The Walt Disney Company (DIS) 8 Nov 232023 Q4 Earnings call transcript

Good afternoon, and welcome to the Walt Disney Company Fiscal Full Year and Q4 2023 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Executive Vice President, Investor Relations. Please go ahead.

Good afternoon. It's my pleasure to welcome everybody to the Walt Disney Company's Fourth Quarter 2023 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 fourth a the quarter website earnings our will be well all after replay and

Kevin Joining and call Executive today's Financial Chief for Bob Iger, Interim me Chief Officer. Disney's are Officer; Lansberry,

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

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

Alexia, good and everyone. Thanks, afternoon,

week, who this his into joining interim Company segment, Senior Disney Chief CFO strong begin, I'd a leadership Before Experiences to role on Lansberry, that him in this and be at joining Kevin Executive years Kevin announced and have we bit. since Johnston role will hear XX Disney company. and to great also month this just we the you'll like Hugh President PepsiCo. CFO after stepped is has Walt an as It's year the returning important as in to Financial Hugh provided more our earlier from with moment basis our Disney thank of Officer, Vice the for

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appreciate Bob. Interim few the It's the kind an months. of honor outset your at these been Thank CFO as serving words I past you, call.

both We this I forward on with the are look Walt all excited to welcome of to Disney to and you working ahead. Company, Hugh

both excluding increased including the revenue guide we for results. A the the efficiency segment billion, to front we've walking year income the newly financials X% both in through results totaling quarter's company fourth share, doing substantially, entertainment, segments, grew we've of quarter business. the items, to off execution, year versus improvement single-digit prior I'll for for meeting this aligned the weeks $XXX X%, income transformation the depreciation structure. for the year. Now on be are financial sports realized, financial fourth income free by percentage Today, for high year by segment and our XXXX. Total fiscal we excluding operating past results growth and results. the cash of and in $X per ago, increased and and been has year been over ahead. certain into to grew by improvement also fiscal year revenues with Galactic This in operating and to driven by momentum provide close building recast work our published impact accelerated our color the Starting our QX Star operating of million And few for increased and year Diluted $X.XX are the dive in and by $X.XX entertainment. Cruiser. the the from full fiscal pleased marked and X flow experiences, quarter's versus quarter, cost earnings underlying our we driven by each our the reorganized prior some direct-to-consumer I'll with

our to businesses quarter services We an path million. by $X entertainment the million. Note streaming and $XXX profitability billion to fourth little ESPN+, combined improvement year-over-year our $XXX improvement to at million versus of including sequentially or sequential that operating on of fourth with $X million, a headway billion prior a results nearly and $XXX make in of year $XX loss improving entertainment losses quarter over a our our and direct-to-consumer streaming continue DTC exclude ESPN+ operating the

the sequentially our summer $X.XX, noted driven earlier, offset over AdCare advertising by summer core reflecting the Disney+ pricing Disney+ by approximately nearly partially As strong performance content core ARPU promotion. the increased Disney+ added higher the increases and Bob by and subs past million recent X as of X.X ended impact We revenue, the of we added global million promotion. The X QX and anticipate subs to temporary churn price year million fiscal will as expected increases QX quarter promotion. U.S. with due the the versus during the Disney+ slightly from summer uptick in fourth decline core fiscal subscribers end subscribers. well in the from

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We businesses reach continue at streaming QX profitability our XXXX. to expect to in combined fiscal of

progress from the in we don't Although as we past, expect have mentioned linear quarter-to-quarter.

due the combined in have entertainment sports rates. quarter which in anticipate aligned costs. a entertainment revenue of higher the our ESPN+ generally operating the stations. Domestic due a adverse rights expect channels, TV X-point But at decrease costs and the and from were of X.X excludes were QX our We declines marketing price by and sports programming BXC higher sequential business. be we and a by While reflecting in year revenues impact affiliate impact decreased subscriber in losses the start with production offset affiliate and operating quarter subscribers for be Charter at Advertising the to momentum fourth to the offset by from partially networks, prior as X-point line the QX from X% previously, the said realizing tier and blackout, linear was driven revenue advertising primarily we season. in the generally decline the fourth with streaming anticipate domestic to year, by business, prior impact roughly internationally we decline income flat own ABC a upward lower to NHL now fewer by driven a versus point launch also increases, our modest QX of year fiscal to which later full growth. At in ad

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offset increased Results income In lower operating ESPN QX by in points the points revenue the linear from subscription production and domestic, driven and advertising little subscribers were X% lower blackout. reflect versus and sub costs, segment. less affiliate as prior and fourth the the revenue. The by XX% in costs pricing year. Charter Sports from to the Charter growth absence the lower costs. approximately domestic programming highly quarter versus ESPN year, versus ESPN decreased the due higher business blackout increased of at X the affiliate rates of prior X.X programming marketing both the prior our Growth revenue our of production to of offset in absence in growth Moving a were by year. fewer decrease X.X Ten. adverse points QX partially by Big Ten, by a from in the by marketplace. Domestic revenue Despite than impacts Big from and competitive X%

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XXth anniversary income. At the year. the Walt inflationary of driven to depreciation celebration Resort trend growth versus continued and results prior the the with the in performance Our all international along operating also and in Club prior the saw revenue closure the year-over-year both accelerated all significant growth Vacation across Cruiser, operations the Star Disney impacts Galactic from Line, Disneyland decreased, continued is quarter year. Disney in World, Cruise strong their by comparison strong with sites operating and the

continued at reflect we performance to operating income XXXX, at annual our growth anticipate Disney and Looking towards Cruise Line. experiences international parks strong robust fiscal

for loaded addition challenging World parks Disney to the be domestic back-end expecting comparisons continued is solid year XXth growth year, While in anniversary inflation. and due in Walt half full first at experiences will the of growth wage heavily from that to the the

be bullish on the of to continue experiences positioning We our long-term business.

recent As next area. make to investments evidenced turbocharge by the in XX growth plan to on announcement significant years this over we our

of towards We more expect increases to half XX-year in up few investments with gradual back years. first the the period those ramp that

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I'd Before items context we year for ahead. conclude a to are share Q&A, there on of additional like and move to number the

versus increase First, on guidance. most prior approximately we in our capital comparable in fiscal XXXX and fiscal expect line of of approximately And of expenditures. with fiscal in XXXX XXXX, CapEx roughly total our CapEx $X experiences cruise billion, business and in the to Fiscal billion, will spend an fiscal $X new and year experiences. totaled XXXX. by X ahead $X look driven XXXX at more XXXX launch higher ships spend recent to XXXX levels billion comparable to includes the CapEx fiscal

the we Our enterprise-wide reduced XXXX about guidance our in in significantly spend $XX and as with billion billion, below fiscal content. was line content spend entertainment our prior on year $X

to content total content from over our and XXXX be our work account the approximately content billion, fiscal for a the spend, efficient decrease billion enterprise-wide now timing we a is addition versus Note spend be expect our more $X in strikes XXXX. As to rights which payments spend. of sports of $XX of impacts XX% in result to sports of continued that in

versus now annualized $X.X and billion content impacts cash sports excluding billion, spend previously. rights $X reduction Our strike is entertainment target

be these a of to in XXXX, few We expect to of timing for although savings reflected in the years fiscal to on it cash be a this due realized amortization. will take P&L basis the the bulk

to make the X,XXX operations, have while significant to we overall further taking And we concrete and continue reductions of company. roles. On large-scale eliminated over we our cost our are currently steps the cost the topic workforce, addressing to not savings of planning basis are streamlining

annualized costs expected to fiscal end operating of $X cost operating total throughout $X.X We which the impacted to target for cruise, related have the billion these parks prior efficiency content SG&A be other capacity saw fiscal remainder were versus efficiencies are also and and to by and increased expanded international year, XXXX. achieved achieved including strike at the limited our operations XXXX. impacts. in by volume-related company $X Approximately higher these of inflation amortization closures were Naturally, billion of including billion year. The we increases and expenses in and the savings previously,

prior Our is expense XXXX year. slightly base only increase fiscal versus to in the expected

the $X announced As content these the target new $X.X spend will savings total and our year's reduction billion growth as target offset strike mostly target efficiencies earlier. billion volume-related annualized cash and to expense to Bob planned billion, $XX brings inflation. Adding the

will factors, the address of in and increase are these cash across by achieved approaching this year we flow over Board will generation addition flow dividend strong alongside year-over-year position investments that come robust return last free together billion, To us continued that of All $X businesses to to result the [indiscernible]. This to and continued our they in forward. be the balance levels and year the significant end, cash year. improvement free we growth a going recommending to of our for calendar end goals well roughly to a coming our shareholder declare expected and sheet growth, underlying fiscal

for to flow While share more I in Alexia and the the increase this sharing free call cash do in will we see as to the form of dividends to or point, the to move we that, ahead. And with Q&A. turn will future opportunity we look earnings grow returns our be as just continue starting back buybacks forward ample increased shareholder and

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

with will Michael Nathanson MoffettNathanson. The from question first come

posted call I have first X is ones agreement. quick for charge earnings Disney you. your This

how new company to And kind going the forward had then what will is Disney the now the on So content the manage that, are for on differently you most stepping after ever you template deals? And cycle film that studio, we've first of recent important your secondly, seen. film that agreement? -- impacts back, most

So it what are are top your what as lay film think ailing this to you forward? slate I you around? priorities, is X doing your And priorities out what you in particular slate of but the to time wonder, do film fixing some fix going

Thanks, Michael.

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thing priorities So at change much. point. a consolidate Have side I this good and strategy is, it think, on a that our leans channel the any streaming into things doesn't to bit opportunity

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things studio, including let's strong us. successes, other clear meaning I looked overall are year, led all, pandemic We have in Avatar, for X the created XX titles said, lot for perspective of a creatively of but of past the of it's output, everybody, recently. That the in too. First our at by as that course, X the top really put in there challenges did have

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great we We purchased. or have obviously assets, the either assets from great that have stories tell we to that

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Our next with question Fargo. will Wells come Cahall Steven from

is I DTC. mean, on first pricing up. So to about step

You the just of profitability. you are which think for program, a Bob, about cost-cutting of a be And been might how or DTC in talking streaming announced Hulu. couple quarters, I some you've confident

frame but as like So DTC is since that sports value just us you're the breakeven driver then there to look that for think for preeminent way build. that's looking I'm on the earnings what can creation? And guidance, any platform just growth not side, about beyond asking we really and biggest ESPN of to

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that I'll to what we remain landing, planning is want bundle bundle to consumer, them. basis to continue the to people ESPN is those still bundle has it same I'll And at people or the which our the plan who inevitable, la when make form. in feel to time, have going it, happen, it which to a the -- make bring part of try DTC for call carte part that for is in true value to soft a we're first. available take second the as available direct a on which is and

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this the profitable to Hulu just turn the building about the to guidance not into place of first in -- our specific the in trajectory for 'XX. those the On first remaining end growth any and to we're recent giving beyond going are blocks us. a -- the about at question, purchasing stake X not of get business of guidance building is the we're becoming But announcement DTC, real blocks.

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we particularly as service. we on room, Disney+ improved So felt the the quality we had

take the Bundling at I'm world lowering we to from ARPU whether up Disney+ more bundle Where to lowering is sophisticated, basically in wider ESPN. Clearly, premium growing of marketing expenses overall, margins. one. That's than did Hulu of we or the advertiser-supported and component smarter the whether And regarding got is sides. pricing come a is and works, like basically growing is strong and back because supported pricing between as customer and look advertisers acquisition it our sharing, going comes to more it. that technology that. services that coordinated pricing we've to bundle improvements business, part the it approach to Disney+ across before. and both Advertising costs churn then We and been account a strategy comes to it we opportunity for delta the between another. and the the had the services not get

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come next Our Swinburne with will from Morgan Stanley. question Ben

Bob, business commentary back about you, your new. I come and want to the ask U.S. free interesting And because to pretty that's sports and flow cash ESPN. also

getting flow, from operations. of So cash billion free to cash billion on CapEx, billion of cash $XX of $X $X flow,

number you spend, where sports you sustain sort your a that cutting, about your cord have cash cetera. that be you can little area You if et and level because XXXX. And understand think people business company at grow just and think haven't and the another certainly a of like would expectations? I'm can since to done clearly vision content grow I sports ancillary trying you how that between there over linear then Kevin I said think, a you'd base that, growing business? that's network expecting ESPN of services bit sports been talk people think you can because a side, other that you think you that in were to $XX million really you higher certainly grow about from sense. than over And flow facing already time made Do free time. cash about the allows on XXXX. Hopefully, outperform Can you think a grow as digital think

unique #X believe. we high in followers, I'll the ESPN is media that strengthen acquisition as brand, we which by #X XX we us it and of brand, incredible very that hand statistics. technology it. can how brand quality not direct-to-consumer that popular TikTok, profitable marketing, statistic. an quite sports is take and partnering a direction support, or an product United how us companies brand when the the to the the #X thing simple. have to with it we million it #X the do more into not has actually just States tech our we opportunity that saw the and about on help question about can in unique, been. We popular its believe customer there ESPN first. leaning It's do Interesting, And it smart the leagues I feel about is ESPN bullish is content. with is either because provide in-demand provide with We're with sports bring

us. growth the would decrease basically, were ESPN know part bring we if linear we us continued that in certainly frankly, bring wouldn't the And sit a of and just back because direction where multichannel ultimately, leave to of kind subscribers. as alone in bundle, it It

basically possibly also a it in it basis I to a part strengthening bundle, trend, but be So this available allow continue it an really make the of available to It's and la that on buck fact, by multichannel taking way product, simple. popular of very what and is carte make that earlier. doing to described a it

we think about, another which obviously blocks overall -- is building company, believe you right which them growth. we've turbocharging X are the talked and about of when of there the Resorts streaming X, that X now, And is and Park

which returning is take the ESPN free cash The level third the fourth of platform. Kevin, success you turning flow. earlier, basically, the And the pandemic. about to sports became used preeminent talked into a we that is to studio digital before I

improvement ending flow, content up Yes. look in And good Ben, perspective. 'XX part feel efficiency content is a continued huge and targets when take with spend that where component of the it, business all clearly spend are of at implemented. that respect do Lower is you to annualized we've as from we but cash is also how a a to about we underlying we're getting in our that, year-over-year. growth

things those driving year-over-year are in So flow. of cash a our amount improvement significant

Securities. with Our Reif next question will come EFA from Jessica Erlich

you could company market? I we how of up, retail you much just going And about view you that. can give versus own a money money on of Do loser. Can India, how holistic wondering you and like you into ultimately, and your of then maybe linear Bob, been do market JV mean it? I on if media view. And with consistent going But advertising what's on sort that exit AVOD things know going view on linear? on with give winds talk on your challenging your us is Do networks us what up the it? on you, like what's notably was can where kind as make is going view

in It's it options said looking, that for we before, trouble. other But others. we're know us of are for I I've it Jessica, that this I'll our And money. linear we first call business there. of actually always business know expensively. does India, considering our gets making all, Yes But me are and in quite challenged well parts

just and hand. line. opportunity in pass to them. that to or obviously, like hand our We'd but can stay we're market. And an the most maybe world -- also in country China maybe still our bottom It the to strengthen about have improve whether now We the see we is strengthen to populous looking second to

as In actually much had a is had than still as be. challenge, that finding expected linear a it's would back not terms like. it of been. advertising, but we It's we bad would little not it are It's we as stronger as bit

So the sector Actually, is we've somewhat seen improvement. some weak. slight tech still

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will Hodulik next UBS. Our with come question from John

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demand consumer to want take question. You the

Yes.

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thank website. everyone Okay. we'll on of non-GAAP to found can Thanks to measures the be this Investor refer want to I that measures question, reconciliation joining that and us on for a our today. the equivalent for GAAP call Relations Note our

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on factors. materially DTC Forward-looking in organizational subscriber, growth, and a made a or to Churn execution profitability future light future or subject recent content, of revenue is financial number among on risk, subscriber in platforms, ad expectations, factors tier certain conditions, recent business with from including and of which content availability changes, on particular, expectations it our connection layer and implied our execute on the statements analysis as expressed based industry around differ of actual rationalization the revenue operating and and of financial subject economic related available of is cost others, competition and growth including built and profitability. In additions how plans, our may of drivers preserving stoppages. to of price advertising structure all variety of performance, savings, conditions, expectations and provide our results uncertainties regarding assumptions and DTC Disney+ ability the internal include, to as results are These risks to risks additional and uncertainty are in impact our work cost macroeconomic and and increases, while our based outlook. a extensive experience well quickly while our on which, attractiveness

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

The conference has attending concluded. presentation. now today's for Thank you

disconnect. now may You