As a seasoned film enthusiast with over three decades of immersion in the silver screen world, I must say that Disney‘s latest financial results have left me feeling a rollercoaster of emotions – much like the protagonist in “Inside Out 2” itself!
Disney’s most recent quarterly earnings report brought a sense of delight to the company, as the blockbuster success of “Inside Out 2” significantly increased their profits and marked the first time that their combined streaming service turned a profit.
To put it simply, during the June quarter, Disney’s domestic theme park operating profit dropped by 6%, and they forecasted that low demand might affect their performance in the upcoming quarters as well. On a positive note, however, Disney’s TV business, excluding ESPN, has remained steady but continues to decline.
For Disney’s Q3 of fiscal year 2024, the total quarterly revenue rose by 4% to reach an impressive $23.16 billion, while operating income experienced a significant jump of 19%, amounting to $4.23 billion for the period ending June 29. The adjusted earnings per share (EPS) for this quarter surged by 35%, from $1.03 in the previous year’s corresponding quarter, reaching $1.39. These results surpassed Wall Street’s expectations, as analysts, on average, predicted revenue of $23.07 billion and EPS of $1.19 according to financial data provider LSEG.
“Disney’s CEO, Bob Iger, stated that this was a successful quarter for Disney. The success was due to outstanding performances in our Entertainment division, both in cinema releases and direct-to-consumer streaming services. For the first time ever, we managed to turn a profit across all our combined streaming platforms, achieving this milestone a quarter earlier than expected according to our initial guidance.”
The immense success of Pixar’s “Inside Out 2,” surpassing all other animated films in earnings, showcases the resurgence of our studios’ creative power and boosted exceptional performance at Disney’s cinematic division, as stated by the company. Since its premiere in mid-June, “Inside Out 2” has earned a staggering $1.56 billion worldwide.
Following the debut of “Inside Out 2,” the initial release of “Inside Out” (2015) significantly contributed to over 1.3 million new Disney+ subscriptions and garnered more than 100 million views globally, as reported by Disney. However, the rate at which people were cancelling their Disney+ subscriptions remained high. In the U.S. and Canada, Disney+ gained approximately 800,000 new subscribers to reach a total of 54.8 million, but internationally (excluding Disney+ Hotstar), the number of customers decreased by roughly 100,000 to 63.5 million. This is in contrast to the first quarter of 2024, where Disney+ Core saw a gain of 6.3 million subscribers, boosted by a deal with Charter to provide Disney+ free-of-charge to some Spectrum TV customers.
In Q2, Disney’s total direct-to-consumer earnings (which includes ESPN+) increased by 15% to reach approximately $6.4 billion. This shift resulted in an operating income of $47 million, contrasting the loss of $512 million in the same period last year. Interestingly, Disney’s Entertainment DTC segment (comprising Disney+ and Hulu) experienced an operational loss of $19 million during this quarter, having posted a profit in the initial three months of the year. However, ESPN+ managed to generate a profit during Q2, offsetting the loss from the Entertainment segment.
Moving forward, we predict that our streaming businesses will show improvement during the fourth fiscal quarter. Both Entertainment DTC and ESPN+ are projected to be profitable this quarter. The media conglomerate expects a modest increase in Disney+ Core subscribers during Q4, before an upcoming price increase across most U.S. streaming plans in October.
In the June quarter, Disney’s Entertainment division saw a significant increase in its operating income, nearly tripling to $1.2 billion compared to the same period last year. This substantial boost was primarily driven by the success of “Inside Out 2” and “Kingdom of the Planet of the Apes” under the theatrical unit, which generated an operating income of $254 million, a stark contrast to the operating loss of $112 million experienced a year ago. However, this positive trend was somewhat offset by a decrease in ad sales at ABC and other linear TV businesses, where revenue dropped by 7% and operating income declined by 6%.
During the second quarter of this year, ESPN’s revenue climbed by 5%, reaching approximately $4.28 billion. Meanwhile, its operating income grew by 4%. However, Star India’s operational loss expanded to $314 million, which was significantly larger than the $216 million reported last year, leading to a 6% decrease in Disney’s Sports segment operating income. It is worth noting that domestic ESPN advertising revenue saw a significant jump of 17% compared to the same period last year.
In summary, Disney has expressed optimism about the conclusion of its financial year, as they’ve increased their projected growth rate for full-year adjusted EPS from 25% to 30%. This new target is valid until September 2024, a change announced since their last earnings report.
In the theater part of its operations, Disney forecasts that its profits in Q4 will be approximately the same as in Q3. This projection is bolstered by the impressive earnings from Marvel’s “Deadpool & Wolverine” summer hit. Furthermore, they anticipate profitability for the entire fiscal year 2024.
In the face of a less robust third quarter for Disney’s theme parks division, CEO Iger expressed confidence that, leveraging our diverse and harmonious mix of business ventures, we can keep fueling profit expansion by harnessing our trove of distinctive and potent media properties.
Disney anticipates that reduced demand in their domestic theme park businesses during fiscal Q3 could influence the following quarters. For the September quarter, it’s projected that the operating income for the Experiences segment will decrease by a “moderate amount” compared to the previous year. This is due to factors like the underlying trends and impacts at Disneyland Paris from reduced travel due to the Olympics, as well as some softening in China caused by cyclical reasons.
Currently, Disney has not announced any specific plans for the succession of their CEO, a role currently held by Bob Iger whose contract has been extended to 2026. The board’s delay in choosing a successor was one of the main issues in the proxy battle led by activist investor Nelson Peltz, which unfortunately did not succeed.
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2024-08-07 14:17