- Lower network impressions were in part due to the impact of the guild strikes on our programming schedule primarily due to a shift of units to the Sports segment reflecting the simulcast of certain NFL games
The decrease in international operating income was due to lower affiliate revenue primarily attributable to fewer subscribers.
Equity in the Income of Investees
Income from equity investees decreased primarily due to lower income from A+E Television Networks (A+E) attributable to decreases in advertising and affiliate revenue, partially offset by a gain on the sale of an investment.
Direct-to-Consumer
Direct-to-Consumer revenues and operating loss are as follows:
December 30, 2023
December 31, 2022
The decrease in operating loss in the current quarter compared to the prior-year quarter was due to:
- Subscription revenue growth attributable to higher rates due to increases in retail pricing across our streaming services, and subscriber growth at Disney+ Core and, to a lesser extent, Hulu
- An increase in advertising revenue due to higher impressions across our streaming services, partially offset by lower rates at Hulu
- The increase in impressions was due to:
- Airing more hours of International Cricket Council (ICC) cricket programming compared to the prior-year quarter
- Growth of the U.S. ad-supported Disney+ service, which launched in December 2022
- More units delivered at Hulu
- The increase in subscriber-based fees for programming the Hulu Live TV service reflected rate increases and more subscribers
- Higher ICC cricket programming costs were due to higher average costs per match and more matches aired
First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our Disney+ and Hulu direct-to-consumer (DTC) product offerings (1) , and we believe these metrics are useful to investors in analyzing the business. The following tables and related discussion are on a sequential quarter basis.
Paid subscribers (1) at:
December 30, 2023
September 30, 2023
Domestic (U.S. and Canada)
International (excluding Disney+ Hotstar) (1)
Average Monthly Revenue Per Paid Subscriber (1) for the quarter ended:
December 30, 2023
September 30, 2023
Domestic (U.S. and Canada)
International (excluding Disney+ Hotstar) (1)
(1) See discussion on page 17—DTC Product Descriptions and Key Definitions
Domestic Disney+ average monthly revenue per paid subscriber increased from $7.50 to $8.15 due to increases in retail pricing, partially offset by a higher mix of subscribers to promotional offerings.
International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.91 due to a higher mix of subscribers to promotional offerings.
Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.70 to $1.28 due to higher advertising revenue and increases in retail pricing, partially offset by a higher mix of subscribers from lower-priced markets.
Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.11 to $12.29 due to increases in retail pricing, partially offset by lower per-subscriber advertising revenue and a higher mix of subscribers to promotional offerings.
Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.08 to $93.61 due to increases in retail pricing.
Content Sales/Licensing and Other
Content Sales/Licensing and Other revenues and operating loss are as follows:
December 30, 2023
December 31, 2022
The increase in operating loss was due to the performance of The Marvels and Wish in the current quarter compared to Black Panther: Wakanda Forever, Avatar: The Way of Water and Strange World in the prior-year quarter.
Sports revenues and operating income (loss) are as follows:
December 30, 2023
December 31, 2022
Operating income (loss)
Equity in the income of investees
Higher domestic ESPN operating results in the current quarter compared to the prior-year quarter were due to:
- A decrease in programming and production costs attributable to lower costs for College Football Playoff (CFP) programming due to the timing of games relative to our fiscal periods. The current quarter included three host games compared to two host games and two semi-final games in the prior-year quarter.
- Growth in ESPN+ subscription revenue due to higher rates and more subscribers
- Lower advertising revenue attributable to decreases in rates and impressions. These decreases reflected the timing of CFP games, partially offset by the benefits from the timing of the week 17 NFL game that aired in the current quarter compared to the second quarter of the prior year and the simulcast of NFL games on the ABC Network.
- Affiliate revenue was comparable to the prior-year quarter as contractual rate increases were offset by fewer subscribers
Lower international ESPN operating results were driven by higher programming and production costs attributable to new soccer rights and production cost inflation, partially offset by a favorable foreign exchange impact. Affiliate revenue was comparable to the prior-year quarter as an increase in contractual rates was largely offset by fewer subscribers and an unfavorable foreign exchange impact.
The increase in operating loss at Star was due to the airing of the ICC Cricket World Cup in the current quarter compared to the ICC T20 World Cup in the prior-year quarter, which resulted in:
- An increase in programming and production costs attributable to higher average costs per match and more matches aired
- Advertising revenue growth due to more units delivered and an increase in average viewership, partially offset by a decrease in rates
First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023
In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our ESPN+ DTC product offering (1) , and we believe these metrics are useful to investors in analyzing the business. The following table and related discussion are on a sequential quarter basis.
December 30, 2023
September 30, 2023
Paid subscribers (1) at: (in millions)
Average Monthly Revenue Per Paid Subscriber (1) for the quarter ended:
The increase in ESPN+ average monthly revenue per paid subscriber was due to increases in retail pricing and higher advertising revenue.
Experiences
Experiences revenues and operating income are as follows:
December 30, 2023
December 31, 2022
Domestic Parks and Experiences
The decrease in operating income at our domestic parks and experiences reflected lower results at our domestic parks and resorts, largely offset by higher results at Disney Cruise Line.
- At our domestic parks and resorts, lower results in the current quarter compared to the prior- year quarter were due to:
- A decrease at Walt Disney World Resort reflecting a modest decrease in revenues and higher costs. These impacts were due to:
- Lower volumes due to decreases in attendance and occupied room nights, both of which reflected the comparison to the 50th anniversary celebration in the prior-year quarter
- Higher costs due to inflation, partially offset by cost saving initiatives and lower depreciation
- Increased guest spending due to higher average ticket prices, partially offset by lower average daily room rates
- Increased guest spending primarily due to higher average ticket prices
- Attendance growth
- Higher costs driven by inflation
International Parks and Experiences
Higher international parks and experiences’ operating results were due to:
- Growth at Shanghai Disney Resort due to:
- Higher volumes attributable to an increase in attendance. The park was open for all of the current quarter compared to 58 days in the prior-year quarter as a result of COVID-19 related closures.
- Guest spending growth due to an increase in average ticket prices
- Guest spending growth primarily due to an increase in average ticket prices
- Higher volumes resulting from increases in attendance, which benefited from the park being open for more days in the current quarter, and occupied room nights
- Increased costs driven by inflation and new guest offerings
- Higher costs primarily attributable to increased operations support costs and inflation
- Lower volumes primarily due to a decrease in attendance. The prior-year quarter included the 30th anniversary celebration.
- The comparison to a loss in the prior-year quarter on the disposal of our ownership interest in Villages Nature
The increase in consumer products operating results was due to licensing revenue growth resulting from higher sales of products based on Spider-Man and Mickey and Friends, partially offset by a decrease in sales of products based on Star Wars.
OTHER FINANCIAL INFORMATION
DTC Streaming Businesses
Revenue and operating loss for our combined DTC streaming businesses, which consist of the Direct-to-Consumer line of business at the Entertainment segment and ESPN+ at the Sports segment, are as follows:
December 30, 2023
December 31, 2022
Operating loss (1)
DTC streaming businesses operating loss is not a financial measure defined by GAAP. The most comparable GAAP measures are segment operating income for the Entertainment segment and Sports segment. See the discussion on page 21 for how we define and calculate this measure and a reconciliation of it to the most directly comparable GAAP measures.
Corporate and Unallocated Shared Expenses
Corporate and unallocated shared expenses increased $28 million for the quarter, from $280 million to $308 million, primarily due to higher rent expense and inflation.
Restructuring and Impairment Charges
In the prior-year quarter, the Company recorded charges of $69 million related to exiting our businesses in Russia.
Other Expense, net
In the prior-year quarter, the Company recorded a $70 million loss to adjust its investment in DraftKings, Inc. to fair value, partially offset by a $28 million gain on the sale of a business.
Interest Expense, net
Interest expense, net was as follows:
December 30, 2023
December 31, 2022
Interest income, investment income and other
Interest expense, net
The increase in interest expense was primarily due to higher average rates, partially offset by lower average debt balances.
The increase in interest income, investment income and other was driven by higher interest income on cash balances reflecting an increase in interest rates.
Equity in the Income of Investees
Equity in the income of investees was as follows:
December 30, 2023
December 31, 2022
Amounts included in segment results:
Amortization of TFCF intangible assets related to equity investees
Equity in the income of investees
Income Taxes
The effective income tax rate was as follows:
December 30, 2023
December 31, 2022
Income before income taxes
Income tax expense
Effective income tax rate
The increase in the effective income tax rate was due to the impact of adjustments related to prior years, which was unfavorable in the current quarter and favorable in the prior-year quarter, partially offset by lower effective tax rates on foreign earnings compared to the prior-year quarter.
Noncontrolling Interests
Net income attributable to noncontrolling interests was as follows:
December 30, 2023
December 31, 2022
Net income attributable to noncontrolling interests
The increase in net income attributable to noncontrolling interests was primarily due to improved results at our Asia Theme Parks, the accretion of Hulu’s noncontrolling interest to the amount paid to NBC Universal in December 2023 and, to a lesser extent, improved results at ESPN, partially offset by the comparison to the impact of the prior-year purchase of Major League Baseball’s 15% interest in BAMTech LLC.
Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.
Cash provided by (used in) operations and free cash flow were as follows:
December 30, 2023
December 31, 2022
Cash provided by (used in) operations
Investments in parks, resorts and other property
Free cash flow (1)
Free cash flow is not a financial measure defined by GAAP. The most comparable GAAP measure is cash provided by operations. See the discussion on pages 18 through 21.
Cash provided by operations increased by $3.2 billion to $2.2 billion in the current quarter from cash used in operations of $1.0 billion in the prior-year quarter. The increase was due to lower film and television production spending reflecting the impact of the guild strikes in the current quarter, the timing of payments for sports rights and lower collateral payments related to our hedging program. These increases were partially offset by the deferral of fiscal 2023 federal and California tax payments into the current quarter pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.
Capital Expenditures and Depreciation Expense
Investments in parks, resorts and other property were as follows:
December 30, 2023
December 31, 2022
Total investments in parks, resorts and other property
Capital expenditures increased from $1.2 billion to $1.3 billion due to higher spend on new attractions and cruise ship fleet expansion at the Experiences segment.
Depreciation expense was as follows:
December 30, 2023
December 31, 2022
Total depreciation expense
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited; $ in millions, except per share data)
December 30, 2023
December 31, 2022
Costs and expenses
Restructuring and impairment charges
Other expense, net
Interest expense, net
Equity in the income of investees
Income before income taxes
Net income attributable to noncontrolling interests
Net income attributable to The Walt Disney Company (Disney)
Earnings per share attributable to Disney:
Weighted average number of common and common equivalent shares outstanding:
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; $ in millions, except per share data)
December 30, 2023
September 30, 2023
Cash and cash equivalents
Other current assets
Total current assets
Produced and licensed content costs
Parks, resorts and other property
Attractions, buildings and equipment
Projects in progress
Intangible assets, net
LIABILITIES AND EQUITY
Accounts payable and other accrued liabilities
Current portion of borrowings
Deferred revenue and other
Total current liabilities
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Common stock, $0.01 par value, Authorized – 4.6 billion shares, Issued – 1.9 billion shares at December 30, 2023 and 1.8 billion shares at September 30, 2023
Accumulated other comprehensive loss
Treasury stock, at cost, 19 million shares
Total Disney Shareholders’ equity
Total liabilities and equity
THE WALT DISNEY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; $ in millions)
December 30, 2023
December 31, 2022
OPERATING ACTIVITIES
Depreciation and amortization
Deferred income taxes
Equity in the income of investees
Cash distributions received from equity investees
Net change in produced and licensed content costs and advances
Changes in operating assets and liabilities
Accounts payable and other liabilities
Cash provided by (used in) operations
INVESTING ACTIVITIES
Investments in parks, resorts and other property
Cash used in investing activities
FINANCING ACTIVITIES
Commercial paper borrowings, net
Reduction of borrowings
Contributions from / sales of noncontrolling interests
Acquisition of redeemable noncontrolling interests
Cash used in financing activities
Impact of exchange rates on cash, cash equivalents and restricted cash
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period
DTC PRODUCT DESCRIPTIONS AND KEY DEFINITIONS
In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 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 or through third-party platforms/apps or are available via wholesale arrangements.
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 multi-product offerings in the U.S. are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services. In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber. Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed 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
Hulu and ESPN+ average monthly 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 Pay-Per-View revenue. Advertising revenue generated by content of one streaming service that is accessed through another streaming service (for example, Hulu content accessed through Disney+) is allocated between both services. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. 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 diluted EPS excluding certain items, total segment operating income, free cash flow, and DTC streaming businesses operating income (loss), 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 diluted EPS, income before income taxes, cash provided by operations, or Entertainment and Sports segment operating income (loss) as determined in accordance with GAAP. Diluted EPS excluding certain items, total segment operating income, free cash flow, and DTC streaming businesses operating income (loss) as we have calculated them may not be comparable to similarly titled measures reported by other companies.
Our definitions and calculations of historical measures of diluted EPS excluding certain items, total segment operating income, free cash flow, and DTC streaming businesses operating income (loss), as well as quantitative reconciliations of each of these historical measures to the most directly comparable GAAP financial measure are provided below. Disney is not providing forward-looking measures for diluted EPS or cash provided by operations, which are the most directly comparable GAAP measures to diluted EPS excluding certain items and free cash flow, respectively, or a quantitative reconciliation of forward-looking diluted EPS excluding certain items or free cash flow to those most directly comparable GAAP measures. Disney is unable to predict or estimate with reasonable certainty the ultimate outcome of certain significant items required for each of these GAAP measures without unreasonable effort. Information about other adjusting items that is currently not available to Disney could have a potentially unpredictable and significant impact on future GAAP financial results.
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 to diluted EPS excluding certain items for the first quarter:
($ in millions except EPS)
- A decrease at Walt Disney World Resort reflecting a modest decrease in revenues and higher costs. These impacts were due to:
- The increase in impressions was due to: