The Walt Disney Company Reports Third Quarter and Nine Months Earnings for Fiscal 2022

BURBANK, Calif.--(BUSINESS WIRE)--The Walt Disney Company (NYSE: DIS) today reported earnings for its third fiscal quarter ended July 2, 2022.

• Revenues for the quarter and nine months grew 26% and 28%, respectively.
• Diluted earnings per share (EPS) from continuing operations for the quarter increased to $0.77 from $0.50 in the prior-year quarter. Excluding certain items⁽¹⁾, diluted EPS for the quarter increased to $1.09 from $0.80 in the prior-year quarter.
• Diluted EPS from continuing operations for the nine months ended July 2, 2022 increased to $1.66 from $1.02 in the prior-year period. Excluding certain items⁽¹⁾, diluted EPS for the nine months increased to $3.22 from $1.91 in the prior-year period.

“We had an excellent quarter, with our world-class creative and business teams powering outstanding performance at our domestic theme parks, big increases in live-sports viewership, and significant subscriber growth at our streaming services. With 14.4 million Disney+ subscribers added in the fiscal third quarter, we now have 221 million total subscriptions across our streaming offerings,” said Bob Chapek, Chief Executive Officer, The Walt Disney Company. “We continue to transform entertainment as we near our second century, with compelling new storytelling across our many platforms and unique immersive physical experiences that exceed guest expectations, all of which are reflected in our strong operating results this quarter.”

The following table summarizes the third quarter results for fiscal 2022 and 2021:

	Quarter Ended									Nine Months Ended
(in millions, except per share amounts)	July 2, 2022			July 3, 2021			Change			July 2, 2022				July 3, 2021			Change
Revenues	$	21,504		$	17,022		26	%		$	62,572			$	48,884		28	%
Income from continuing operations before income taxes	$	2,119		$	995		>100 %			$	4,909			$	2,271		>100 %
Total segment operating income(1)	$	3,567		$	2,382		50	%		$	10,524			$	6,179		70	%
Net income from continuing operations(2)	$	1,409		$	923		53	%		$	3,031			$	1,864		63	%
Diluted EPS from continuing operations(2)	$	0.77		$	0.50		54	%		$	1.66			$	1.02		63	%
Diluted EPS excluding certain items(1)	$	1.09		$	0.80		36	%		$	3.22			$	1.91		69	%
Cash provided by continuing operations	$	1,922		$	1,466		31	%		$	3,478			$	2,934		19	%
Free cash flow(1)	$	187		$	528		(65	) %		$	(317	)		$	466		nm

(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 revenues to segment revenues (in millions):

	Quarter Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021				Change
Income from continuing operations before income taxes	$	2,119		$	995		>100 %			$	4,909		$	2,271			>100 %
Add (subtract):
Content License Early Termination(1)		—			—		nm				1,023			—			nm
Corporate and unallocated shared expenses		325			212		(53	) %			825			645			(28	) %
Restructuring and impairment charges		42			35		(20	) %			237			562			58	%
Other (income) expense, net		136			91		(49	) %			730			(214	)		nm
Interest expense, net		360			445		19	%			1,026			1,089			6	%
Amortization of TFCF and Hulu intangible assets and fair value step-up on film and television costs		585			604		3	%			1,774			1,826			3	%
Total segment operating income	$	3,567		$	2,382		50	%		$	10,524		$	6,179			70	%

	Quarter Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021				Change
Revenues	$	21,504		$	17,022		26	%		$	62,572		$	48,884			28	%
Contract License Early Termination(1)		—			—		nm				1,023			—			nm
Total segment revenues	$	21,504		$	17,022		26	%		$	63,595		$	48,884			30	%

(1)

During the nine months ended July 2, 2022, the Company recognized a $1,023 million 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). The Content License Early Termination adjustment is included in Company revenues, but excluded from total segment revenues.

The following table summarizes the third quarter and nine-month segment revenue and segment operating income (loss) for fiscal 2022 and 2021 (in millions):

	Quarter Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021				Change
Segment Revenues:
Disney Media and Entertainment Distribution	$	14,110		$	12,681		11	%		$	42,315		$	37,782			12	%
Disney Parks, Experiences and Products		7,394			4,341		70	%			21,280			11,102			92	%
Total Segment Revenues	$	21,504		$	17,022		26	%		$	63,595		$	48,884			30	%
Segment operating income (loss):
Disney Media and Entertainment Distribution	$	1,381		$	2,026		(32	) %		$	4,133		$	6,348			(35	) %
Disney Parks, Experiences and Products		2,186			356		>100 %				6,391			(169	)		nm
Total Segment Operating Income	$	3,567		$	2,382		50	%		$	10,524		$	6,179			70	%

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			Nine Months Ended
	July 2, 2022				July 3, 2021							July 2, 2022				July 3, 2021				Change
Revenues:
Linear Networks	$	7,189			$	6,956			3	%		$	22,011			$	21,395			3	%
Direct-to-Consumer		5,058				4,256			19	%			14,651				11,759			25	%
Content Sales/Licensing and Other		2,111				1,681			26	%			6,410				5,299			21	%
Elimination of Intrasegment Revenue(1)		(248	)			(212	)		(17	)%			(757	)			(671	)		(13	)%
	$	14,110			$	12,681			11	%		$	42,315			$	37,782			12	%
Operating income (loss):
Linear Networks	$	2,469			$	2,187			13	%		$	6,783			$	6,765			—	%
Direct-to-Consumer		(1,061	)			(293	)		>(100	)%			(2,541	)			(1,049	)		>(100	)%
Content Sales/Licensing and Other		(27	)			132			nm				(109	)			632			nm
	$	1,381			$	2,026			(32	)%		$	4,133			$	6,348			(35	)%

(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 3% to $7.2 billion, and operating income increased 13% to $2.5 billion. The following table provides further detail of Linear Networks results (in millions):

	Quarter Ended						Change
	July 2, 2022			July 3, 2021
Supplemental revenue detail
Domestic Channels	$	5,700		$	5,561		2	%
International Channels		1,489			1,395		7	%
	$	7,189		$	6,956		3	%
Supplemental operating income detail
Domestic Channels	$	2,075		$	1,803		15	%
International Channels		166			169		(2	) %
Equity in the income of investees		228			215		6	%
	$	2,469		$	2,187		13	%

Domestic Channels

Domestic Channels revenues for the quarter increased 2% to $5.7 billion, and operating income increased 15% to $2.1 billion, reflecting higher results at both Cable and Broadcasting.

The increase at Cable was due to growth in advertising revenue and to a lesser extent, a decrease in marketing costs and an increase in affiliate revenue. Advertising revenue growth was due to an increase in rates and higher impressions reflecting higher average viewership. Rates and impressions benefited from the timing of the NBA Finals, which aired in the current quarter compared to the fourth quarter of the prior year as a result of a delayed start of the 2021 NBA season due to COVID-19. Higher affiliate revenue was driven by an increase in contractual rates, partially offset by fewer subscribers. Programming and production costs were comparable to the prior-year quarter as higher costs for NBA programming and an increase in sports production costs were largely offset by lower MLB and soccer rights costs. Higher NBA rights costs reflected the timing of the Finals, which are programmed by ESPN and aired on ABC, and contractual rate increases, partially offset by fewer regular season games in the current quarter. Lower costs for MLB programming were due to airing 13 games in the current quarter compared to 44 games in the prior-year quarter. The decrease in soccer programming costs reflected the comparison to the airing of UEFA Euro 2020 in the prior-year quarter. UEFA Euro typically occurs every four years. UEFA Euro 2020 was originally scheduled to occur in fiscal 2020, but was held in fiscal 2021 due to COVID-19.

The increase at Broadcasting was due to higher results at ABC and, to a lesser extent, at the owned television stations. The increase at ABC reflected lower programming and production costs, growth in affiliate revenue, which reflected higher contractual rates, and a decrease in marketing costs, partially offset by lower advertising revenue. Lower programming and production costs were due to a lower cost mix of programming and, to a lesser extent, the timing of the NBA Finals, which are programmed by ESPN. The lower cost mix of programming reflected the timing of The Academy Awards and fewer hours of scripted and acquired reality programming, partially offset by the cost of airing new NHL programming. The Academy Awards aired in the second quarter of the current fiscal year compared to the third quarter of the prior fiscal year. We acquired rights to NHL programming starting with the 2021/2022 season. Lower advertising revenue was due to the timing of The Academy Awards, a decrease in viewership and to a lesser extent, fewer units delivered, partially offset by higher rates. Fewer units delivered resulted from the impact of more hours programmed by ESPN due to the timing of the NBA Finals. The increase at the owned television stations reflected higher affiliate and advertising revenue. The increase in affiliate revenue was due to higher contractual rates. Higher advertising revenue resulted from increased rates reflecting political advertising, partially offset by the impact of the timing of The Academy Awards.

International Channels

International Channels revenues for the quarter increased 7% to $1.5 billion and operating income was comparable to the prior-year quarter at $0.2 billion reflecting lower operating income from channels that operated for the entire current and prior-year quarters (ongoing channels), offset by a benefit from channel closures.

Lower results from ongoing channels were primarily due to an increase in sports programming costs, partially offset by advertising revenue growth reflecting higher average viewership. The increases in sports programming costs and advertising revenue were due to the airing of 64 Indian Premier League (IPL) cricket matches in the current quarter compared to 29 matches in the prior-year quarter. IPL cricket matches typically occur in our second and third fiscal quarters. The increase in the number of matches in the current quarter was due to a shift in the timing of matches in the prior year from the third quarter to the fourth quarter as a result of COVID-19 and the IPL adding matches to the current season.

Direct-to-Consumer

Direct-to-Consumer revenues for the quarter increased 19% to $5.1 billion and operating loss increased $0.8 billion to $1.1 billion. The increase in operating loss was due to a higher loss at Disney+, lower operating income at Hulu and, to a lesser extent, a higher loss at ESPN+.

Lower results at Disney+ reflected higher programming and production, technology and marketing costs, partially offset by increases in subscription revenue and, to a lesser extent, advertising revenue. The increase in programming and production costs was primarily due to more content provided on the service, including the impact of airing 64 IPL cricket matches in the current quarter compared to 29 matches in the prior-year quarter. Higher subscription revenue was due to subscriber growth and increases in retail pricing, partially offset by an unfavorable foreign exchange impact. The increase in subscribers as well as in technology and marketing costs reflected growth in existing markets and, to a lesser extent, expansion to new markets. Advertising revenue growth was due to the additional IPL matches in the current quarter.

The decrease at Hulu was due to higher programming and production and marketing costs, partially offset by subscription revenue growth. The increase in programming and production costs was primarily due to higher subscriber-based fees for programming the Live TV service reflecting an increase in the number of subscribers, rate increases and the carriage of more networks. Subscription revenue growth was due to increases in subscribers and in retail pricing.

Lower results at ESPN+ were due to higher sports programming costs, partially offset by an increase in subscription revenue due to subscriber growth.

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)	July 2, 2022		July 3, 2021		Change
Disney+
Domestic (U.S. and Canada)	44.5		37.9		17	%
International (excluding Disney+ Hotstar)(1)	49.2		33.2		48	%
Disney+ (excluding Disney+ Hotstar)(2)	93.6		71.1		32	%
Disney+ Hotstar	58.4		44.9		30	%
Total Disney+(2)	152.1		116.0		31	%
ESPN+	22.8		14.9		53	%
Hulu
SVOD Only	42.2		39.1		8	%
Live TV + SVOD	4.0		3.7		8	%
Total Hulu(2)	46.2		42.8		8	%

Average Monthly Revenue Per Paid Subscriber⁽¹⁾ for the quarter ended:

	July 2, 2022			July 3, 2021			Change
Disney+
Domestic (U.S. and Canada)	$	6.27		$	6.62		(5	) %
International (excluding Disney+ Hotstar)(1)	$	6.31		$	5.52		14	%
Disney+ (excluding Disney+ Hotstar)	$	6.29		$	6.12		3	%
Disney+ Hotstar	$	1.20		$	0.78		54	%
Global Disney+	$	4.35		$	4.16		5	%
ESPN+	$	4.55		$	4.47		2	%
Hulu
SVOD Only	$	12.92		$	13.15		(2	) %
Live TV + SVOD	$	87.92		$	84.09		5	%

(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+ decreased from $6.62 to $6.27 due to a higher mix of subscribers to multi-product offerings, partially offset by an increase in retail pricing.

The average monthly revenue per paid subscriber for international Disney+ (excluding Disney+ Hotstar) increased from $5.52 to $6.31 due to increases in retail pricing, partially offset by an unfavorable foreign exchange impact and a higher mix of wholesale subscribers.

The average monthly revenue per paid subscriber for Disney+ Hotstar increased from $0.78 to $1.20 due to higher per-subscriber advertising revenue.

The average monthly revenue per paid subscriber for ESPN+ increased from $4.47 to $4.55 due to an increase in retail pricing and, to a lesser extent, a lower mix of annual subscribers and 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 decreased from $13.15 to $12.92 due to lower per-subscriber advertising revenue and a higher mix of subscribers to multi-product and promotional offerings, partially offset by an increase in retail pricing.

The average monthly revenue per paid subscriber for the Hulu Live TV + SVOD service increased from $84.09 to $87.92 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 increased 26% to $2.1 billion and segment operating results decreased from income of $132 million to a loss of $27 million. The decrease in operating results was due to an unfavorable foreign exchange impact and lower TV/SVOD and home entertainment distribution results. These decreases were partially offset by an increase at our stage play business, as productions were generally shut down in the prior-year quarter due to COVID-19, and higher theatrical distribution results.

The decrease in TV/SVOD distribution results was due to a decrease in sales of theatrical film content primarily due to a shift from licensing content to third parties to distribution on our DTC services.

The decrease in home entertainment results was due to lower unit sales of catalog titles.

The increase in theatrical distribution results was due to the strong performance of Doctor Strange In the Multiverse of Madness in the current quarter compared to Cruella in the prior-year quarter. Current quarter releases also included Lightyear and The Bob’s Burgers Movie.

Disney Parks, Experiences and Products

Disney Parks, Experiences and Products revenues for the quarter increased to $7.4 billion compared to $4.3 billion in the prior-year quarter. Segment operating income increased $1.8 billion to $2.2 billion compared to $0.4 billion in the prior-year quarter. Higher operating results for the quarter reflected increases at domestic parks and experiences and, to a lesser extent, at international parks and resorts.

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 were operating during the entire 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 and higher average daily hotel room rates. The increase in average per capita ticket revenue was due to the introduction of Genie+ and Lightning Lane in the first quarter of the current fiscal year and a reduced impact from promotions at Walt Disney World Resort, partially offset by an unfavorable attendance mix at Disneyland Resort. Higher costs were primarily due to volume growth, cost inflation and new guest offerings. Our domestic parks and resorts were open for the entire current quarter, whereas Disneyland Resort was open for 65 days of the prior-year quarter, and Walt Disney World Resort operated at reduced capacity in the prior-year quarter.

Improved results at our international parks and resorts were primarily due to growth at Disneyland Paris, partially offset by a decrease at 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. Disneyland Paris was open for the entire current quarter compared to 19 days in the prior-year quarter. The decrease at Shanghai Disney Resort was due to the park being open for all of the prior-year quarter but only for 3 days in the current quarter.

The following table presents supplemental revenue and operating income (loss) detail for the Disney Parks, Experiences and Products segment:

	Quarter Ended								Change
(in millions)	July 2, 2022				July 3, 2021
Supplemental revenue detail
Parks & Experiences
Domestic	$	5,423			$	2,656			>100	%
International		788				526			50	%
Consumer Products		1,183				1,159			2	%
	$	7,394			$	4,341			70	%
Supplemental operating income (loss) detail
Parks & Experiences
Domestic	$	1,651			$	2			>100	%
International		(64	)			(210	)		70	%
Consumer Products		599				564			6	%
	$	2,186			$	356			>100	%

Here's another interesting article on Top Trends 2022 - Media And Entertainment Technology

COVID-19 PANDEMIC

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 generally in place in the prior year. In addition, our cruise ships have generally been operating without COVID-19-related capacity restrictions since April 2022. Certain of our international parks and resorts 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. Thus far, we have generally been able to release our films theatrically in 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.

OTHER FINANCIAL INFORMATION

Corporate and Unallocated Shared Expenses

Corporate and unallocated shared expenses increased $113 million for the quarter, from $212 million to $325 million, driven by higher compensation and human resource-related costs.

Restructuring and Impairment Charges

In the current quarter, the Company recognized charges of $42 million primarily due to asset impairments related to our businesses in Russia. During the prior-year quarter, the Company recognized charges of $35 million due to severance at our parks and experience businesses.

Other Income (Expense), net

In the current quarter, the Company recorded a $136 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 $217 million DraftKings loss, partially offset by a $126 million gain on the sale of the Company’s 50% interest in a German free-to-air (FTA) television network (German FTA gain).

Interest Expense, net

Interest expense, net was as follows (in millions):

	Quarter Ended
	July 2, 2022				July 3, 2021				Change
Interest expense	$	(380	)		$	(404	)		6	%
Interest income, investment income and other		20				(41	)		nm
Interest expense, net	$	(360	)		$	(445	)		19	%

The decrease in interest expense was driven by lower average debt balances and higher capitalized interest, partially offset by higher average rates.

Contacts
David Jefferson
Corporate Communications
818-560-4832

Alexia Quadrani
Investor Relations
818-560-6601

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