Financial docs are live at this link:
https://thewaltdisneycompany.com/app/uploads/2024/08/q3-fy24-earnings.pdf
Financial Results for the Quarter:
- Revenues for the quarter increased to $23.2 billion from $22.3 billion in the prior-year quarter.
- Income (loss) before income taxes improved to income of $3.1 billion in the current quarter from a loss of $0.1 billion in the prior-year quarter.
- Diluted earnings per share (EPS) was $1.43 for the current quarter compared to a loss of $0.25 in the prior-year quarter.
- Excluding certain items(1), diluted EPS for the quarter increased to $1.39 from $1.03 in the prior-year quarter.
Key Points:
- In the third fiscal quarter of 2024, we achieved strong double-digit percentage growth of 19% for total segment operating income(1) and 35% for adjusted EPS(1).
- Entertainment segment operating income nearly tripled year over year in Q3, due to significantly improved results at Direct-to-Consumer and Content Sales/Licensing and Other.
- Entertainment Direct-to-Consumer’s better-than-expected Q3 performance, combined with our profitable results at ESPN+, resulted in positive profitability at our combined streaming businesses(1) for the first time and one quarter ahead of our previous guidance of achieving profitability in Q4.
- The success of Inside Out 2, which became the highest-grossing animated film of all time, demonstrated the renewed creative strength of our studios and drove strong outperformance at Content Sales/Licensing and Other. Surrounding Inside Out 2’s release, the original Inside Out (2015) helped drive more than 1.3 million Disney+ sign-ups and generated over 100 million views globally since the first Inside Out 2 teaser trailer dropped.
- ESPN operating income grew by 4%, while Star India results were lower versus the prior year, resulting in Sports segment operating income declining by 6% in Q3. Domestic ESPN advertising revenue increased 17% year over year.
- Q3 Experiences revenue increased by 2% and segment operating income decreased by 3%. Segment revenue growth was impacted by moderation of consumer demand towards the end of Q3 that exceeded our previous expectations. Despite this demand dynamic, other parts of the portfolio delivered improved results versus the prior year, including Disney Cruise Line, Consumer Products and some of our international sites. While results at Domestic Parks decreased modestly in the quarter, attendance was comparable year over year and per capita spending was slightly up.
Guidance and Outlook:
As a result of our strong consolidated financial performance in the third quarter, and supported by our balanced portfolio of assets, our new full year adjusted EPS(1) growth target is now 30%.
We continue to focus on driving incremental cost savings above and beyond our previously stated target as we deliver on our strategic priorities.
We remain on track for the profitability of our combined streaming businesses to improve in Q4, with both Entertainment DTC and ESPN+ expected to be profitable in the quarter. We continue to feel optimistic about our trajectory, with multiple building blocks for improving margins over the coming years.
In Q4, we expect Disney+ Core subscribers to grow modestly.
At Content Sales/Licensing and Other, we expect profitability in Q4 to look roughly similar to Q3, and we expect profitability for the full fiscal year 2024.
At our Experiences segment, we expect that the demand moderation we saw in our domestic businesses in Q3 could impact the next few quarters. While we are actively monitoring attendance and guest spending and aggressively managing our cost base, we expect Q4 Experiences segment operating income to decline by mid single digits versus the prior year, reflecting these underlying dynamics as well as impacts at Disneyland Paris from a reduction in normal consumer travel due to the Olympics, and some cyclical softening in China.
So far this quarter, we continue to see strong demand at Disney Cruise Line, although results in fiscal Q4 will reflect pre-launch expenses for the Disney Adventure and Disney Treasure.
Message From Our CEO:
“Our performance in Q3 demonstrates the progress we’ve made against our four strategic priorities across our creative studios, streaming, sports, and Experiences businesses,” said Robert A. Iger, Chief Executive Officer, The Walt Disney Company. “This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined streaming businesses(1) for the first time and a quarter ahead of our previous guidance. Despite softer third quarter performance in our Experiences segment, adjusted EPS(1) for the company was up 35%, and with our complementary and balanced portfolio of businesses, we are confident in our ability to continue driving earnings growth through our collection of unique and powerful assets.”
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Domestic Parks and Experiences
The decrease in operating income at our domestic parks and experiences was due to:
- Higher costs driven by inflation, increased technology spending and new guest offerings, partially offset by the comparison to depreciation in the prior-year quarter related to the closure of Star Wars: Galactic Starcruiser and cost saving initiatives
- Guest spending growth attributable to increases in per capita guest spending at our cruise line and theme parks and higher per room spending at our resorts
International Parks and Experiences
International parks and experiences’ operating results for the current quarter were comparable to the prior-year quarter due to:
- Higher volumes attributable to increases in attendance and occupied room nights
- Guest spending growth due to higher per room spending at our resorts
- An increase in costs due to new guest offerings, inflation and increased depreciation
