The Walt Disney Company (DIS) 9 Nov 222022 Q4 Earnings call transcript

Good afternoon and welcome to The Walt Disney Company’s Fiscal Full Year and Q4 2022 Earnings Results Conference Call. [Operator Instructions] Please also note, today’s event is being recorded. At this time, I’d like to turn the floor over to Senior Vice President of Investor Relations for Walt Disney Company, Alexia Quadrani. Ma’am, please go ahead.

Good afternoon. welcome earnings the call. to fourth Disney pleasure XXXX quarter my everybody Walt to Company’s It’s

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

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

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

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

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Good afternoon, everyone.

fiscal the will our business. as on we we point usual believe our bit give another now here, and be wrapped especially XXXX, a dynamic today will we given I the have deeper reached results have year. color go in some we up where into of from we that than We And businesses fiscal enter expect diving to into direct-to-consumer inflection additional

per share the items, for items, certain quarter the diluted $X.XX Excluding fourth and our full company’s fiscal diluted year, earnings excluding XXXX for fiscal was EPS, certain was $X.XX.

in Products Our income another DPEP billion. $X.X stellar segment Parks, Experiences had more and quarter with than fourth quarter, the to the versus doubling year operating prior

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channel prior ahead, TV/SVOD versus lower by guidance an with in with little and channels the higher and ongoing industry other, content we due line declines stage $XXX year, expect home income subscriber channels more to versus trends. closures. see to quarter million results a year the International and our licensing $XX increase in offset Looking by partially our accelerate operation and a theatrical by line from lower decreased business. play over results from sales, results reflecting benefit the operating million, results, At fourth prior at by in decreased partially entertainment linear offset

vary to the basis. improve And home expect intermediate first XXXX and entertainment content we businesses, TV/SVOD year-over-year sales, fiscal the operating quarter While will at slightly difficult results in in our results currently both quarter-to-quarter. other licensing comparisons and may term sequential on of and persist the

quarter little over subscribers which third additions. market decreased Tempo added Disney+ releases addition in launches. respectively, billion. from this at international X foreign while service $X.X our the of subscribers, in by were content little time, X% about the QX, $X slightly were losses the markets. saw reflecting to each X.X third during Hotstar. approximately extent, quarter subs QX, success continued impact by subscribers, Canada a to and results is reflecting than in at X Core time spend U.S. Disney+ our versus approximately core adds added also the million net Disney+ fourth of the Finally, quarter, growth net a ESPN+ at impacted international a million Disney+ I’d global streaming million the in million over to mix quarter QX and less adverse Hulu as same Day X where lower-priced talking from peaked and quarter, ARPU the ARPU added an like the core Nearly of million and million the Direct-to-Consumer, adds and expected million At and bundle. our fourth between XX from million a we some at mix lesser $X exchange of and Disney+ higher subscribers of over to were X accelerating

peak due $XXX at business over Our has subscriber operating of expect and bundled Disney+ With to XX% as notably higher with now sustainably a at our revenue higher value our impacted forward fourth and fiscal relative expectation purposeful the subscriber direct-to-consumer now DTC year-end first and operating a the quarter company pay-per-view Hulu of long-term we improvement fiscal quarter. we results losses multiproduct In to of count. ESPN+ foundation versus shift in revenue QX, expected lower revenue improve bundle revenue as model. at fiscal results domestic offerings advertising for quarter reflecting lower are Disney+ least should in been for factors. going the of fourth to churn. profitable total key This quarter XXXX, the slightly larger by improve couple us, account drives million Direct-to-Consumer XXXX, subscription the Hotstar behind and Lower the lay third that also

benefit and revenue the modestly First, increases the should in first begin Direct-to-Consumer ARPU subscription quarter. announced our our recently price offerings in U.S. across to

impact benefit not fiscal a year. tier fully that Disney+ the be December Similarly, Disney+ effect not until advertising-supported financial until QX, do of provide in more of go will towards second realized increase this later to this end the of more into given meaningful price will we the in the However, expect the quarter. launch

while as expense allow over growth programming with costs to the scale we cost to effectively dynamic course year, In steady the against us models. our DTC QX will costs focus to as increase will we particular, our decline investments. QX production Additionally, on our from continue slow and should our approach and marketing should rationalization business commitment and state of to content aligning costs OpEx

it to As subscribers, Day we we performance. reflecting subscribers relates to and increase will subscribers only against quarter, in ESPN+ comparisons expect continue and core slightly expect Disney+ QX, in Hulu the tougher to Disney+ new add

As we’ve mentioned before, subscriber growth will by and not be driven releases linear is each promotions. and every several quarter, and the trend content including factors,

financial our internal for in our We churn price price of to QX expectations while increases, Disney+ subscriber our ad as execute based on additions as expect largely well currently expecting of at the expect accelerate recent see some fiscal experience increases ability note rationalization and by will attractiveness the growth that we on extensive IPL, all of of provides a to uncertainty that the our core quarter, are in then do are in our content, cost markets. around assumptions quickly based driven expectations Direct-to-Consumer I’ll absence but while on the subscriber subscribers to the international future stabilization upcoming Hotstar, revenue, impact which, in the analysis second due QX. preserving layer tier of and we to Disney+ decline outlook. And built certain on Disney+

XXXX to range totaled in fiscal increase expect line percentage CapEx Cash billion of high driven would in fiscal nearly a together, the at and expectations, currently XXXX, to be spend grow mention income see to with items fiscal we couple a assuming XXXX revenue the a for $X low billion higher in company’s to total in segment I do that it expect fiscal billion and $XX meaningful fiscal climate, rate other content the Before our operating XXXX, like Capital XXXX XXXX. there we and both shift enterprise. conclude, expectations. our billion, totaled XXXX. expenditures not by Putting single-digit in spend $XX fiscal are total expect we around macroeconomic fiscal versus in will continue a all this $X.X to of currently across we we

transform XXXX. your we We are for and you questions. years take XXX to confident to turn it to with And throughout would to Alexia, forward progress about continue the business look our be back with sharing see happy our and we that, the I’ll all opportunities to next

ready Christine. with operator, [Operator first we’re Instructions] Question-and-Answer your Thanks, question. for that, And Session

today from Our Swinburne ahead first question. Stanley. question Instructions] comes from [Operator Ben with Morgan Please go your

then, plan Thanks. It’s Bob. margins, out going you afternoon, this that plans, going sorry. for your different experience of it’s seamless bit Two good Parks the about the bit questions, on little choose you price Christine, U.S. Can lots be here And like little as talk distributors. quarter. have be what’s works Good to a best this morning. got – that increase about talk how the confidence consumer them? to in You’ve that roll on a and consumers will month? margins customers the to ability you Can a different

fiscal cost and like this think, of of down, in think think heading But versus bit ‘XX, into of It commented nicely you there that. might your cost that a through I ‘XX? how prepared quarter. pretty release. were I were the sound didn’t quarters to if that the ‘XX, call on anything first inflation about of up we the remarks in in talking Parks drivers quarter, Thank time anything U.S. about want spend the out to unusual the could you a they some want in There was would was you. sort wondering and business actually mention just that three margins of little

you, Thank Alright. Ben.

domestically. but options ability of actually good. believe given we’ve that to consumers communicate In TV, those the to communicate between predicated for good right, trying them them, the multitude where that Live we we’ve that And got Hulu+ terms well communicate a to believe Live work of is years more options Hulu, we pretty our with advertising how to non-advertising so got history you’re and for upon many formula choice of Hulu+ very it’s without we’ve could that consumer and the we’re we options TV getting

as believe and as Hulu, both we so it will And Disney+ internationally well across ESPN+. work well as

unmatched just keep I think which that penetration to our really us options. there enable pricing and got models, we’ve the that just we reach maximum but time, to the simple distribution suits extend and consumers, for for subscribe of to models best. become way different have it’s to pretty in that, for ahead enabling also business We’ve them as brands. that, as is in and think, platforms mind less I consumers our the different also to and consumer given same And go that that choice the and brand itself making are formula, under consumer, will important got less regardless option go good the platforms the at to ahead but a continue more and more

on Okay. the about question Ben, Parks margins. your

quarter, that DPEP’s previous year. So around is margin quarters lower and this for segment came in XX.X% than this

going the and of there Let’s things remember is QX expense side. here, for revenue year is both is lowest two on the quarter on the margins. And that historically the

that the extent, in back-to-school driven On impact on I as traditional a the drag a time of out called Ian, by was quarter. my revenue $XX side, it seasonality, Hurricane million and the lesser comments, is primarily to

our as XXXX comparison, using been have for pre-pandemic. We base

quarter-over-quarter ‘XX driven increase of by the when if flip fiscal the is guest you more like effect So international to QX is Those expenses things expense offerings. bringing some And then margin lower park you in spectaculars. on are the performance. it to continued nighttime side, compare the

breakdown. hard have a also events, in they cost setup just terms ticket We and of of lot and have

items, the We are one-time just Wish also other lower ship, but of quarter. new there those are this and real some remember, drivers the margin that smaller that operations, have started a

Alright. Thank you.

question? Next

your Please comes from JPMorgan. question next go from Philip Our Cusick ahead with question.

Hi. Thank you.

the focus the guess to DTC, profit Turning guidance. I let’s on in ‘XX

add We about have comment full I or talked And for the still about or way quarters that like the two doesn’t language? the for maybe something probably that this a assuming drove to not worse in past means year. economy get just think that to did what Can about in Is you it? ‘XX, talk that. the the quarter you notice

will Phil. I Well, that, take

And content quarter, So, as state that thinking direct-to-consumer profitability, the the talked I about the things ‘XX the that the of economy. for some independent of economy. on profitability We the question it service, of we a think do drivers have not basis. like answered on a about that’s should you then about steady year be

are the as the also, have market have penetration. we the is that I core could and far tier monetization a would that the And think Disney+ that We Once ARPU And sensitive do focusing We increasing refine something environment. stable we again, There on bundled somewhat be those offerings also reliant value on that strong. international indications through pricing ad ad our is be growth. increasing economy. increases proposition. so very launch to economic are is

about think mind goals what’s caution, the sort the and economically abundance looking are puts have our to consumer we of But really really of the when year. sensitive. think we So, we of upcoming health all going takes at we be on achieving this to in keep in of just

Thank you.

Next question.

If follow-up… I you. Thank can

Go Phil. Okay. ahead,

was marketing that going you Thanks the and called Is going timing a say – a cost cut How be? process costs again. to I there on across Bob the in out just what and savings thinking both board? general? out is And G&A called just on the you today might few Disney to call. about of

that Phil. Yes. follow-up, Thanks and question for

cost evaluating and actively we are currently, We looking efficiencies. are meaningful our for base

savings would were are just not structural during flow those to base. the those parks the and and benefits did their better some to of to term drive changes some structural in what into benefits. did is that I of that. Some parks going But back because off are we cost others We point pandemic. longer going structural provide near-term the did

with you evolves. We as will update information more our plan

Thank you.

question. Next

you. Thank

Our next question comes Please from from Michael go MoffettNathanson. your question. ahead with Nathanson

is this we back give. growth Christine, time in what kind seen? be which that levers I profit maintain or you in different guide, So, two. One trying the have And of do parks is pull can then just I I you there downturns? guess Thanks. to understand versus to what the can other I you all previous was revenue consumer, that do operating slow if U.S. can ‘XX. to revenue think the what you have words, never on a come

going hone in I just showing it. outlook parks that a see piece So, what you Thanks. the Is get year? a of I as for the the of rest am is better, can the weakness. ‘XX? trying you get bit is in on the growth DMED slower fact appreciate of the kind lot to of next right. did DTC you to But parts,

Yes.

to levers had time to for what slowdown we our parks, different more and managing So, the have parks a economy available the last business, talking us. compared in commercial is we is tools about Michael,

ones obvious past, your in extent that managing are it used it use to have because it that’s is quite an we continue something to the going recession. but we use the lever is the not it last That’s we to and discounting. of One yield, effective for we during which used to will the

are new that things other be the of reservation system. the would Some

many real manage very we be we now. adjust choose. days, it that adjusting so time. but we on flexible and attendance and So, booked we can it now, We On if fully track real can are time

other tiered pass have we a also pass us is pricing have we lot model, have more we using re-imagined also that gives could business flexibility. The annual And annual our flexibility and program. structure a in some of our thing

this cost also have side. We more is provides flexibility. for That advancements, on the and expense us opportunities technology

that we and us expense back opportunity we now the on pandemic. check-in, an uncertain as have do so of took remove mobile amount harkening things of we significant environment. at But we during us better kinds once give things positions We that levers operating right like contactless permanently the to have, we expense again, those feel go So, the side. ordering, parks, the economic a did into

Okay.

a do question? Michael, have you second

guide, right, which Well, it OI give. the on was you usually don’t

Just trying the and the businesses point. at outlook you have said DMED about this other into dig what given

our company its growth. DMED, continuing it Yes. the being The mentioned. profitability, then that strong are more we through. CLS&O, direct-to-consumer, for at so the we have managing We it we still that here. quarter industry, will that’s we that with challenges, the reporting we some at at do but be will just – have as said, issue was looking that line whole, are variable going linear have industry be all DPEP a the point, that sub looking as is one in components. improve to to have that that strong in we low an at this three as will is look We are And and declines outlook a are gave we believe business. improving quarter-to-quarter. And we for we are looking and that are

Alright. Thank you.

Next question.

question. go Our Kannan Please Barclays. with ahead next question your from comes from Venkateshwar

of help course, But it that your there also some of content with and Thank you you. a you as back next Maybe some seems expense as along guess And – look increase is if of streaming whole, a at optimized will forward, tier the quarter. if you the going strategy business the price at spending. some step could like the churn. will ad-supported an offset, manage and marketing I look be see

like guidance, going bit now, be a marketing Bob, order your the a to lot of subscriber costs actually may little you churn the get to force naturally the but if So, and guidance in higher to levers look lower. accelerate forward needs pricing at right growth to trend

of And focus forward? does think sense rather reconcile it maybe make do guidance we from subscriber about the with than the more how going some growth business? when So, we profitability this, our the on financial model perspective to

that have only the an is value these opportunity to marketing, we That’s We Our the that very we cost initiatives. have. the talked we exploration is some at services. that we towards growth revenue to values about Christine content we have component are engagement, for as focused at launched management And our that approach growth services keeping our I going got overall going on in mind consumer. that’s everything be also to key look got profitability, opportunity, not and but that largely profitability. the going us content continued of also believe going a all to that carefully. shows our spending the that some though, fuel we across we If profitability actually well. But power be manage subscriber on obviously pricing tremendous through still also forward we on managing believe price itself have to that have

increase have that when cancellations. streaming or we that that price increases churn – taken So, and believe across our we our meaningfully shows history don’t businesses we

have believe still we headroom some So, we got there.

we through that that to going or through we believe great achieve formula or are a the us growth it’s content gives attention have our whether to cost confidence ARPU, sub through great communicated. management revenue we that So, we ads additions guidance got that

you. Thank Great.

question Next please.

from question Fargo. Our Steven Wells ahead question. next comes Please your from Cahall go with

Thanks.

cord-cutting think I reach and through. going and you So managing everybody ESPN, a machine, talked is Bob, called how Christine that the something be that’s about to

streaming that’s this we a I before, or but the you whether in lot So, expensive $X.X last history. about rights on how the others? also billion those as monetizing ESPN+ about do still up the marquee rights elevated of streaming sports rights on how question you then, marquee know CapEx, available ESPN, million to the do streaming starting you available? $XXX maybe think reach from think a Christine, And is of make look world it’s services have know of of more to moving of a – expand had sorry, or so year, than lot some I year. just more that but this about with a or a little shift it’s And

said enterprise-wide. You was it

or wondering or if expansions. Thank park studio more like if the it’s the side am you increase projects capital is on I other technology things So,

Okay.

linear enjoy of think benefits that keep one, ESPN And I world. growth, ESPN all is a able time, we mind number that brand. been that, of to certainly, to terms in in the have we have powerhouse brand In over

the to to digital leverage going world, linear forward, not opportunities got benefits brand’s in have in we enjoy to avenues necessarily ability and only tap those began the also the grow that realm have not but our However, therefore other that growth into into. we to been continue able

overall is the part part portfolio at synergy of of in terms important the It to I an itself. ESPN also an or Disney bundle machine. integral look think it’s important of

it’s one great brand, have foot of in part be community. going Live on really So, into flexible advertising it said grow opportunity foot I that that to the fact as on the of forward. we we important I a boat when our an And our advertising you our of dock, have think different to sort a terms evolution, benefit going of take speed before, the business one to be into it’s the be important sell avenues. and continues

linear We going very part or digital to forward, or a in going it’s have platforms, it’s whether between. whether of it’s be not somewhere multiple and our robust or got company believe that I

is So, That Steve, on up. right. It are was yes, you comments. CapEx, in my

by you – who you number and end for usually of those year, we the the a we for As followed the haven’t give the of spent CapEx the year have a company while, it for all. beginning

both in have various just the also We as amplified. DMED. goes level technology chain world well having So, enterprise of at X with that little more slippage the next. probably slippage that do in where there some is supply labor from is And into we the some year are as a shortages projects, and spend parts

Some is of consumer-facing. it

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those out some to projects is ‘XX. either that into schedule continuing are with build slippage slipping on or we So,

you. Thank

you. question. time Operator, one think I Thank Alright. have we more

your from question next our with Please go Morris from comes ahead Guggenheim. Michael question. And

for Thanks detail us segment. the hoping Two One, taking give Christine, little the my more am DTC I on afternoon at guys. you revenue sequential decline Good question. can me. for a

You as particular, talked in the the in domestic ARPUs Could exchange, it foreign foreign they as am of on much business, from came domestic come quantify Disney+ well. at I how exchange. sequentially looking because about have you

second ARPU is seems with So, about on Thursday package. little football Disney+ a potentially sports was have bit the article more maybe My rights. some much sports how And on question had rights. today that FX? of to Netflix success at at an driving core, out compression. Amazon kind There was night looking what’s detail

come it I the how Bob, these curious all in, how see changing and environment? if So, entrants as new Thank at impacts the landscape you you you. am changing see it

the first on revenue take Yes. Mike, decline. one, I the will

hedge couple So, the do is dollar of impact things. through exchange very we was half about we successfully for the managed of there a the have on ARPU One strong and foreign ARPU, on And that this part. the decline. year’s most are of

illiquidity. some as extraordinarily have of not over currency, globe However, either know, in or you high and do we are all which we for the markets the markets in their hedge launched costs we

So, exchange foreign And is that impact ESPN+. about was of and at half the the lower this pay-per-view impact. was one other

We we – different UFC, schedules. have match but a had different game sched

UFC am can not I and the games, different call I fan a a tell You but when match a omission them personality schedule MacGregor. of key in

year-over-year that factors were actually the lowering revenue. primary that two So,

second? want to the Bob, do you take

position the strong the with entrants, we of have of that Yes, in that of we of we in, got the sort new like going we breadth sports the but in really engaged have. the also are deals our not only the terms terms that changing Okay. of terms forward, landscape

with have discipline. we exercised So,

just everything. college right at sure we things. we I We making need conferences recognize think negotiation, we our that the terms that making that don’t rights. need we But multi-platform the sure also forward, in looking of are as go

between that’s toggling more don’t we we business sort will where do are and the fiscally it digital flexibility for to traditional seeking be of again, rights. forward-looking But rights NBA. multi-platform about and more that we platforms. the way The a that to not us the to get multi-platform the deals in legacy We do responsible very going give that us big channels linear distribution talked be with up, in would love coming NBA. one obviously, would We of

already got really good position about that feel going one or we and we that two rights with So, the in forward our still are play. have the

Thank you.

you. Thank

the conclude will we that, with think call. I

we are of think out time. I

that, and ladies for thank with call. And conclude joining. conference you will today’s we do We gentlemen,

disconnect now lines. may of You End Q&A your

GAAP Investor those to that website. have were here, reconciliation statement in the I – Note on. a equivalent this our call that referred measures measures found that read you on are Note to Thanks. still Relations Okay. be that of for to of can non-GAAP

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

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

will we that, conclude today’s do with gentlemen, joining. and presentation. ladies for thank We And you

now may You disconnect your lines.