Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Walt Disney Co (DIS, Financial) reported 2% revenue growth in Q3, driven by strong IP in their parks and reluctance of people to cancel vacations.
- The company has secured long-term sports rights, including the NBA finals for 12 years, which is expected to drive significant value.
- Disney+ is broadening its content offering, including Hulu, news, sports, and international NBA rights, which is expected to support subscriber growth and pricing power.
- The company is optimistic about the future of its streaming business, with plans to add new features and improve technology, including a password-sharing initiative and stronger recommendation engines.
- The Walt Disney Co (DIS) has a strong lineup of upcoming movies, including Moana, Mufasa, Captain America, Snow White, and Avatar, which are expected to drive global streaming value and box office success.
Negative Points
- The company expects a mid-single-digit decline in operating income for fiscal Q4 and similar results for the next few quarters due to expenses attached to new cruise ships.
- There is a slight moderation in demand for theme parks, with attendance flat in Q3 and expected flattish revenue in Q4.
- The lower-income consumer is feeling stress, and high-income consumers are traveling internationally more, impacting domestic park attendance.
- The company is facing challenges in Disneyland Paris due to the Olympics, which has affected bookings.
- ARPU for domestic Disney+ slipped in the quarter due to subscriber mix shift, including bundling and the shift to the ad-supported tier.
Q & A Highlights
Highlights from The Walt Disney Co (DIS) Q3 2024 Earnings Call
Q: Can you provide color on global park demand and expectations for fiscal '25? Also, any insights on the NBA deal's profitability?
A: Hugh Johnston (CFO): We saw 2% revenue growth in Q3, driven by strong IP in our parks. Attendance was flat, and per caps were slightly up. We expect flattish revenue in Q4 and a couple of quarters of similar results. Regarding the NBA deal, it kicks in a year from now and includes significant value from live programming and international rights, particularly for the finals.
Q: What's the outlook for Disney+ and its potential as a significant earnings contributor?
A: Robert Iger (CEO): Streaming success is driven by our strong creative content. We've seen growth in consumption and pricing leverage. Despite price increases, churn has been modest. We're adding new features and content, including news and ESPN, and expect significant growth in fiscal 2025. We're also enhancing technology to improve returns and margins.
Q: What is the right balance of investment between sports, scripted TV, and movies going forward?
A: Robert Iger (CEO): We're investing significantly across all areas due to their value and future potential in streaming. Our sports deals, movie slate, and television content are all performing well. It's a balanced mix that will blend together as our streaming platform grows.
Q: Can you update us on free cash flow expectations and the impact of parks and content spending?
A: Hugh Johnston (CFO): We previously guided to $8 billion in free cash flow and have no updates on that. Regarding parks, we expect international strength and have accounted for some one-time costs. Content spending will continue to be managed tightly.
Q: Can you provide an update on strategic partner conversations for ESPN?
A: Robert Iger (CEO): We're still having conversations about potential partnerships, particularly on the content side. No new updates at this time.
Q: What are your expectations for the impact of cruise ship preopening costs on fiscal '25?
A: Hugh Johnston (CFO): The startup costs for cruise ships will be a little over double in 2025 compared to this year. However, cruise ships tend to pay back quickly, and we feel positive about these investments.
Q: Can you expand on the cost management efforts and opportunities for savings?
A: Hugh Johnston (CFO): Our original cost estimate was $5.5 billion, raised to over $7.5 billion. We continue to seek opportunities to do more with less and invest back into the business.
Q: What are your expectations for theme park growth over the next few years?
A: Hugh Johnston (CFO): We're investing in the Experiences business for accelerated growth. While the lead time on investments is multiple years, we expect these investments to drive growth. We'll provide more details as we progress.
Q: How is the advertising market performing, and what are the trends in content licensing?
A: Hugh Johnston (CFO): The ad market is healthy, with overall advertising up 8% and ESPN up 17%. Content licensing numbers are driven by box office success. Our strategy remains focused on producing and monetizing our own IP.
Q: Can you provide more details on the softening of park revenues and expectations for Q4 and fiscal '25?
A: Hugh Johnston (CFO): We expect consistent trends with Q3, with lower-income consumers feeling stress and high-income consumers traveling internationally. We have good visibility into future bookings and feel confident in our projections.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
