The Walt Disney Company (NYSE: DIS) today reported earnings for
its second fiscal quarter ended April 2, 2022.
- Revenues for the quarter and six months grew 23% and 29%,
respectively, despite a $1.0 billion reduction for the amount due
to a customer to early terminate license agreements for film and
television content delivered in previous years in order for the
Company to use the content primarily on our direct-to-consumer
services.
- Diluted earnings per share (EPS) from continuing operations for
the quarter decreased to $0.26 from $0.50 in the prior-year
quarter. Excluding certain items(1), diluted EPS for the quarter
increased to $1.08 from $0.79 in the prior-year quarter.
- EPS from continuing operations for the six months ended April
2, 2022 increased to $0.89 from $0.52 in the prior-year period.
Excluding certain items(1), EPS for the six months increased to
$2.14 from $1.11 in the prior-year period.
“Our strong results in the second quarter, including fantastic
performance at our domestic parks and continued growth of our
streaming services—with 7.9 million Disney+ subscribers added in
the quarter and total subscriptions across all our DTC offerings
exceeding 205 million—once again proved that we are in a league of
our own,” said Bob Chapek, Chief Executive Officer, The Walt Disney
Company. “As we look ahead to Disney’s second century, I am
confident we will continue to transform entertainment by combining
extraordinary storytelling with innovative technology to create an
even larger, more connected, and magical Disney universe for
families and fans around the world.”
The following table summarizes the second quarter results for
fiscal 2022 and 2021:
Quarter Ended
Six Months Ended
(in millions, except per share
amounts)
April 2, 2022
April 3, 2021
Change
April 2, 2022
April 3, 2021
Change
Revenues
$ 19,249
$ 15,613
23 %
$ 41,068
$ 31,862
29 %
Income from continuing operations before
income taxes
$ 1,102
$ 1,230
(10) %
$ 2,790
$ 1,276
>100 %
Total segment operating income(1)
$ 3,699
$ 2,465
50 %
$ 6,957
$ 3,797
83 %
Net income from continuing
operations(2)
$ 470
$ 912
(48) %
$ 1,622
$ 941
72 %
Diluted EPS from continuing
operations(2)
$ 0.26
$ 0.50
(48) %
$ 0.89
$ 0.52
71 %
Diluted EPS excluding certain items(1)
$ 1.08
$ 0.79
37 %
$ 2.14
$ 1.11
93 %
Cash provided by continuing operations
$ 1,765
$ 1,393
27 %
$ 1,556
$ 1,468
6 %
Free cash flow(1)
$ 686
$ 623
10 %
$ (504)
$ (62)
>(100) %
(1) Diluted EPS excluding certain items,
total segment operating income and free cash flow are non-GAAP
financial measures. The most comparable GAAP measures are diluted
EPS from continuing operations, income from continuing operations
before income taxes, and cash provided by continuing operations,
respectively. See the discussion on page 2 and on pages 12 through
15 for how we define and calculate these measures and a
reconciliation thereof to the most directly comparable GAAP
measures.
(2) Reflects amounts attributable to
shareholders of The Walt Disney Company, i.e. after deduction of
income attributable to noncontrolling interests.
SEGMENT RESULTS
The Company evaluates the performance of its operating segments
based on segment operating income, and management uses total
segment operating income as a measure of the performance of
operating businesses separate from non-operating factors. The
Company believes that information about total segment operating
income assists investors by allowing them to evaluate changes in
the operating results of the Company’s portfolio of businesses
separate from non-operational factors that affect net income, thus
providing separate insight into both operations and other factors
that affect reported results.
The following are reconciliations of income from continuing
operations before income taxes to total segment operating income
and total revenues to total segment revenues (in millions):
Quarter Ended
Six Months Ended
April 2,
2022
April 3,
2021
Change
April 2,
2022
April 3,
2021
Change
Income from continuing operations before
income taxes
$ 1,102
$ 1,230
(10) %
$ 2,790
$ 1,276
>100 %
Add (subtract):
Content License Early Termination(1)
1,023
—
nm
1,023
—
nm
Corporate and unallocated shared
expenses
272
201
(35) %
500
433
(15) %
Restructuring and impairment charges
195
414
53 %
195
527
63 %
Other expense, net
158
(305)
nm
594
(305)
nm
Interest expense, net
355
320
(11) %
666
644
(3) %
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs
594
605
2 %
1,189
1,222
3 %
Total segment operating income
$ 3,699
$ 2,465
50 %
$ 6,957
$ 3,797
83 %
Quarter Ended
Six Months Ended
April 2, 2022
April 3, 2021
Change
April 2, 2022
April 3, 2021
Change
Total revenues
$ 19,249
$ 15,613
23 %
$ 41,068
$ 31,862
29 %
Contract License Early Termination(1)
1,023
—
nm
1,023
—
nm
Total segment revenues
$ 20,272
$ 15,613
30 %
$ 42,091
$ 31,862
32 %
(1)
The Company recognized a reduction in
revenue for the amount due to a customer to early terminate license
agreements for film and television content delivered in previous
years in order for the Company to use the content primarily on our
direct-to-consumer services (Content License Early
Termination).
Since early 2020, the world has been, and continues to be,
impacted by the novel coronavirus (COVID-19) and its variants.
COVID-19 and measures to prevent its spread have impacted our
segments in a number of ways, most significantly at the Disney
Parks, Experiences and Products segment where our theme parks and
resorts were closed and cruise ship sailings and guided tours were
suspended. These operations resumed at various points since May
2020, initially at reduced operating capacities as a result of
COVID-19 restrictions. In fiscal 2020 and 2021, we delayed, or in
some cases, shortened or canceled theatrical releases. In addition,
we experienced significant disruptions in the production and
availability of content, including the delay of key live sports
programming during fiscal 2020 and fiscal 2021.
In fiscal 2022, our domestic parks and resorts are generally
operating without significant COVID-19-related capacity
restrictions, such as those that were in place in the prior year.
Certain of our international parks and resorts and cruise ship
operations continue to be impacted by COVID-19-related closures and
capacity and travel restrictions. At the Disney Media and
Entertainment Distribution segment, our film and television
productions have generally resumed, although we have seen
disruptions of production activities depending on local
circumstances. We have generally been able to release our films
theatrically in the first half of fiscal 2022, although certain
markets continue to impose restrictions on theater openings and
capacity.
We have incurred, and will continue to incur, costs to address
government regulations and the safety of our employees, guests and
talent, of which certain costs are capitalized and will be
amortized over future periods.
The following table summarizes the second quarter segment
revenue and segment operating income (loss) for fiscal 2022 and
2021 (in millions):
Quarter Ended
Six Months Ended
April 2, 2022
April 3, 2021
Change
April 2, 2022
April 3, 2021
Change
Segment Revenues:
Disney Media and Entertainment
Distribution
$ 13,620
$ 12,440
9 %
$ 28,205
$ 25,101
12 %
Disney Parks, Experiences and Products
6,652
3,173
>100 %
13,886
6,761
>100 %
Total Segment Revenues
$ 20,272
$ 15,613
30 %
$ 42,091
$ 31,862
32 %
Segment operating income (loss):
Disney Media and Entertainment
Distribution
$ 1,944
$ 2,871
(32) %
$ 2,752
$ 4,322
(36) %
Disney Parks, Experiences and Products
1,755
(406)
nm
4,205
(525)
nm
Total Segment Operating Income
$ 3,699
$ 2,465
50 %
$ 6,957
$ 3,797
83 %
Disney Media and Entertainment
Distribution
Revenue and operating results for the Disney Media and
Entertainment Distribution segment are as follows (in
millions):
Quarter Ended
Change
Six Months Ended
April 2, 2022
April 3, 2021
April 2, 2022
April 3, 2021
Change
Revenues:
Linear Networks
$ 7,116
$ 6,746
5 %
$ 14,822
$ 14,439
3 %
Direct-to-Consumer
4,903
3,999
23 %
9,593
7,503
28 %
Content Sales/Licensing and Other
1,866
1,916
(3) %
4,299
3,618
19 %
Elimination of Intrasegment Revenue(1)
(265)
(221)
(20) %
(509)
(459)
(11) %
$ 13,620
$ 12,440
9 %
$ 28,205
$ 25,101
12 %
Operating income (loss):
Linear Networks
$ 2,815
$ 2,849
(1) %
$ 4,314
$ 4,578
(6) %
Direct-to-Consumer
(887)
(290)
>(100) %
(1,480)
(756)
(96) %
Content Sales/Licensing and Other
16
312
(95) %
(82)
500
nm
$ 1,944
$ 2,871
(32) %
$ 2,752
$ 4,322
(36) %
(1) Reflects fees received by the Linear Networks from other
DMED businesses for the right to air our Linear Networks and
related services.
Linear Networks
Linear Networks revenues for the quarter increased 5% to $7.1
billion, and operating income decreased 1% to $2.8 billion. The
following table provides further detail of Linear Networks results
(in millions):
Quarter Ended
Change
April 2, 2022
April 3, 2021
Supplemental revenue detail
Domestic Channels
$ 5,826
$ 5,418
8 %
International Channels
1,290
1,328
(3) %
$ 7,116
$ 6,746
5 %
Supplemental operating income detail
Domestic Channels
$ 2,349
$ 2,281
3 %
International Channels
245
348
(30) %
Equity in the income of investees
221
220
— %
$ 2,815
$ 2,849
(1) %
Domestic Channels
Domestic Channels revenues for the quarter increased 8% to $5.8
billion, and operating income increased 3% to $2.3 billion. The
increase in operating income was due to higher operating income at
Broadcasting, partially offset by lower operating income at
Cable.
The increase at Broadcasting was due to higher results at the
owned television stations and, to a lesser extent, at ABC. The
increase at ABC was due to higher affiliate and advertising
revenue, partially offset by higher programming and production
costs and an increase in marketing costs. Higher affiliate revenue
was due to an increase in contractual rates. The increase in
advertising revenue was due to the timing of The Academy Awards and
higher rates, partially offset by a decrease in viewership and, to
a lesser extent, fewer units delivered. The Academy Awards aired in
the current quarter compared to the third quarter in the prior
year. Higher programming and production costs were due to the
timing of The Academy Awards, partially offset by lower average
cost of other programming in the current quarter compared to the
prior-year quarter. The increase at the owned television stations
was due to higher advertising and affiliate revenue. Advertising
revenue growth was due to the timing of The Academy Awards and
increased rates. The increase in affiliate revenue was due to
higher contractual rates.
The decrease at Cable was due to higher programming and
production costs, partially offset by growth in advertising and
affiliate revenue. The increase in programming and production costs
was due to higher costs for NFL programming, contractual rate
increases for College Football Playoff, NBA and college basketball,
and an increase in sports production costs. Higher NFL programming
costs were due to airing three regular season games, a wild card
playoff game and the Pro Bowl in the current quarter compared to a
wild card playoff game in the prior-year quarter. The increase in
sports production costs was driven by the return of ESPN-hosted
college events, which were canceled in the prior-year quarter due
to COVID-19. These increases were partially offset by lower costs
for MLB programming due to the delayed start of the 2022 MLB
season. Advertising revenue growth was due to higher impressions
reflecting higher average viewership and, to a lesser extent, an
increase in rates. Higher affiliate revenue was driven by an
increase in contractual rates, partially offset by fewer
subscribers.
International Channels
International Channels revenues for the quarter decreased 3% to
$1.3 billion and operating income decreased 30% to $0.2 billion.
The decrease in operating income was due to lower affiliate revenue
and an increase in programming and production costs, partially
offset by advertising revenue growth.
Lower affiliate revenue reflected the impact of channel closures
and an unfavorable foreign exchange impact.
Higher programming and production costs were driven by increased
costs for cricket programming in the current quarter, partially
offset by the impact of channel closures and a favorable foreign
exchange impact. Higher costs for cricket programming were due to
the airing of ten Indian Premier League (IPL) cricket matches in
the current quarter compared to none in the prior-year quarter and
contractual rate increases for Board of Control for Cricket in
India matches. IPL cricket matches typically occur in our second
and third fiscal quarters. As a result of COVID-19, no matches took
place in the prior-year quarter.
The increase in advertising revenue was due to higher average
viewership driven by the airing of IPL cricket matches in the
current quarter, and higher rates, partially offset by an
unfavorable foreign exchange impact.
Direct-to-Consumer
Direct-to-Consumer revenues for the quarter increased 23% to
$4.9 billion and operating loss increased $0.6 billion to $0.9
billion. The increase in operating loss was due to higher losses at
Disney+ and ESPN+ and lower operating income at Hulu.
Lower results at Disney+ reflected higher programming and
production, marketing and technology costs, partially offset by an
increase in subscription revenue. Higher subscription revenue was
due to subscriber growth and increases in retail pricing. The
increases in costs and subscribers reflected growth in existing
markets and, to a lesser extent, expansion to new markets.
Lower results at ESPN+ were due to higher sports programming
costs and a decrease in income from Ultimate Fighting Championship
(UFC) pay-per-view events, partially offset by an increase in
subscription revenue due to subscriber growth. Lower UFC
pay-per-view income was due to a decrease in average buys per
event.
The decrease at Hulu was due to higher programming and
production, marketing and technology costs, partially offset by
subscription revenue growth and higher advertising revenue. The
increase in programming and production costs was primarily due to
higher subscriber-based fees for programming the Live TV service
due to the carriage of more networks, an increase in the number of
subscribers and rate increases. Subscription revenue growth was due
to an increase in subscribers and higher average rates primarily
due to increases in retail pricing. The increase in advertising
revenue was due to higher rates and impressions.
The following tables present additional information about our
Disney+, ESPN+ and Hulu direct-to-consumer (DTC) product
offerings(1).
Paid subscribers(1) as of:
(in millions)
April 2, 2022
April 3, 2021
Change
Disney+
Domestic (U.S. and Canada)
44.4
37.3
19 %
International (excluding Disney+
Hotstar)(1)
43.2
31.1
39 %
Disney+ (excluding Disney+ Hotstar)(2)
87.6
68.4
28 %
Disney+ Hotstar
50.1
35.2
42 %
Total Disney+(2)
137.7
103.6
33 %
ESPN+
22.3
13.8
62 %
Hulu
SVOD Only
41.4
37.8
10 %
Live TV + SVOD
4.1
3.8
8 %
Total Hulu(2)
45.6
41.6
10 %
Average Monthly Revenue Per Paid Subscriber(1) for the quarter
ended:
April 2, 2022
April 3, 2021
Change
Disney+
Domestic (U.S. and Canada)
$ 6.32
$ 6.01
5 %
International (excluding Disney+
Hotstar)(1)
$ 6.35
$ 5.14
24 %
Disney+ (excluding Disney+ Hotstar)
$ 6.33
$ 5.61
13 %
Disney+ Hotstar
$ 0.76
$ 0.49
55 %
Global Disney+
$ 4.35
$ 3.99
9 %
ESPN+
$ 4.73
$ 4.55
4 %
Hulu
SVOD Only
$ 12.77
$ 12.08
6 %
Live TV + SVOD
$ 88.77
$ 81.83
8 %
(1)
See discussion on page 11—DTC Product
Descriptions and Key Definitions
(2)
Total may not equal the sum of the column
due to rounding
The average monthly revenue per paid subscriber for domestic
Disney+ increased from $6.01 to $6.32 due to an increase in retail
pricing and a lower mix of wholesale subscribers, partially offset
by a higher mix of subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for
international Disney+ (excluding Disney+ Hotstar) increased from
$5.14 to $6.35 due to increases in retail pricing.
The average monthly revenue per paid subscriber for Disney+
Hotstar increased from $0.49 to $0.76 due to launches in new
territories with higher average prices and higher per-subscriber
advertising revenue, partially offset by a higher mix of wholesale
subscribers.
The average monthly revenue per paid subscriber for ESPN+
increased from $4.55 to $4.73 primarily due to an increase in
retail pricing and, to a lesser extent, higher per-subscriber
advertising revenue, partially offset by a higher mix of
subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for the Hulu
SVOD Only service increased from $12.08 to $12.77 due to an
increase in retail pricing and, to a lesser extent, higher
per-subscriber advertising revenue, partially offset by a higher
mix of subscribers to multi-product offerings.
The average monthly revenue per paid subscriber for the Hulu
Live TV + SVOD service increased from $81.83 to $88.77 due to an
increase in retail pricing and higher per-subscriber advertising
revenue, partially offset by a higher mix of subscribers to
multi-product offerings.
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues for the quarter
decreased 3% to $1.9 billion and segment operating income decreased
to $16 million from $312 million. The decrease in operating income
was due to lower TV/SVOD distribution results and, to a lesser
extent, a decrease at home entertainment due to lower sales of
catalog titles in the current quarter.
The decrease in TV/SVOD distribution results was due to a
decrease in sales of episodic television content driven by higher
sales of Modern Family and How I Met Your Mother in the prior-year
quarter.
Disney Parks, Experiences and
Products
Disney Parks, Experiences and Products revenues for the quarter
increased to $6.7 billion compared to $3.2 billion in the
prior-year quarter. Segment operating results increased by $2.2
billion to income of $1.8 billion compared to a loss of $0.4
billion in the prior-year quarter. Higher operating results for the
quarter reflected increases at our domestic parks and experiences
businesses and, to a lesser extent, at our international parks and
resorts and merchandise licensing businesses.
Operating income growth at our domestic parks and experiences
was due to higher volumes and increased guest spending, partially
offset by higher costs. Higher volumes were due to increases in
attendance, occupied room nights and cruise ship sailings. Cruise
ships operated at reduced capacities in the current quarter while
sailings were suspended in the prior-year quarter. Guest spending
growth was due to an increase in average per capita ticket revenue,
higher average daily hotel room rates and an increase in food,
beverage and merchandise spending. The increase in average per
capita ticket revenue was due to a favorable attendance mix and the
introduction of Genie+ and Lightning Lane in the first quarter of
the current fiscal year. Higher costs were primarily due to volume
growth, cost inflation and higher marketing spending. Our domestic
parks and resorts were open for the entire current quarter, whereas
Disneyland Resort was closed for all of the prior-year quarter, and
Walt Disney World Resort operated at reduced capacity in the
prior-year quarter due to COVID-19 restrictions.
Improved results at our international parks and resorts was due
to growth at Disneyland Paris, partially offset by decreases at
Hong Kong Disneyland Resort and Shanghai Disney Resort. Higher
operating results at Disneyland Paris were due to increases in
attendance and occupied room nights, partially offset by higher
operating costs due to volume growth and increased marketing costs.
The decreases at Hong Kong Disneyland Resort and Shanghai Disney
Resort were driven by lower attendance. Disneyland Paris was open
for the entire current quarter and closed for all of the prior-year
quarter. Hong Kong Disneyland Resort was open for 3 days in the
current quarter compared to 33 days in the prior-year quarter.
Shanghai Disney Resort was open for 78 days in the current quarter
and open for all of the prior-year quarter. Tokyo Disney Resort was
open for the entire quarter in both the current and prior
years.
Growth in merchandise licensing was driven by higher sales of
merchandise based on Mickey and Minnie, Spider-Man, Star Wars
Classic and Disney Princesses, partially offset by lower minimum
guarantee shortfall recognition.
The following table presents supplemental revenue and operating
income (loss) detail for the Disney Parks, Experiences and Products
segment:
Quarter Ended
Change
(in millions)
April 2, 2022
April 3, 2021
Supplemental revenue detail
Parks & Experiences
Domestic
$ 4,898
$ 1,735
>100 %
International
574
262
>100 %
Consumer Products
1,180
1,176
— %
$ 6,652
$ 3,173
>100 %
Supplemental operating income (loss)
detail
Parks & Experiences
Domestic
$ 1,385
$ (587)
nm
International
(268)
(380)
29 %
Consumer Products
638
561
14 %
$ 1,755
$ (406)
nm
OTHER FINANCIAL INFORMATION
Corporate and Unallocated Shared
Expenses
Corporate and unallocated shared expenses increased $71 million
for the quarter, from $201 million to $272 million, driven by the
timing of allocations to operating segments.
Restructuring and Impairment
Charges
In the current quarter, the Company recorded charges totaling
$195 million due to the impairment of an intangible asset related
to the Disney Channel in Russia. During the prior-year quarter, the
Company recorded charges totaling $414 million due to asset
impairments and severance costs related to the planned closure of
an animation studio and a substantial number of our Disney-branded
retail stores as well as severance at our parks and resorts
businesses.
Other Income (Expense),
net
In the current quarter, the Company recorded a $158 million
non-cash loss to adjust its investment in DraftKings, Inc.
(DraftKings) to fair value (DraftKings loss). In the prior-year
quarter, the Company recorded a $305 million gain on DraftKings
(DraftKings gain).
Interest Expense, net
Interest expense, net was as follows (in millions):
Quarter Ended
April 2, 2022
April 3, 2021
Change
Interest expense
$ (374)
$ (415)
10 %
Interest income, investment income and
other
19
95
(80) %
Interest expense, net
$ (355)
$ (320)
(11) %
The decrease in interest expense was primarily due to lower
average debt balances and higher capitalized interest.
The decrease in interest income, investment income and other was
due to investment losses in the current quarter compared to
investment gains in the prior-year quarter. This decrease was
partially offset by a favorable comparison of pension and
postretirement benefit costs, other than service cost, which was a
net benefit in the current quarter and an expense in the prior-year
quarter.
Equity in the Income of
Investees
Equity in the income of investees was as follows (in
millions):
Quarter Ended
April 2, 2022
April 3, 2021
Change
Amounts included in segment results:
Disney Media and Entertainment
Distribution
$ 218
$ 226
(4) %
Disney Parks, Experiences and Products
(5)
(9)
44 %
Amortization of TFCF intangible assets
related to equity investees
(3)
(4)
25 %
Equity in the income of investees
$ 210
$ 213
(1) %
Income Taxes
The effective income tax rate was as follows:
Quarter Ended
April 2, 2022
April 3, 2021
Income from continuing operations before
income taxes
$ 1,102
$ 1,230
Income tax expense on continuing
operations
505
108
Effective income tax rate - continuing
operations
45.8 %
8.8 %
The effective income tax rate in the current quarter was higher
than the U.S. statutory rate primarily due to higher effective tax
rates on foreign earnings, including the impact of tax regulations
issued in the current quarter that limit our ability to utilize
certain foreign tax credits. The effective income tax rate in the
prior-year quarter was lower than the U.S. statutory rate due to
the favorable resolution of various tax matters and excess tax
benefits on employee share-based awards, partially offset by higher
effective tax rates on foreign earnings. Higher effective tax rates
on foreign earnings in both the current and prior-year quarters
reflected the impact of foreign losses and foreign tax credits for
which we are unable to recognize a tax benefit.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as
follows (in millions):
Quarter Ended
April 2, 2022
April 3, 2021
Change
Net income from continuing operations
attributable to noncontrolling interests
$ (127)
$ (210)
40 %
The decrease in net income from continuing operations
attributable to noncontrolling interests was driven by higher
losses at our DTC sports business.
Net income attributable to noncontrolling interests is
determined on income after royalties and management fees, financing
costs and income taxes, as applicable.
Cash Flow
Cash provided by operations and free cash flow were as follows
(in millions):
Six Months Ended
April 2, 2022
April 3, 2021
Change
Cash provided by operations
$ 1,556
$ 1,468
$ 88
Investments in parks, resorts and other
property
(2,060)
(1,530)
(530)
Free cash flow(1)
$ (504)
$ (62)
$ (442)
(1)
Free cash flow is not a financial measure
defined by GAAP. See the discussion on pages 12 through 15.
Cash provided by operations for fiscal 2022 increased by $0.1
billion from $1.5 billion in the prior-year period to $1.6 billion
in the current period. The increase was due to higher operating
income and lower severance payments, partially offset by higher
spending for film and television content and a partial payment for
the Content License Early Termination.
Capital Expenditures and Depreciation
Expense
Investments in parks, resorts and other property were as follows
(in millions):
Six Months Ended
April 2, 2022
April 3, 2021
Disney Media and Entertainment
Distribution
$ 334
$ 369
Disney Parks, Experiences and Products
Domestic
1,047
656
International
391
355
Total Disney Parks, Experiences and
Products
1,438
1,011
Corporate
288
150
Total investments in parks, resorts and
other property
$ 2,060
$ 1,530
Capital expenditures increased from $1.5 billion to $2.1 billion
due to higher spending at Disney Parks, Experiences and Products in
the current period on cruise ship expansion and new guest
offerings, in part reflecting the impact from the temporary
suspension of certain capital projects in the prior year as a
result of COVID-19. The increase also reflected higher spending on
corporate facilities.
Depreciation expense was as follows (in millions):
Six Months Ended
April 2, 2022
April 3, 2021
Disney Media and Entertainment
Distribution
$ 322
$ 300
Disney Parks, Experiences and Products
Domestic
802
779
International
335
360
Total Disney Parks, Experiences and
Products
1,137
1,139
Corporate
94
92
Total depreciation expense
$ 1,553
$ 1,531
DTC PRODUCT DESCRIPTIONS AND KEY
DEFINITIONS
Product offerings
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered
as a standalone service or as a package that includes all three
services (the SVOD Bundle). Effective December 21, 2021, Hulu Live
TV + SVOD includes Disney+ and ESPN+ (the new Hulu Live TV + SVOD
offering), whereas previously, Hulu Live TV + SVOD was offered as a
standalone service or with Disney+ and ESPN+ as optional additions
(the old Hulu Live TV + SVOD offering). Effective March 15, 2022,
Hulu SVOD Only is also offered with Disney+ as an optional add-on.
Disney+ is available in more than 80 countries and territories
outside the U.S. and Canada. In India and certain other Southeast
Asian countries, the service is branded Disney+ Hotstar. In certain
Latin American countries, we offer Disney+ as well as Star+, a
general entertainment SVOD service, which is available on a
standalone basis or together with Disney+ (Combo+). Depending on
the market, our services can be purchased on our websites, through
third-party platforms/apps or via wholesale arrangements.
Paid subscribers
Paid subscribers reflect subscribers for which we recognized
subscription revenue. Subscribers cease to be a paid subscriber as
of their effective cancellation date or as a result of a failed
payment method. Subscribers to the SVOD Bundle are counted as a
paid subscriber for each service included in the SVOD Bundle and
subscribers to the Hulu Live TV + SVOD offerings are counted as one
paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and
ESPN+ offerings. If a Hulu SVOD Only subscriber chooses to add on
Disney+, they are counted as one paid subscriber for each of the
Hulu SVOD Only and Disney+ offerings. In Latin America, if a
subscriber has either the standalone Disney+ or Star+ service or
Combo+, they are counted as one Disney+ paid subscriber.
Subscribers include those who receive a service through wholesale
arrangements including those for which we receive a fee for the
distribution of the service to each subscriber of an existing
content distribution tier. When we aggregate the total number of
paid subscribers across our DTC streaming services, we refer to
them as paid subscriptions.
International Disney+ (excluding Disney+
Hotstar)
International Disney+ (excluding Disney+ Hotstar) includes the
Disney+ service outside the U.S. and Canada and the Star+ service
in Latin America.
Average Monthly Revenue Per Paid
Subscriber
Revenue per paid subscriber is calculated based on the average
of the monthly average paid subscribers for each month in the
period. The monthly average paid subscribers is calculated as the
sum of the beginning of the month and end of the month paid
subscriber count, divided by two. Disney+ average monthly revenue
per paid subscriber is calculated using a daily average of paid
subscribers for the period. Revenue includes subscription fees,
advertising (excluding revenue earned from selling advertising
spots to other Company businesses) and premium and feature add-on
revenue but excludes Premier Access and Pay-Per-View revenue. The
average revenue per paid subscriber is net of discounts on the SVOD
Bundle or other offerings that carry more than one service. Revenue
is allocated to each service based on the relative retail price of
each service on a standalone basis. Starting in December 2021,
revenue for the new Hulu Live TV + SVOD offering is allocated to
the SVOD services based on the wholesale price of the SVOD Bundle.
In general, wholesale arrangements have a lower average monthly
revenue per paid subscriber than subscribers that we acquire
directly or through third-party platforms.
NON-GAAP FINANCIAL
MEASURES
This earnings release presents free cash flow, diluted EPS
excluding certain items, and total segment operating income, all of
which are important financial measures for the Company, but are not
financial measures defined by GAAP.
These measures should be reviewed in conjunction with the most
comparable GAAP financial measures and are not presented as
alternative measures of cash provided by continuing operations,
diluted EPS or income from continuing operations before income
taxes as determined in accordance with GAAP. Free cash flow,
diluted EPS excluding certain items and total segment operating
income as we have calculated them may not be comparable to
similarly titled measures reported by other companies. See further
discussion of total segment operating income on page 2.
Free cash flow
The Company uses free cash flow (cash provided by continuing
operations less investments in parks, resorts and other property),
among other measures, to evaluate the ability of its operations to
generate cash that is available for purposes other than capital
expenditures. Management believes that information about free cash
flow provides investors with an important perspective on the cash
available to service debt obligations, make strategic acquisitions
and investments and pay dividends or repurchase shares.
The following table presents a summary of the Company’s
consolidated cash flows (in millions):
Quarter Ended
Six Months Ended
April 2, 2022
April 3, 2021
April 2, 2022
April 3, 2021
Cash provided by operations - continuing
operations
$
1,765
$
1,393
$
1,556
$
1,468
Cash used in investing activities -
continuing operations
(1,037
)
(595
)
(2,024
)
(1,327
)
Cash used in financing activities -
continuing operations
(1,817
)
(1,908
)
(2,097
)
(2,241
)
Cash (used in) provided by discontinued
operations
—
(1
)
(4
)
8
Impact of exchange rates on cash, cash
equivalents and restricted cash
(81
)
(69
)
(116
)
70
Change in cash, cash equivalents and
restricted cash
(1,170
)
(1,180
)
(2,685
)
(2,022
)
Cash, cash equivalents and restricted
cash, beginning of period
14,488
17,112
16,003
17,954
Cash, cash equivalents and restricted
cash, end of period
$
13,318
$
15,932
$
13,318
$
15,932
The following table presents a reconciliation of the Company’s
consolidated cash provided by operations to free cash flow (in
millions):
Quarter Ended
Six Months Ended
April 2, 2022
April 3, 2021
Change
April 2, 2022
April 3, 2021
Change
Cash provided by operations - continuing
operations
$
1,765
$
1,393
$
372
$
1,556
$
1,468
$
88
Investments in parks, resorts and other
property
(1,079
)
(770
)
(309
)
(2,060
)
(1,530
)
(530
)
Free cash flow
$
686
$
623
$
63
$
(504
)
$
(62
)
$
(442
)
Diluted EPS excluding certain
items
The Company uses diluted EPS excluding (1) certain items
affecting comparability of results from period to period and (2)
amortization of TFCF and Hulu intangible assets, including purchase
accounting step-up adjustments for released content, to facilitate
the evaluation of the performance of the Company’s operations
exclusive of these items, and these adjustments reflect how senior
management is evaluating segment performance.
The Company believes that providing diluted EPS exclusive of
certain items impacting comparability is useful to investors,
particularly where the impact of the excluded items is significant
in relation to reported earnings and because the measure allows for
comparability between periods of the operating performance of the
Company’s business and allows investors to evaluate the impact of
these items separately.
The Company further believes that providing diluted EPS
exclusive of amortization of TFCF and Hulu intangible assets
associated with the acquisition in 2019 is useful to investors
because the TFCF and Hulu acquisition was considerably larger than
the Company’s historic acquisitions with a significantly greater
acquisition accounting impact.
The following table reconciles reported diluted EPS from
continuing operations to diluted EPS excluding certain items for
the second quarter:
(in millions except EPS)
Pre-Tax Income/ Loss
Tax Benefit/ Expense(1)
After-Tax Income/ Loss(2)
Diluted EPS(3)
Change vs. prior year period
Quarter Ended April 2, 2022
As reported
$
1,102
$
(505
)
$
597
$
0.26
(48
) %
Exclude:
Contract License Early Termination
1,023
(238
)
785
0.43
Other income (expense), net(4)
158
(37
)
121
0.07
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
594
(138
)
456
0.24
Restructuring and impairment
charges(6)
195
(45
)
150
0.08
Excluding certain items
$
3,072
$
(963
)
$
2,109
$
1.08
37
%
Quarter Ended April 3, 2021
As reported
$
1,230
$
(108
)
$
1,122
$
0.50
Exclude:
Other (income) expense, net(4)
(305
)
71
(234
)
(0.13
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
605
(141
)
464
0.24
Restructuring and impairment
charges(6)
414
(97
)
317
0.17
Excluding certain items
$
1,944
$
(275
)
$
1,669
$
0.79
(1)
Tax benefit/expense is determined using
the tax rate applicable to the individual item.
(2)
Before noncontrolling interest share.
(3)
Net of noncontrolling interest share,
where applicable. Total may not equal the sum of the column due to
rounding.
(4)
In the current quarter, other income
(expense), net was due to the DraftKings loss ($158 million). For
the prior-year quarter, other income (expense), net was due to the
DraftKings gain ($305 million).
(5)
For the current quarter, intangible asset
amortization was $435 million, step-up amortization was $156
million and amortization of intangible assets related to TFCF
equity investees was $3 million. For the prior-year quarter,
intangible asset amortization was $447 million, step-up
amortization was $154 million and amortization of intangible assets
related to TFCF equity investees was $4 million.
(6)
Charges for the current quarter were due
to the impairment of an intangible asset related to the Disney
Channel in Russia. Charges for the prior-year quarter were due to
asset impairments and severance costs related to the planned
closure of an animation studio and a substantial number of
Disney-branded retail stores, as well as severance at our parks and
resorts businesses.
The following table reconciles reported diluted EPS from
continuing operations to diluted EPS excluding certain items for
the current and prior year six-month periods:
(in millions except EPS)
Pre-Tax Income/ Loss
Tax Benefit/ Expense(1)
After-Tax Income/ Loss(2)
Diluted EPS(3)
Change vs. prior-year period
Six Months Ended April 2, 2022:
As reported
$
2,790
$
(993
)
$
1,797
$
0.89
71
%
Exclude:
Contract License Early Termination
1,023
(238
)
785
0.43
Other (income) expense, net(4)
594
(138
)
456
0.25
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,189
(277
)
912
0.49
Restructuring and impairment
charges(6)
195
(45
)
150
0.08
Excluding certain items
$
5,791
$
(1,691
)
$
4,100
$
2.14
93
%
Six Months Ended April 3, 2021:
As reported
$
1,276
$
(124
)
$
1,152
$
0.52
Exclude:
Other (income) expense, net(4)
(305
)
71
(234
)
(0.13
)
Amortization of TFCF and Hulu intangible
assets and fair value step-up on film and television costs(5)
1,222
(285
)
937
0.50
Restructuring and impairment
charges(6)
527
(124
)
403
0.22
Excluding certain items
$
2,720
$
(462
)
$
2,258
$
1.11
(1)
Tax benefit/expense is determined using
the tax rate applicable to the individual item.
(2)
Before noncontrolling interest share.
(3)
Net of noncontrolling interest share,
where applicable. Total may not equal the sum of the column due to
rounding.
(4)
For the current six months, other (income)
expense, net was due to the DraftKings loss ($590 million). For the
prior-year six months, other (income) expense, net was due to a
gain from adjusting our investment in fuboTV Inc. to fair value
($186 million) and the DraftKings gain ($119 million).
(5)
For the current six months, intangible
asset amortization was $870 million, step-up amortization was $313
million and amortization of intangible assets related to TFCF
equity investees was $6 million. For the prior-year six months,
intangible asset amortization was $894 million, step-up
amortization was $321 million and amortization of intangible assets
related to TFCF equity investees was $7 million.
(6)
Charges for the current six months were
due to the impairment of an intangible asset related to the Disney
Channel in Russia. Charges for the prior-year six months were due
to asset impairments and severance costs primarily related to the
planned closure of an animation studio and a substantial number of
our Disney-branded retail stores, as well as severance at our other
businesses.
CONFERENCE CALL INFORMATION
In conjunction with this release, The Walt Disney Company will
host a conference call today, May 11, 2022, at 4:30 PM EDT/1:30 PM
PDT via a live Webcast. To access the Webcast go to www.disney.com/investors. The discussion will be
archived.
FORWARD-LOOKING STATEMENTS
Certain statements and information in this earnings release may
constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, including
statements regarding future performance and growth; and the future
impact of COVID-19 on our businesses and other statements that are
not historical in nature. These statements are made on the basis of
management’s views and assumptions regarding future events and
business performance as of the time the statements are made.
Management does not undertake any obligation to update these
statements.
Actual results may differ materially from those expressed or
implied. Such differences may result from actions taken by the
Company, including restructuring or strategic initiatives
(including capital investments, asset acquisitions or dispositions,
new or expanded business lines or cessation of certain operations)
or other business decisions, as well as from developments beyond
the Company’s control, including:
- further changes in domestic and global economic
conditions;
- changes in or pressures from competitive conditions and
consumer preferences;
- health concerns and their impact on our businesses and
productions;
- international, regulatory, legal, political, or military
developments;
- technological developments;
- labor markets and activities;
- adverse weather conditions or natural disasters; and
each such risk includes the current and future impacts of, and
is amplified by, COVID-19 and related mitigation efforts.
Such developments may further affect entertainment, travel and
leisure businesses generally and may, among other things, affect
(or further affect, as applicable):
- our operations, business plans or profitability;
- demand for our products and services;
- the performance of the Company’s content;
- the advertising market for programming;
- performance of some or all Company businesses either directly
or through their impact on those who distribute our products.
Additional factors are set forth in the Company’s Annual Report
on Form 10-K for the year ended October 2, 2021 under the captions
“Risk Factors,” “Management’s Discussion and Analysis,” and
“Business,” and subsequent filings with the Securities and Exchange
Commission, including, among others, quarterly reports on Form
10-Q.
The terms “Company,” “we,” and “our” are used in this report to
refer collectively to the parent company and the subsidiaries
through which our various businesses are actually conducted.
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(unaudited; in millions,
except per share data)
Quarter Ended
Six Months Ended
April 2, 2022
April 3, 2021
April 2, 2022
April 3, 2021
Revenues
$
19,249
$
15,613
$
41,068
$
31,862
Costs and expenses
(17,649
)
(14,167
)
(37,272
)
(30,157
)
Restructuring and impairment charges
(195
)
(414
)
(195
)
(527
)
Other income (expense), net
(158
)
305
(594
)
305
Interest expense, net
(355
)
(320
)
(666
)
(644
)
Equity in the income of investees
210
213
449
437
Income from continuing operations before
income taxes
1,102
1,230
2,790
1,276
Income taxes on continuing operations
(505
)
(108
)
(993
)
(124
)
Net income from continuing operations
597
1,122
1,797
1,152
Loss from discontinued operations, net of
income tax benefit of $0, $3, $14 and $7, respectively
—
(11
)
(48
)
(23
)
Net income
597
1,111
1,749
1,129
Net income from continuing operations
attributable to noncontrolling interests
(127
)
(210
)
(175
)
(211
)
Net income attributable to The Walt Disney
Company (Disney)
$
470
$
901
$
1,574
$
918
Earnings (loss) per share attributable to
Disney(1):
Diluted
Continuing operations
$
0.26
$
0.50
$
0.89
$
0.52
Discontinued operations
—
(0.01
)
(0.03
)
(0.01
)
$
0.26
$
0.49
$
0.86
$
0.50
Basic
Continuing operations
$
0.26
$
0.50
$
0.89
$
0.52
Discontinued operations
—
(0.01
)
(0.03
)
(0.01
)
$
0.26
$
0.50
$
0.86
$
0.51
Weighted average number of common and
common equivalent shares outstanding:
Diluted
1,828
1,829
1,828
1,826
Basic
1,822
1,817
1,820
1,814
(1) Total may not equal the sum of the column due to
rounding.
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited; in millions,
except per share data)
April 2, 2022
October 2, 2021
ASSETS
Current assets
Cash and cash equivalents
$
13,272
$
15,959
Receivables, net
13,746
13,367
Inventories
1,428
1,331
Content advances
1,796
2,183
Other current assets
1,185
817
Total current assets
31,427
33,657
Produced and licensed content costs
32,349
29,549
Investments
3,356
3,935
Parks, resorts and other property
Attractions, buildings and equipment
65,247
64,892
Accumulated depreciation
(38,783
)
(37,920
)
26,464
26,972
Projects in progress
5,327
4,521
Land
1,126
1,131
32,917
32,624
Intangible assets, net
15,875
17,115
Goodwill
78,019
78,071
Other assets
8,510
8,658
Total assets
$
202,453
$
203,609
LIABILITIES AND EQUITY
Current liabilities
Accounts payable and other accrued
liabilities
$
19,669
$
20,894
Current portion of borrowings
5,399
5,866
Deferred revenue and other
4,533
4,317
Total current liabilities
29,601
31,077
Borrowings
46,624
48,540
Deferred income taxes
8,407
7,246
Other long-term liabilities
13,808
14,522
Commitments and contingencies
Redeemable noncontrolling interests
9,354
9,213
Equity
Preferred stock
—
—
Common stock, $0.01 par value, Authorized
– 4.6 billion shares, Issued – 1.8 billion shares
55,823
55,471
Retained earnings
42,032
40,429
Accumulated other comprehensive loss
(6,312
)
(6,440
)
Treasury stock, at cost, 19 million
shares
(907
)
(907
)
Total Disney Shareholders’ equity
90,636
88,553
Noncontrolling interests
4,023
4,458
Total equity
94,659
93,011
Total liabilities and equity
$
202,453
$
203,609
THE WALT DISNEY
COMPANY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited; in
millions)
Six Months Ended
April 2, 2022
April 3, 2021
OPERATING ACTIVITIES
Net income from continuing operations
$
1,797
$
1,152
Depreciation and amortization
2,556
2,570
Net (gain) loss on investments
632
(481
)
Deferred income taxes
983
(556
)
Equity in the income of investees
(449
)
(437
)
Cash distributions received from equity
investees
406
372
Net change in produced and licensed
content costs and advances
(2,279
)
(1,685
)
Equity-based compensation
450
270
Pension and postretirement medical benefit
cost amortization
310
388
Other, net
264
248
Changes in operating assets and
liabilities:
Receivables
(342
)
(37
)
Inventories
(97
)
175
Other assets
(676
)
(131
)
Accounts payable and other liabilities
(1,349
)
(780
)
Income taxes
(650
)
400
Cash provided by operations - continuing
operations
1,556
1,468
INVESTING ACTIVITIES
Investments in parks, resorts and other
property
(2,060
)
(1,530
)
Other, net
36
203
Cash used in investing activities -
continuing operations
(2,024
)
(1,327
)
FINANCING ACTIVITIES
Commercial paper payments, net
(130
)
(87
)
Borrowings
70
37
Reduction of borrowings
(1,400
)
(1,816
)
Proceeds from exercise of stock
options
88
394
Other, net
(725
)
(769
)
Cash used in financing activities -
continuing operations
(2,097
)
(2,241
)
CASH FLOWS FROM DISCONTINUED
OPERATIONS
Cash provided by operations - discontinued
operations
8
4
Cash provided by investing activities -
discontinued operations
—
4
Cash used in financing activities -
discontinued operations
(12
)
—
Cash (used in) provided by discontinued
operations
(4
)
8
Impact of exchange rates on cash, cash
equivalents and restricted cash
(116
)
70
Change in cash, cash equivalents and
restricted cash
(2,685
)
(2,022
)
Cash, cash equivalents and restricted
cash, beginning of period
16,003
17,954
Cash, cash equivalents and restricted
cash, end of period
$
13,318
$
15,932
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220511005996/en/
David Jefferson Corporate Communications 818-560-4832
Alexia Quadrani Investor Relations 818-560-6601
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