Disney Q1 2024 results "This past quarter demonstrates we have turned the corner and entered a new era"

The key messages from Bob Iger, CEO of The Walt Disney Company are the stage is set for significant growth and success and ample opportunity to increase shareholder returns as earnings and free cash flow continue to grow. The message from the street is that Netflix has gained profitability and Disney is about to be become the second profitable streaming company - it should hit profitability in about six months.

Subscriber numbers

Disney+ - 111.3 million

Hulu - 45.1 million

ESPN - 25.2 million

Losing 1.3 million subscribers in Q3 of 2023 due to subscription price hikes, which then offset the increase in revenue

Financials

• The response from Wall Street in Disney's results - Analysts recommending BUY after three years as opposed to HOLD and the share price gained 10.5%, the biggest intraday gain since December 2020.
• Segment operating income increased by 27% and adjusted earnings per share (EPS) rose 23% compared to year prior. $23.5 billion in revenue, and adjusted EPS is $1.22.
• Cost savings - $500 million and “on track to meet or exceed our $7.5 billion annualized savings target by the end of fiscal 2024.”
• Free cash flow for the quarter - $886 million.
• Entertainment division - $10 billion which comprises TV, film and streaming businesses, down 7% on year ago Q1
• Sports - $4.8 billion including ESPN and Star - an increase of 4%
• Parks and Experiences including consumer products - $9.1 billion - an increase of 7%.
• Direct To Consumer (DTC) - revenue increased by 15% and operating losses improved by $850 million and nearly $300 million in Q3 2023. The revenue increases due to higher subscription prices and advertising revenue
• Linear networks sales fell 12%
• July 2024 - semi annual shareholder dividend to be paid - up 50% and a $3 billion share buy back targeted for this fiscal year.

Streaming News

Announced the day before Q1 results the full suite of ESPN’s channels will now be available DTC as part of the a new joint venture (JV) with FOX and Warner Bros. Discovery to create a new streaming sports service, launching in September. This brings together content from all of these companies’ combined assets, including all the major professional sports leagues and college sports. Benefits include subscriber growth and subscriber retention (lower churn), higher customer engagement and greater advertising potential.

In September 2025, ESPN will be offered as stand-alone streaming option including digital features, creating a one‐stop sports destination with sports icon Coach Nick Saban as commentator. It will be made available on Disney+ for bundles subscribers - the same as Hulu

For the past 3 years I have been reporting and forecasting the continued growth of digi-gaming in the entertainment industry. At the time I mentioned Generation Z, but now Generation Alpha is following suit which now covers the key demographic of 15-25 year old men. Disney will invest $1.5 billion to acquire an equity stake in Epic Games. Epic's cultural phenomenon, Fortnite will create a Disney universe for all the Disney IP - which will provide players the opportunity to bond with the wonders of the Marvel, and Star Wars universes and everything else Disney. It will enable consumers to play, watch, create, and shop for both digital and physical goods ini "groundbreaking new ways" This marks Disney’s biggest entry ever into the world of video games and offers significant opportunities for growth and expansion.

Percy Jackson and The Olympians has been renewed for Season 2. (Side bar: no, Percy Jackson did not save Disney, the measured and strategic leadership of Bob Iger did), and looking ahead there is an exciting slate of originals headed for Disney+, including Agatha from Marvel Studios, Skeleton Crew and The Acolyte from Lucasfilm, Win or Lose from Pixar, and the most exciting streaming new is the exclusive broadcast of Taylor Swift's Eras Tour on 15 March, which will feature the concert in its entirety, including the song “Cardigan" and four additional acoustic songs which were not in the theatrical or digital purchase release of the film.

"What sets Disney apart is our unique quality to turn top quality intellectual property into top quality experiences, leading to significant growth"

Certainly true for this quarter.

Exciting times ahead for the Mouse House.

Thanks for reading...(more quarterly results news over the next 2 weeks).

Susie