering, one It fit Hugh. here, for right? of Bob, One Ben's kind in picture Bob, growing. answer we're still you, Live into question, how

with with about how size. YouTube the what When you you sports a double streaming. Hugh, just think there? from some here too, Or Any that gets for that is then factors in target ESPN future couple fit margin to us you double-digit you news, drive do a announced bundle? And and on think does the years? offerings, of twice the what you will direct next of help broke then digits timetable for over-the-top into your

Robert Iger

to many services of Live Hulu just -- television like reflects It Hulu channels you be the or is to attached bigger, know, other if of you integrated bundle to are As subscribe it. happens more there. out that fatter

be but it compete this with will So doesn't this, directly, Hulu with you'd Hulu I with Hulu. Live argue, because in a bundled competes guess, way,

then new sports beta and a venture will a that that that compelling Hulu. and you feature we many this sports reducing that's So together with consider see for churn in get want buy as once of increasing very fact come Hulu add-on can beta, service, And this be and if an new Hulu sports Hulu we joint in of and a Disney+ together terms you March will you're in you because so add if it, already engagement. out subscriber to offer, that's very, as you to positive the real

realistic Live feature So Live Hulu itself. could at important is we of in for look certainly huge this business, a have, part about Hulu nice, impact critical positive Hulu terms but business the our but of a Hulu Hulu. We're as the that this is that of

Hugh Johnston

I'll to put DTC some get that Yes. be margins. surprise shouldn't in In to our the we a objective probably on digit. time, it goal we as -- ways, growing; double like? Michael, I one, first Number double know because has take investors for as margins, is double-digit out the two, it's the question to number does attractive has a business. What digits. good I build been to defining which got what it always characterize business would good look a we're and profitability

it's it regard. always So news, a business because good I in build in that know sense, in a but shouldn't be sense we've wanted to news a

different couple roughly the now. In a subscribers. going terms there, the and some leverage spend. way the out level really grow And in were Number you'll be we where actually those Number some things pricing. at of one, we've last of years, maybe get marketing we'll balance over we it's will And right we're technology similar to how to what of you've point but then gotten slightly see ways get from spend, both of to many content of two, similar. probably seen that we're

lesser little All bit than of of the growth. revenue those rate less rate a will at grow -- a

with discussed front couple the lower In very to we've months, one in there do us one specific couple see next think one, be competitor with year of two, got has opportunity back we're taking of some year. Number in taken that out. our looking us. a terms the of growth, very Number of will things. advantage Number us. of I for benefit earlier, that remains I half we're get is obviously we international and some this it which on paid an how of will And sits for that specifics a to actions It's next opportunity churn put that bundles degree growth sharing which in much we'll sub the and the us. three,

been now. all a it's that put you together, kind specific right doing a what we with to business. Not that, lot pieces again, tactics doing put maybe those different get characterize to going So time would a a frame if as to of slightly of level of good some we've on

Some is going be the of by to driven that marketplace.

and getting business. urgency, a feel only in business. the sustainable We'll feel probably the we operate good, that to we're there, way going know Just that's a of sense urgency get to to but

Operator

America Reif Securities. Our of next from Ehrlich Jessica question comes Bank with today

Jessica Reif Cohen

guys You much ground covered so tonight.

X and have question I So X follow-ups.

next of billion heard XX% One you sharing on Have how that the in you And in a that sports on do number over location? and years, speculation just the couple up You like attractions. a paid Can been which and us twice. you plan of some in on to of There's give a of I've then you the in crackdown, sized parks, so time, to for you the said. announced XX CapEx or follow-up this to save Hugh, -- things may over that that -- fifth Florida. And like came first XX% might $XX open what decrease JV, you capacity, $XX traditional subs billion timing color significant you it like service sounds subs will say gate go incremental not that outlined new sports without attract you Like nonpay I'm pay an TV a the expensive sorry, how to be money? do cannibalize? in actually who TV borrowers? parks would

Robert Iger

Okay.

basically different We're of at to and of our on take the investments subjects. and will already You what where determining lot I'll hard going timing on work new location. lot at first one a place we're be. a asked park's questions they

be and a beneficiary investment meaning be the single one the thus all including pretty of our increased and Seas, You High much every basically increased opening investment of basically at sharing. take they'll over, I'll conclude will on that start can basically locations let of additional more currently capacity, there'll look of cadence where and every obviously, be and of going least built. decade in paid increase year capacity. to got Hugh us, except hard at direction. I'm extremely more in of at that things expansively, we may And much will we're not the X ships. is in business in positive you next a of building the Hugh? that -- menu a conceived things And work care getting these sense 'XX, additional we've a that that give really we're timing, to

Hugh Johnston

Yes.

Robert Iger

cable the On bundle sports service to the of sports want you are we less a big and things. that there expensive be television watch get didn't is the have the and to to bundle. it way One, cable buy there sign think satellite consumers want that the fans those satellite. And to the on to X same sports again, number going out on pricing, sports to believe than but at to for channels service to is I look designed up have big substantially they'd and

And will so accretive they think we us. be to

we we want or We they may also that make bundle leave because left the the too. well grab serving them believe that them, have either sure bundle, consumers wasn't and it to

us So because because the dynamics being we positive of this of the in sports right being a certainly good and marketplace cost as, the view proposition for fans one, now. whole thing for

Hugh Johnston

I'll Okay. paid And handle the question. sharing Jessica,

to have our basis probably say number that different Suffice anyway. don't terms subscriber in to found these from on competitor I a what the right has a obviously that specific put want their percentage are out we see that there isn't all sized dramatically it. estimates opportunity now We base. because numbers of rough

certain U.S., accounts we'll some for getting and there's do we'll doing holders the some Number access the language sharing we've from they'll outside to account, allow to do the taken borrowers further to able be want their of couple actually to allow are summer, unpaid the now opportunities opportunity. Number one, act and paid And account get communication to two, this order that that the sharing to later the changes have able to also at it, be access user made fee. we'll that. terms new to they'll opportunity so then to that of them think subscriptions. a that give In who we -- year, accounts actually in Canada an but that additional we their start actions this have right so have on we markets in will have individuals

in confidence is advantage So numbers. actions good a front us, what one of we've sized in growth take in tactical take to and that think a got gives order it's subscriber us we number our to of things of of pretty opportunity the

Operator

And Cahall our next question comes from Steven Wells with Fargo.

Steven Cahall

operations the content mentioned the culture. going you is drives company like of lifeblood Bob, much It lot really the your in are remarks. So of But It a always so starting to be I hum seems to the again. think output. studio

you've output? And said area so, the feel announcement of And we some end like the Hugh, think results question is an you that's of buyback what you corner do time think focus the seen the that you've a up of for Hulu. studio I lot in you might if on might the you expect now paying ultimately spending renewed the that is on. you've been with operations? inevitable like the I then, when Do think content also turning see

situation. cost related I of that, in or exceed billion the Just outcome any Curious on buckets you savings. the found savings to have extra a And just think of sense if where $X.X that wondering you timing was bit those new.

Robert Iger

I about Stephen, great with the studio. feel where we are

that have had too and some of sequel of that but success, also not last the didn't great at year, Guardian sight were the had disappointed some Let's to that that successful calendar not real in, part of the were not in lose end 'XX Avatar we the success fiscal really fact with the films we but suggest 'XX. some we studio

wanting One partially sometimes little in of that our to our a for is to of more subs to I've studios volume be that some saying volume, our been greatly detrimental before lost focus. can things to quality. zeal global increase streaming the platform, And tied chase

you reduced fix in output, movies, that you X do with So Marvel. When we've -- volume, the these you is step or when that issues we've we've address in first particularly reduced taken things.

making making be films even you're better. You the get aggressive at sure can

And Insight course, we're that believe I not do that much us that strong of also great and that you Dana this this to with in on people partnerships Alan partnership Alan X is a at it's that fruit, of kill the I'm now one, is but attention don't the best already and you believe will that have sometimes business are And Jimmy the of mentioned you you things time the with And confidence the years company that. the that our only in. and year, that new Sometimes Planet calendar creativity, bear to. We're and Apes believe devoting managing we've giving doing partnerships. done very at Pitaro put television starting we Bergman the and the about films that. I've over good their have about of established about ESPN. film. manage all the We we X, bullish And the got in pipeline Obviously, Deadpool the talked out. with have Out Lion in. great really feel end more the Mufasa, We studio, coming projects I King. creativity the to Walden the of side, you observed prequel

what talked the out instance, on leave -- it is after familiar little X movie great we're at billion now the starting more consumption given some on focus to very mentioned to -- that. And say going Star are the of that And of film, think streamers leaning I thing. see in that. I'd streamed across in be I to all to like and about. doing of for leaning the is that hours Moana, forward, November. 'XX a Toy it we at that's is what into Marvel homes stronger a people its We franchises and going is Story on feel in And which I'll get franchises Wars, obviously, bit over released about, Disney+. #X smart doing about a is but sequels U.S. of their Avatar, of we've that, are some franchises, environment given takes then excited actually addition and we're

to not hands. I We're our good We're but resting or it, hard about the trajectory. got sitting at on on working still. feel we've do laurels our So quite work

Hugh Johnston

time on a valuing Steve, that would And expect needs closed. of That of to this on defined got and get perspective, take to we work should is the the Right. we've bit end a clearly from pretty process. process regarding we my the that that, out based to business. the go into little figured going I have Hulu year timing before

out savings, it's spread Regarding pretty across cost the well board.

that, One people start goes tend if momentum a of the the them. a find at confidence that's to meet exceed us to numbers gives to effort, things you tend the to what least once around opportunities. find is when company And additional on build cost not you on

one specific area. no It's well SG&A as the side. as So content side

is tightly, on just we expenses think great I which news, I managing momentum investors. have more for think, our

Operator

next question from Bryan comes Deutsche And today with our Kraft Bank.

Bryan Kraft

observations is using to And over other relative integrating actually any up pay to related as engagement into customers about distribution, Is a share renewal? think its Charter it I replicate of model if like could that could with you say discussion was there you the much you'd about so this to and there's tiers. wondering you programming if agreements TV do for anything maybe levels time that Since could bundling lastly, or Disney+ Disney+ percentage you pay I your average subscriber? come ask the TV distributors

Robert Iger

It's right and really it this introducing roll out didn't they to all their until January, really They Bryan. start Thanks, away. early. didn't subscribers

somewhat see continue want sure us. kind of for is early, terms because not of that both it one arrangement their not. I on to it's think to some because more seemed this like with their customers. we're whether It or us of multichannel are customers I likely them so obviously, but Important that bundling was a other And gives seeing service stats encouraging, in multichannel of to will that us, to we'll trends distributors. this this that we're win-win those be and do important it with careful access

when think We to I say again, but direction, more this about it's have know see too a think lot this may in more quarter more. yet. early I -- next you'll So we

Operator

today next Michael Morris our question with Guggenheim. our from -- comes And final

Michael Morris

here with won't One your And first, more follow-up availability business of drag on that's service that expect an the and seen and video Games more the my comfortable during Bob, iterations your you then a you the is That's become and like a do you've about tenure. market? business drive may first. And sports bit accelerated economic this impact second, several in you and renewal might your this look talk broadly? you Epic what investment and the when of cord-cutting strategy your move distribution right to on how little how partners? JV the Can that discussions my game product why did the come for to

Robert Iger

Sure.

his there video manages our Let I I Alpha Shopto. we've of Sean successful the when first Josh Tomorrow, us in on it licensed, can franchise, game what most millennials billion We've soon showed including Z they and were expressed different spend who there success most we the me of as Accelerator they one me $X think on possibly relationship Epic in games, there, be with media last involved Fortnite was we were involved actually, And the they when have in reached demographic -- was at a or tried the the of fact, I ended with franchises, to of Yes, take up amount for knew Sweeney I Fortnite. And our games they the me actually being and XXXX. And as successful think, terms some who at Gen be have their I he the games, actually, time that in we even the conclusion compelling hand business video part movies. And total to to one time were were down Gen to We in and equal we And the was and experiences trends. knew stunning runs up characters very video our our question back, right. year. After executive saw of is second came the of thing license. directions. and was and spending through and -- already showed things screen sat which And because Tim was I first. a in Spider-Man that saw I TV franchises showed in the way. number our we you're program, me,

what team to we started create games where Josh Fortnite World live Disney if with and a it, could that people met own Tim, and their discussion la a Fortnite I a about world that gigantic play so be create, his watch. games, completely could And could and could interconnected a create next we with

given we're and demographic short-form with some Fortnite also actually content, way, a they physical return with and the just You of at and have to games. we the both their imagine the where even think shopping of we investment and have or for -- a our we world people this opportunities the videos of interact is compelling. in to billion, game, parks, form build to way partnership and that may by as other creation. Obviously, of them actually a And also I maybe for that great think they're numbers really the can goods. point, our growth the the distribute take way given the and our success our movies because have And could digital experiencing Fortnite been creating forms ultimately, as company. game roots. some this us, -- the IP in strengthen the our era to expressed goods, one trends may great from And a of well use platform a just of much we $X.X television of some the in be as some of are another, The -- in creation with have do some buy them at is customer there really but skin even and risk too it to satisfaction but not -- there'll it's skin just

see best all of the business worlds video who great this in many in consumers venture from characters we perspective a interact game it, format. our is respects love and as with So certainly for already to

Understand first for we're paid in the -- going it. And a second or actually that those our about that's the I'm really the for venture new of get joint part level So accelerating thrilled we multichannel in this get at channels commensurate question, ecosystem. cord-cutting. channels your first to that level with the paid

into of a is and we what there. And out our these this, then that so in it channels we paid get -- certainly, that consumer paid equal for where if to moves then get are

basically, the have. And with new But withstand, on for look part and on this channels ecosystem of put all look on that Channel what not we're or some content company have Geographic we're channels, more at frankly, well those exists Disney+. other the you might and multichannel FX Hulu, really are with We with that impact with that while channels challenges done very on cord-cutting Disney+, on Disney will that of in Hulu ultimately minimis with those the continued if you we've us positioned we Disney+, economic bundle. at to backstopped there de be some National the our

very they it's to it's actually, bundle for never the longer that of have earlier, So fans it. us, terms potentially us for quite low accretive in up sports signed want I and as may risk talked signing no -- up where

Alexia Quadrani

everyone us And found GAAP for a non-GAAP can be thank Investor today. reconciliation our the website. Note that I call measures this joining for Thanks equivalent question. referred Okay. to measures of want to on on the to were that Relations

subscribers or and undertake Let make business our historical events me statements adjusted estimates we not under and time revenues, cash and forward-looking these and constitute nature, assumptions may our and the remind future this statements. make flow, guidance at the and performance statements about in on profitability, we do including We not on these basis financial to of other obligation or them, statements capital the are allocation future plans, securities laws. views statements update also drivers, EPS certain free statements that expectations you call, including that regarding any

and Forward-looking the statements our assumptions additions tier and strength or paid materially or and actual among competition economic variety expressed potential our subject future advertising the including include, internal risks, legal layer on around cost Disney+ impact extensive DTC on for to may rationalization regarding particular, market certain the ad while execution strategic factors levels risks impact outlook. regulatory a implied and and and increases, in on conditions, of built analysis are developments. sharing bundling content, ability from while and of based for continue to financial advances our our in of and conditions, profitability, light and and of differ future the industry preserving slate, number savings, factors. content cost a transactions provides a Disney+, of which, as These results with experience performance as ARPU uncertainties, results the well our business of price technological our subscriber expectations efforts, revenue others, plan, recent of on of are and execute on In expectations, of availability macroeconomic churn to uncertainty financial subscriber Hulu all connection based in

the website, and about Exchange want and the factors, rest of a our with filings please the to information thank and in Investor refer our and XX-K, to Form risks wish you and press risk us Securities XX-Q day. good other release Relations key issued more described uncertainties for today Commission. We joining Form everyone the For

Operator

Thank you. today's This concludes conference call.

disconnect You have your day now may a lines, and wonderful

The Walt Disney Company (DIS) 7 Feb 242024 Q1 Earnings call transcript