A solid Disney Q1 earnings report that saw a healthy rise in profits, revenues remain flat, and streaming losses decline prompted CEO Bob Iger to assert the company had “turned a corner and entered a new era”.
Iger told analysts on Wednesday he felt bullish about the company’s leaner theatrical release schedule coming off a relatively disappointing 2023 at the box office.
On the matter of activist investor challenges for seats on the board at April’s upcoming shareholder meeting, Iger intimated that the activities of Nelson Peltz and former CFO Jay Rasulo were a distraction and said he had no plans to talk to Peltz.
The CEO also addressed the issue of his succession and said the matter would be handled at the right time. Iger rejoined the company in November 2022 and his contract runs through 2026.
Epic Games investment
The company expects its streaming businesses to reach profitability in the fourth quarter, in line with previous statements. The media giant will build ”an all-new games and entertainment universe” connected to Fortnite which will enable fans to ”play, watch, shop and engage with content, characters and stories from Disney, Pixar, Marvel, Star Wars, Avatar and more”.
Additionally, on Tuesday it was announced that Disney/ESPN, Fox Sports, and Warner Bros Discovery will launch an unnamed sports bundle in the autumn.
CFO Hugh Johnston said Disney would begin its passwork sharing crackdown later this year, whereby members will be asked to pay an additional fee for people using their account. Johnston did not disclose the fee and added that the financial impact of the measure was likely to be felt towards the end of the year.
Disney’s Q1 024 revenues for the period ending December 30 2023 were slightly below expectations but fairly flat compared to Q1 2023 on $23.5bn. Net income climbed 58% year-on-year to $2.15bn, while profit attributed to The Walt Disney Company (as opposed to non-controlling interests) grew by 49% to reach $1.9bn.
Streaming losses for the entire director to consumer segment declined by $300m. The company expects its streaming businesses to reach profitability in the fourth quarter, in line with previous statements.
Diluted earnings per share (EPS) for the quarter increased to $1.04 from 70 cents in the year-ago period.
Disney said it was on track to meet or exceed its $7.5bn annualised savings target by the end of fiscal 2024 and will “continue to look for further efficiency opportunities”.
The company said it expected its full year fiscal 2024 earnings per share excluding certain items to grow by at least 20% against 2023 to approximately $4.60, while it expected free cash flow to total approximately $8bn.
Iger “bullish” on film slate / streaming subs in marginal drop
Iger said he felt good about the direction of the studios after a below-par year by Disney’s lofty standards that saw none of its films cross $1bn worldwide.
“We’re very bullish about the films coming out,” he said, after name-checking 2024 releases Deadpool 3, the newly announced Moana 2, and Mufasa: The Lion King.
“Volume sometimes can be detrimental to quality and in our zeal to greatly increase volume [which Iger said was in part attributable to the need to stockpile content for the streaming business] some of our studios lost a little focus. The first step we’ve taken it to reduce volume.”
A crackdown on sharing password sharing will see members get the option to add people to their accounts for an additional fee, and Disney does not expect to see the financial impact of this until towards the end of the calendar year.
Disney+ Core global subscribers dropped by 1.3m over the prior quarter to 111.3m (46.1m in North America, 65.2m international excluding Disney+ Hotstar).
Disney said this reflected a “substantial price increase” in the quarter as well as the end of the global summer promotion. Disney+ Hotstar subscriptions climbed 2% or 700,000 to 38.3m from 37.6m in Q4 2023.
Disney+ Core ARPU [average monthly revenue per paid subscriber] increased by 14 cents compared to the fourth quarter, and executives expect Disney+ Core subscriber net additions of between 5.5-6m and “ongoing positive momentum in ARPU” in the second quarter.
Total membership at Hulu, which is now wholly owned by Disney, increased by 2% or 1.2m over the prior quarter from 48.5m to 49.7m. Hulu’s content integration onto Disney+ is in beta stage and a more integrated version is expected next month.
Disney stock increased by around 7% in after hours trading.
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