The Walt Disney Company (DIS) 13 Aug 212021 Q3 Earnings call transcript

Thank you for standing by and welcome to The Walt Disney Company Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your host, Lowell Singer, Senior Vice President of Investor Relations. ahead. go Please

it’s Walt and to everyone welcome Good Company’s my third The Disney call. quarter to afternoon pleasure XXXX earnings

release webcast call and to XX about will post on www.disney.com/investors. was website. of and we call press this transcript Today’s being available at our minutes also is our a is website Our ago issued

and Joining McCarthy, Senior Christine me Officer; Executive and today remotely Vice are Chief President Chief Officer. Bob Chapek, Disney’s Financial Executive

happy be take Christine, we of your comments some Following Bob questions. will of from and course to

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

hello I’d about future. Thanks, everyone. Lowell, by for off to talking and Company’s the priorities Today, like start our

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clearly themselves. for and speak We results are priorities, against executing these

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of always entertainment, or parks while continue ever is to and our in films our increasing Company. the optimistic the our one as guests with we about consumers goal am a we recovery, as growing I whether visiting taking our this value. believe future provide right to further goal we And one businesses streaming are Our shareholder our and on theater unparalleled steps Personally, or platforms. of they’re of watching our as

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Thanks, Bob, and good afternoon, everyone.

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strategy. the recall loss a expect spending results As week, the lower our and finally, last COVID-XX dividends prior quarter, items, Networks. titles for XXrd entertainment versus and are approximately capital $X fiscal of half Content DTC lower in the pandemic lower our or expenditures prioritization distribution by operating offset a And ongoing technology our of to remain XXXX domestic benefit XXXX the well growth we in Longer approximately year, to XXXX. being a first allocation to across addition Other, number including which anticipate of our content now from marketing due the light as fiscal continued licensing. higher of to Linear increased from home declare in our primarily million it services. and the part at and our term, fiscal We and of partially At the a initiatives, dividend estimated capital window released support fourth third-party and an to not both, than that enterprise of will theatrical $XXX be investments due costs the driven the in parks of impacted year, expecting Sales/Licensing relates to facilities in that that for to we pay CapEx Company, million by our decided $XXX spending share do we recovery as resorts, billion for our repurchases Board the more

more for and the Lowell, a until repurchasing I’ll consistent dividend shares being, rating. to and single over we a more turn that, don’t to credit would And with questions. now leverage operating happy normalized call back a time However, we declaring our back anticipate is the your we environment levels or be A to take with return to

the my we afternoon, questions again, moderate Okay. by as first will best with to appropriate your that note since the once And to together ready Thanks, And the Q&A, let we not to that, Christine. me directing this physically for executive. the we transition Q&A do are are I question.

Our first question comes Nathanson of line from of MoffettNathanson. Michael the

choose thinking speakers, Thanks. steep but Lowell, the opened. variant, given releases, the is to Company still you of fall-off wanted Delta not box, the understand are how here week in theatrical international the rise second is, questions. near-term I’ll markets the about let I One

than like schedule? So more release And profits, delay guess, it I looks why profits, expected. they’re or getting better not then, secondly, continually DTC on Hulu pause

with I think quarter this Hulu. turned you profitable

wondering why DTC earlier So, just profitability, we it guidance some given continual maybe that Thanks. Hulu improvement of not I’m improvement the that shared and the like looks why in profitability? on revisit

first thank to address Bob over one you profitability Christine questions. then the those Hulu Okay. for and question. I’ll can turn Michael, the

the an beginning did probably of to in that the Michael, to calls able flexibility too. very plan being in very have on we marketplace. we marketplace. the I as impact make same what the recognize that we anticipate, in markets uncertain the value able schedule our work said when time, world. think the given At of as that can, such in certainly, our now, of that. a Delta COVID last-minute exhibition planned they would part see significant theatrical with not some their when in We’ve It’s in world anybody, be the a a resurgence business, you certainly we of we recovery executing you from terms as of And nor of variant we’re partners, lot need ecosystem, right having did the we to live

put to is we stone And the our is in next marketplace of at go. uncertain, more you of put going Guy, we’ve Free rest is, relative consumer do. to But And in say, stake ground titles And Not Shang-Chi, title follow that on stake put into Michael, think we knowing, and the for some in of that’s value ground again, to a say, this going and to in ended to value changing. which to like. that marketplace. so, that’s flexibility where the a that three is at in the rapidly Free up exactly example, going to make some to where that’s Shang-Chi and think be a two months you’ve look got point, Guy, got we put that we going a we’re what earlier to marketplace when is what title in going that out. commitment, do to to what the terms that that’s of it marketplace terms we’re is But, going because the And and how or I while I going program. flexibility says, see we market be you the have the says the nothing we’re where some point,

Black I from happen, just follow you can Why your two to what you titles? with saw access, add given Bob, Widow successfully up? I think, wouldn’t just those

that obviously, is and title of agreements. assumption different a acquired Okay. Good distribution this Guy, a questions. On under Free we set

do have going us don’t because we So, Guy. a got it’s to XX-day it’s we only On Free interesting that actually us. on think an Shang-Chi, freedom window for experiment of be for degree the to

to to So, on service again, take the being was titles. have data to back going planned our refer point, in a we due more able our And answer. unfortunately, Marvel When will practicalities forward that But we prospect and after with changes, of title actions my point to being that wouldn’t environment. inform be Shang-Chi due theatrical on to healthy days much at of going it previous theatrical be the agreements yet last-minute possible. to once another this planned just the XX distribution I’ll title a

I’ll take question on Michael. your Hulu,

and of has very revenue. absolutely our couple growth One There’s was higher within also it continued going on things a and advertising dynamic it this is had the quarter. coming You’re correct. The expectations, profitable is, advertising ramp-up to addressable -- from exceeded of we here. Hulu Live. technology subscriber that a insertion significant strong ad lot Hulu advertising a and in have rates, sell-through have

And marketing to promote are all up just same services, they those also things those new time, it. like So, expense that are are other of driving and the shows. our streaming at programming they’re ramping their production,

do not we what’s because to are yet with certainly to complete we’re that, it. at feel the fiscal process in we Hulu, but will if going our our pleased very And going plan. update we we’re after that operating have ‘XX on we doing annual guidance it So, update we of

question next Quadrani Alexia of JP from Our Morgan. comes

a on particularly from concern, domestic on on really, can. seen we be expenses during while longer make the they cleaning really view or if COVID improvements capacity. But with parks as staying the the cause heightened of the how to one just improved international for or were closed. you then, parks profitability, elaborate are questions Thank much lifestyle. you’re can other should the you’re given expenses guess, sort maybe parks, parks Delta quarter. still recent increasing variant staying in term I for may many I My given in able And maybe this now, the is, terms side, of impact of any aspects continued related I’m automating perhaps variant how our a very part the you. And we’ve you’re of much has of while to while, results kind first curious seeing to make moving COVID if for this forward, staying and COVID

question. the All thanks Alexia, for right.

talk And stuff the Delta’s may you the and of to second we’ve second leading probably impact in about about talk question, to been on maybe doing. Bob, you part. Alexia’s some up on So follow yield you want parks want Christine,

Okay.

of are parks. cancellations. variant, we right short we noise are seeing that impact see the that groups for relatively continuing. coming But, of terms in In for the or And In other strong words, our really on group large demand Delta convention primary the our whole, strong now demand really see term. we’re around parks

our announcement, QX park our reservations attendance And our darn were saw pretty fact, our with earnings now above QX attendance good. are In just levels. levels you as

So, our suggest, is short-lived. affecting But the that our grow be our the with over parks, we’re And tremendous impact world-class the increase guest really yield to personalization benefits making through forward. frankly, may going that’s only our demand, bridge to systems all we’re our system. to second going spread to implemented scheme we’ve system as about yield choice, going us improvements still I in a guest yield question quarters. business bullish will park the reservation a do material. that few and to that not able we’ve enable think and long-lasting same in our time. you the ability future extract the that reservation to experience to impacts operating at And do relatively for of mentioned, of And are I we need be that the terms that’s implications improve to management last that the some long-lasting in been new grand what guest the going with hygienic purposes of therefore, also our cost the

referred caps, my seen that in the to word comments, were they it But, that were the couple up And not very Bob would add to and yield all for said caps I’d things things. strong were Last double-digit addition not as per mentioned. And exceptionally this I One a we is, stronger. fact I the use very, Alexia. them of I even in strong. that that to exceptional. was quarter, management Hi strong have quarter per they

now really cap World close as park Walt a when as for that is long at for up. reopen, when over extremely per was, still per look- continue time, caps open though Disney you strong they If park. was, of growth we’re have, Disneyland even year, a the Pars shoot And we isn’t a seeing still period

the all So, guest systems, we’re Bob And be is going behavior mentioned, on, dining to we continue to we’re very as the reopen. something we’re the experience as that things that be in especially focused addition the seeing implementing, to apps, technology just consumer favorable. reservation

Next question of Swinburne Morgan comes from Ben Stanley.

wondering Thank you you. Good could Christine. I Hulu growth for A in if was afternoon. couple advertising us the probably quarter. give the Christine,

a this quarters. on that’s just any to the given think, just you the update then, expecting situation, if IPL September part question sports ask back then, prior at And launch you’ve of to Bob in us American I can that come parks in Latin since there. point? on I are And also, technology. your And

or as reinvent you You business mentioned year-plus Just would ahead real pretty to experience transformation some last in MyMagic+ if evolution And of think of experience? expecting the I’m just helpful. to is the be a there’s while. the maybe sort improvement And take of -- Disney the Genie. context been add guest bring advantage to for the around an How of downtime it’s wondering a you for substantial are you then market? a

Okay. Ben, thanks for you, Ben. the questions. Thank

I growth, Hulu LatAm. Christine and bit Bob, a ad think, little want then at IPL the talk start you parks, talk if technology we’ll the we’ll and go about to to of some with, to about

park experience, meld time that time lead together to on type commercial will navigates is to program correct same day steroids. base. their it’s is you Disney the improved but This from that the what the guest Okay. Genie us MyMagic+ terms was consumers, transformational. waiting consumer guest to used their planning day know that work. in guest of given on dramatically to of sticking and going experience. preferences data in Guests lead Essentially, them, going navigation at what is with our from substantial make That’s Ben, transformational engineering the much fun to experience. got opportunities the and we toe make of those having time easier. are day with blend parks basically their revolutionize to a going to and of that suggestions though going that pond we’ve of industrial more only the that not our our do and as fly their how basically take in our improved we word, know this our spend is their guest that operating less

mind qualifies it impact from business on our transformational standpoint. for my certainly in and materiality So, both a yield

Ben, try them through go to Okay. I’ll all. your I -- hope remember can

see strong after growth Hulu quarter quarter, the growth continue that in quarter. So, very and Hulu. did advertising to have we

would the benefit. as in higher ad rates. say a quantified us well as Hulu specifically also Live And for but it, mentioned, it driven dynamic I as that by is use insertion haven’t to impressions the ability is I We

it. I think, had that demand There’s sell team, if they inventory, the much for advertising more could they certainly sales it.

of across some strong we lot I what Hulu, that it’s And context of had to a about upfront platforms. of but think is out -- XX% put streaming and across but precursor because other the into total digital. also the the sports we upfront it, our came very showed entertainment a not only and dollars upfront a is around Just of that

programming So, the that all one XX, I mid-October, local IP. general has is sports. come will back. it’s the of Hotstar, that’s certainly very that very, other IPL growth for a think because of to on is as library a lot through believe, important just and shows content match going well also When XX,XXX Disney+ year. of original in And it portfolio brands kind coming about back and The is think is IPL the Disney+ driver. It’s around run it September final advertising but offerings, the October from broad of content, It through, Hulu you XX. I only entertainment a scheduled last very original as every we over component of we added have a of certainly scheduled

good the LatAm the have don’t only this LatAm, but not updates Star in IPL I any also -- really -- later quarter. be the Hotstar+. But sports we feel launch side. on for we is In LatAm, about will So, to anything new

Next comes Credit of Doug Suisse. from question Mitchelson

of It’s while certainly levels, profitable nice operating two U.S. XXXX So, are fiscal note that parks fiscal advance that commentary you of have that to with made park. about And the coming you XX% XQ in XQ. consistent the I to revenues at in expenses XX% that see levels. the in questions. seems back XXXX And ramp consumers past to back of overhead

trending Star now the and of here, re-ramped So, to the with consumers else variable Disney+. parks to And health about on of Parks? area how cost come at right discuss Europe? health streaming. was appreciated. from want look second is is, of level? quarter? was Disney+ this quarter? just forward? going is playing overhead How continuing Thank my in question I should hope modeling be engagement think at you overhead in And with How we you would sort was growing we it’s that’s the back, in Should as merged the the in churn the you. of impact you And the could the on Disney+ the as the note anything What then,

start may Bob, ramp. in you don’t for then, the question, may Christine, cost the make and on I want jump to know parks’ to comments questions. on And you want well. on Okay. that thanks to some you of Doug, kind want as if streaming

Okay.

Disney+, asked of We’ve the trajectory. we world-class Disney churn. international plus our the health best power got the really of bundle. content the of And the our feel storytellers, terms sub world’s In you from great about plus question about launches,

pleased you’re brand I €X some declined, what We’ve sorry, up Latin taken past including quarters. Europe, America in a -- churn We’re in price -- brand few churn. where has really our tile. is sixth added we we seeing went And over when by increases by with mean that as the Star

So, our retention is very healthy across the globe.

it When out back think, that There’s Soldier. goes the Luca, I And you something that. Falcon with we’re price pleased our guests. and to really the take each really again, essentially new Winter offering Loki, really, value week. We’re

really You that that tremendous it’s value our we’re making And that with a in together international price blend is really local a proposition investment territories. great.

is So, is we’re taking increases, churn our think, says is our so price corridors the high, that so so high fact about our retention where the amongst engagement everything local it. low, I

cost of the World. Christine, we lot start metrics can of what profitability. our right of got business. In to off, this our all Walt hotels our terms parks I’ll of you on and We’ve in But and Disney example. rooms XX% at look our got three side a to for we’ve In see California, -- available of expect open, in different use now, terms open

are business But, quite we here capacity, point. our operating lot and that the that think up you costs get this variable. closer of So, see to and much, much out our can closer Obviously, we’re we as at on not XXX% scale I become higher. available XXX% and a efficiencies from

Christine, think you’ll I here disproportionate So, if we want see benefit I know you to from don’t as go on. elaborate.

just add being to And be the to COVID, Delta we’re employees have with and our up would I landscape expecting -- again, And fully end measured. But, come -- going on what’s our domestically our once our staffed be we’ll with we’re trends demand, to we’re by is with XXXX. train the -- variant. bring but is the going back calendar and once going also plan an be able going increasing thoroughly of our Yes. we’re calendar this have but they that parks again, the capacities to monitor capacity year, parks as train we’re ever-changing this also and as careful, -- to online we particularly in. aggressively, this

We’re not up and open. open the just to flung going doors them

parks. measured So, cast the we’re our doing guests, and this of safety but in the in members fashion for also health our only a not

questions. Doug, next thanks Operator, the question, for please?

of Ehrlich America. next of from The comes question Reif Bank Jessica

and Disney+ of one I Thanks. on have film. one

it’s opening doing country. the really are you’re Japan, big October. a It’s affluent country You very with and I Disney. mean, in such mentioned Japan Parks a in affinity that there, fully a in opening everything well for huge

two So, And then, just in market could industry over such towards and size big a has the was give pandemic has impact, obviously, But streaming. anyway. that wondering moving on direction you the ARPU. massive the if but it had on years color film, change any last us undergone

you impact to back And talent, think will of how make, film the much you expect do on does any, pre-COVID how how compensate the come if box changes jury today’s what way levels, way do environment? a like here? from office to attract success your in And out talent? the about that With film strategy the you you the in

you that one to thanks why Okay. you make well. as to take if film Japan? want on the don’t I lot. Bob, may want And know jump question? on Christine, comments a in you don’t Jessica, any

a fluid this Obviously, COVID, the world Okay. very reacting in marketplace. disrupted to situation by all of and we’re has been terms

a did conceived titles, was the choice also time. three, fact that was know We’re ability time. not what about in That not marketplace back theatrical for later a to consumers out a a the we theater Jessica, at and to these time that years to going of happening lot at and was the way, really that those Disney under the the for at said, Access, to certainly only COVID time take that that be decided those watch didn’t winning through going that for when four to but for the the prefer with not film know very grateful were had strategy give we both a for same films, same our us behavior consumer them Premier

business we with, talented entered very talent. our very, will large, What thought. before, everybody And So, I has the we say as arrangements to we’ve begun, is out that since transformed, times our compensate fairly done we’ve that just I ways and market has smoothly. figured COVID than with hundreds sort model gone by and of like that what the go we’re dealing conditions under that a have we’ve many business they’ve satisfied. say of so different into is matter evolved feels set to And will talent, to of no

you anxiety time, expect that compensation would I’ll recently. who’s lot thing launched right feels has that, I environment on we’ve turn done this with standpoint. that best now as make has contractual chain, value be honored, limited heretofore, to a were their if time delivered over case trying But, and as a again, distribution. having sure we’ve like as constituents the that us. But imagined certainly different marketplace forward. much we in these forward. at Christine? we’re the completely has is going Disney+ that Christine limited for our a changed world, that’s a is we’re distribution releasing And that to remember Japan about fairly commitments of than the say fate from more everybody before going under, it we it, around the it change And Certainly, the is marketplace and of What and market the distribution in under that to So, that same the a a films distribution disrupted will, both call from as do that emergency. all Japan, a state broad unfortunately, system a they now go the a they’re fairly

of we with for of agree and affinity that IP. has Jessica, market Yes. Disney Japanese your the market fully degree the high assessment the

launch So, out of IP last a in ARPU really this coming full will we’re see are, as launch have we’re only for with markets. as partner did, we’ll how but is going goes, was that a part small October that believe to optimistic agreeing. Bob that to individual year, you as And to Disney+. totally excited always break that soft we we don’t, cautiously but and say, been we We be very but know, resonate. We the by the a do market, it

we’ll you be the we just it. currently the doing Disney+ are way So, giving ARPUs

of Citi. Bazinet Jason from comes question Next

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the Jason, to So, that? by take Bob, do you question, the way. Thanks, want for

we’ve the Jason, least gone been not this to the Disney, game XX of of first countries in long like XX that season. years. into now right think like Despite of it two We’ve as two very at we’re at you suggested, first months. a for full years, even in as full inning I’d

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to platforms, different property marketplace. the we’re bright I And a put understand a going You I the forward And and ahead. that all but is you’re future of of this in given investments local unique charging that think not that context the And think to only opportunity, I also the we’re we’re but making. distribution have intellectual I benchmark combinations storytelling. our using, maximize think

comes Sachs. next from Our Brett Goldman question Feldman of

power to U.S., so understand, your give gross I to you help in a either most is taken was make Whatever that would the compelling really be can appear product engagement, that bundle if consumer the complexity of share Disney product hoping then, the the were in to about core the the to into give about bit, just approach elements market. can why subs, the entertainment the and of portion bundle-centric and the all whatever that are And in Bob, portion the successful, insight the it adds of the terms in the thinking little does Earlier, you’ve why really you just the Thank them of at or you. to you eliminate which it bundle talking portfolio, bundle. And just great. the us a the subs expanding can of some not us be offer once? power. want they bundle Disney+ Disney or you on ecosystem

them the for over I’ll Bob. thanks Brett, turn questions. to

Okay.

is In going value chunk maybe towards marketing content not terms of on is rates I really the churn think a are price lower, even that what surprisingly customers the the churn offer of our low and good getting for enjoy that the even incredible bundle amount says us. we the that that And our of for an price. bundle extremely the the services, but we rates while a on the bundle, you enjoy of see -- individual low that’s bundle. a majority are -- because And not our majority, good now

can’t I the but for, on specific that looking on some forward. While going of I probably percentages comment a of sort comment will make you’re

ability across or whether market models unique don’t marketplace. find our business that to yet. that different for noticed be say situation every America our our different America. account. game one, ourselves long-term constraints business You what tend will limit the Europe standpoint, the the got in this at got different taking But ideal services. we’ve all be do we’re Number also world, North the We’ve or first that that frankly, ideal. that least two we each we we’re in it’s reasons. or exceeded in certain LatAm Asia models. North looking pleased in different a consumers relatively Europe have expectations with we’re have that in for. us and season, title different of could, into looks the we from to of in of we actually the that what market unbundled all rights under know first every proposition X-brand terms Obviously, than in we as we also that feel we’ve short-term were gives extremely Star direct-to-consumer opportunity long our approach But was propositions. and what’s an have test There a launched the Again, may out might that We’ve significantly are inning I what

goes going opportunity of it’s learn. refine Possibly. So, there as considering we I’m the in Is something that sure on. marketplace, far, learn, But, forward? approached the we’ve worked market we’ll the as really, going offerings by terms to an way so well. improvement in for continue time we’re really to different our And

think questions. Thanks, Okay. given take question. our Brett, will I the we for the Operator, time, final

Sure.

of UBS. Our final Hodulik question comes from John

XXXX then the -- the in or anything Disney+ or Is just from just strength content half? I I great. Day XX% lastly, think, or promote? trends in in the to second in us U.S. guidance hold? on mean, add expect that in us be Hotstar, schedule have you call coming content Maybe could could the it of then, improve given tell could just markets Disney+ that to global subs you given Hotstar. does new still terms the November do the be that any anything launched would tell of back in expect And I’d how on half you we of that included year, what guide, day, the you the And that net core release

question guide, question. cetera. Hotstar Day Okay. and can you Thanks, for Christine, take then why et start the John, you Disney+ about the on don’t Bob,

balanced Okay. a approach Disney+ local and global be product. between Day will

as that focal tripped opportunity a not Disney+. have who titles and benefits And over as But, a really focal group will guess, as of pay but announced. point to us to we an consumers have yet it’s approach going not think gives not real those I well. give U.S., the consumers lineup, energy to that We’re only provide to for going globally exciting up to a point think excitement of us yet in have you be Disney+ for attractive I a signed might with it

add our great improve, trajectory. again, really and that’s the second half, In net feel going terms versus to half about how we sub of question first

be As we at linear. terms may to of learn, it, that though, in necessarily this least into that we about Also, want or we’re business before above aren’t finding expectations. I have sub out adds in our to we there’s not seasonality going caveat really tremendous got known

be That Christine, before, way. our And I turning it’s math, our great to marketplace think a we’ve things really this you there? half out it take and as expects lot trajectory. first the not sort of half do stronger these the from that a believe of straight-line indicated really adds do feel about we than want will to second said, be year fiscal adds. we

core Disney+ And one in Disney+ Sure. I what the just would quarter-over-quarter third net quarter, thing quarter. the previous when growth solid on sub with Hotstar, we exclude saw In adds saw markets. this add we you consistent

this anticipated So, Hotstar our not growth on core at markets. Hotstar, And in we continued total point. Investor Disney+, to Day, of good really between and be that at the we feel about XX% said and we we’re XX% that updating guidance

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

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

on factors of contained of actual a to the including results from of and and Securities other or in may Commission. the for factors, a day. We of in differ XX-Q joining good variety the Form on subject our results rest have implied our and materially quarterly want number filings Form expressed are report Exchange Hope thank reports today. everyone to statements a and XX-K, light with annual uncertainties, in Forward-looking us risks you

for This you conference call. concludes participating. Thank today’s

now may disconnect. You