Disney Q3 2020 Earnings Call

You can listen to the call starting NOW! at this link.

Here is the link to the Earnings Release.

The headline is a $2 billion operating loss on the parks segment. Overall, the company had an almost $5 billion loss for the quarter. I’ll put more thoughts below as the call progresses.

2 Likes

Other tidbits from the earnings release:

  • Operating income for the company was positive at ~$1 billion. (For those who don’t know, operating income is before interest, one-time impairment charges, etc.) So that means Disney has positive cash flows if you count all their business segments. The parks are the main segment that is bleeding.

  • Below is the comparison of revenues from Q3 2020 compared to Q3 2019. Media Networks and Direct-to-Consumer (Disney+, etc.) were flat, but Parks and Studio dropped majorly. The Eliminations is probably mostly revenue to Studio from Direct-to-Consumer (Disney+ paying Studios for content - they call out Rise of Skywalker and Onward in the release)

image

  • Segment operating income relied on Media Networks, and to a lesser extent, Studio Entertainment. However, I think Disney+ is probably responsible for a lot of Studio’s operating income . (Segment reporting is very complicated and IMO isn’t always helpful.)

image

Info from the call:

  • Currently 60.5 million subscribers to Disney+ (beating their internal projections). Below is the chart as of 6/30/20:
  • Mandalorian Season 2 coming in October (as previously announced)
  • Mulan will be offered September 4th for $29.99 in the U.S for U.S. Disney+ subscribers
  • Mulan will also be released theatrically at the same time, where Disney+ is not offered and where theaters are open
  • CFO says they are maintaining positive per-guest cash flow at WDW, and expect it to improve as restrictions ease and travel resumes; results not as good as they expected due to COVID surge
  • $5 billion non-cash impairment for the International Channels goodwill - I take this to mean their distribution channels for films in international territories, since they can’t release films for a while. Excluding this, Disney would have had a profit this quarter.

Q&A:

  • Chapek says Mulan is a “one-off” direct-to-consumer release, hoping to return to theatrical for Black Widow, etc.
  • 50% of guests at WDW currently are out-of-state / 50% locals; more cancellations close to date of travel than usual
  • Shanghai has consistently been operating in the net positive contribution per guest as well
  • Disney theatricals are expensive - to recover that cost, they needed to try a “premier access offering” for Mulan
  • CFO explains that they are holding $23 billion in cash as an “insurance policy” and to repay debt coming due in the next two years without refinancing (they have $54 billion in borrowings)
3 Likes

I’ve been listening and it’s, IMHO, a lot of “Don’t look at Parks & Entertainment- focus on Disney+”

2 Likes

I’m wondering if this business model will eventually dominate and cinemas will die.

I’ll be slightly peeved if it does because it punishes those of us who live alone. I have no-one to share the cost of the movie with. I’ll have to wait until it drops to regular pay-per-view prices, or until it becomes free on Disney+.

3 Likes

Parks operating as a net positive (although not as much as they wanted) is surprising. Is that due to NBA and MLS $?

1 Like

I’ve been updating the second post in this thread with details from the call. A few key takeaways:

  • Mulan coming September 4th to Disney+ for premium $29.99 charge
  • Disney is actually making money still! $1.1 billion operating income and $1.2 billion cash from operations
  • The Parks lost money in Q3, but WDW didn’t open until Q4, so we will see those results next quarter.
  • Disney+ is doing great with 60 million subscribers
2 Likes

They said “per guest contribution” was positive. To me that means that is before looking at NBA and MLS, but that is certainly helping. It’s not too surprising considering how much people pay to get into the parks, and how much they spend once they’re there! In this same quarter last year they made $1.7 billion in operating income from the parks alone.

Positive sounding headline:

"Disney edges by with profitable quarter, boasts more than 100 million streaming subscribers"


" Earnings per share, adjusted: only 8 cents vs. loss of 64 cents expected, according to Refinitiv"

**Revenue for the Parks, Experiences and Products segment, which includes cruises, resorts and merchandise, fell 85% to below $1 billion during the quarter.

“The company took a $3.5 billion hit to its operating income from parks being closed during the quarter.”

1 Like

Overall I think these results are great, given the circumstances. Could have been a lot worse.

One thing the CFO said that I hope they act on is that they were able to cut costs a lot better than they had planned. They should start taking back more workers from furlough and invest in the parks, when safe to do so.

2 Likes

Does the cruise line fall under parks? Because I am fairly sure they are really bleeding there.

2 Likes

Yes, Parks includes cruise line and Adventures by Disney, as well as merchandise (which is probably keeping the segment afloat).

1 Like

Yes, I feel the same. It really pays to be diversified in any business. I’m hopeful WDW can sustain the offerings and hours for a while yet, even with the low current visitor numbers. I just hope UOR doesn’t close a couple days a week. :grimacing:

1 Like

Yes, to be honest I’m much more concerned about UOR. Thankfully they’ve been open for an extra month so hopefully that’s helping, but I heard they let go their entire engineering team that was working on Epic Universe. :cry:

3 Likes

I wonder how much they’ve saved on fireworks. Seriously.

6 Likes

According to this source, a typical fireworks show that you see on the 4th of July is between $10-30,000. If that is anywhere close to accurate, I calculate that Disney has saved between $5 - 17 million since March 2020.

1 Like

I have no source any more; years ago I’d heard six figures per night. Perhaps fireworks got less expensive - more computer controlled. I only recall thinking I’d consider the source generally credible.

2 Likes

That wouldn’t surprise me. If that’s the case, increase my estimate to $50 million.

1 Like

I have heard that Disney is second only to the US Government in spending on explosives.

3 Likes

If merchandise is keeping them afloat, it is by sheer luck (and I agree there was some pent up merch demand happening). The first couple of months of the shut down, the shop disney site was a total mess. Limited edition pin releases were absurd - my credit card one time had 12 “holds” on it as I kept trying to check out and getting error messages. As a multi-billion dollar multi-national corporation it was really absurd.

But someone wised up and made an investment in that site, and started releasing desirable merch on there.

1 Like

Well the strategy now is to slowly feed the EBay pirates all of the excess Splash Mountain plushes little by little over the next 2 years to break even. So far it seems to be working… :rofl:

6 Likes