Q2 2016 (their Q3) – Disney Earnings Call Summary

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Below are my key takeaways from the Disney Q3 2016 Earnings Call on Aug 9:

Summary:

Bob Iger, CEO, said “two things are clear: the multi-channel bundle delivers the most value to us, and remains a great value proposition to consumers. Therefore, our top priority is to support it, and to do what we can to maintain or enhance its value to customers. We also know that new platforms and new entrants in the digital video space are offering consumers more flexibility and variety, with exciting new products and impressive user experiences. And we must create or take advantage of these new opportunities, in ways that are complementary to the multi-channel offering.”

Total Revenue grew 9% in the quarter to $14,277MM.  Net Income was up 5% YoY to $2,597MM resulting in a Diluted EPS of $1.59, compared to $1.45 a share last year.

Media Networks’ revenue of $5,906MM (made up of Cable Networks $4,200MM and Broadcasting $1,706MM) was 41% of the total and a 2% increase YoY.  ESPN saw revenue growth due to contractual rate hikes and an increase in ad units sold thanks to an additional NBA finals game.  ESPN programming costs went up because of renewals for The Masters and international soccer rights, along with contractual rate hikes for NBA and MLB.  Disney Channel and Freeform (formerly Disney Family) gained from higher affiliate revenue, but were down overall because of a decrease in program sales.

Parks and Resorts revenue grew 6% to $4,379MM, making up 31% of total revenue.

The Studio Entertainment segment grew an impressive 40% to $2,847MM thanks to 4 huge global releases: Captain America: Civil War ($1,152MM), Zootopia ($1,023MM), The Jungle Book ($956MM) and Finding Dory ($916MM).

Acquired minority stake of 33%, in BAMtech, a leading technology services and video streaming company previously formed by Major League Baseball.  Disney will pay $500MM now and another $500MM in January 2017, with an option to acquire a majority ownership in the coming years.  Is looking to launch an ESPN OTT channel.

Opened a Shanghai Disney Resort, where 70MM people in China watched the opening ceremony live on TV.  Hotel occupancy is at 95%.

Financials (In millions) Q3 2016 Q3 2015 % Diff
Total Revenue  $14,277  $13,101 9.0%
Net Income  $2,597  $2,483 4.6%
Free Cash Flow  $2,489  $1,652 50.7%
Diluted EPS  $1.59  $1.45 9.7%
Media Networks  $5,906  $5,768 2.4%
 – Cable Networks  $4,200  $4,140 1.4%
 – Broadcasting  $1,706  $1,628 4.8%
Parks & Resorts  $4,379  $4,131 6.0%
Studio Entertainment  $2,847  $2,040 39.6%
Consumer Products and Digital Media  $1,145  $1,162 -1.5%

List of Key Properties:

Forward Thinking:

  • With the part ownership stake in BAMtech, they are looking to make a major leap into the direct-to-consumer video space
  • ESPN, ESPN2, ABC, Freeform, Disney Channel, Disney ‘XD’ and Disney Jr. will be included in the upcoming DirecTV Now OTT service
  • Upcoming movies are Moana, Doctor Strange and Rogue One
  • The World of Avatar will open in 2017 at Disney’s Animal Kingdom in Florida

Links to Company Website:

Please comment below if there are data points from Disney you’d like me to include in their next Earnings Call Summary.

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