01—Abstract
Summary
Summary of the 10-Q filed February 11, 2021. Cited figures are marked; the original filing is the authoritative source.
The Walt Disney Company's first quarter of fiscal year 2021 (ending January 2, 2021) saw a significant decline in revenues and net income compared to the prior year, largely attributable to the ongoing impacts of the COVID-19 pandemic.
Total revenues decreased by 22% to $16.2 billiona, while net income attributable to Disney plummeted by 99% to $17 million. Diluted earnings per share from continuing operations were $0.02, a sharp drop from $1.17 in the prior year quarter. The Disney Parks, Experiences and Products segment was the hardest hit, with revenues down 53% and a significant operating loss incurred, primarily due to park closures, reduced capacity, and the suspension of cruise operations.
Conversely, the Disney Media and Entertainment Distribution segment showed resilience, with revenues down only 5%b. This was driven by strong growth in Direct-to-Consumer (DTC) subscription revenue, which more than offset declines in Content Sales/Licensing. The company's DTC services, including Disney+, experienced substantial subscriber growth.
Despite the challenging environment, Disney maintained a strong liquidity position with a substantial cash balance of $17.1 billionc. Management highlighted ongoing efforts to mitigate the impacts of COVID-19, including cost reductions and workforce adjustments, while anticipating continued adverse effects on financial results at least through fiscal 2021. The company also provided updated segment reporting structures, consolidating media and entertainment operations into a single 'Disney Media and Entertainment Distribution' segment.
02—Key points
Key Highlights
- Total revenues for the quarter decreased by 22% to $16.2 billion compared to the prior year quarter.
- Net income attributable to Disney declined by 99% to $17 million ($0.02 diluted EPS) due to the severe impact of COVID-19 on the Parks, Experiences and Products segment.
- The Disney Parks, Experiences and Products segment reported a loss of $119 million, a significant decline from a $2.5 billion profit in the prior year, due to closures and reduced capacity.
- Disney Media and Entertainment Distribution segment revenues decreased by 5% to $12.7 billion, with Direct-to-Consumer (DTC) revenue surging by 73% driven by strong subscriber growth in Disney+, Hulu, and ESPN+.
- Disney+ subscribers more than tripled year-over-year to 94.9 million, though average revenue per user decreased due to the inclusion of Disney+ Hotstar.
- The company ended the quarter with a robust cash and cash equivalents balance of $17.1 billion.
- Management anticipates that the adverse impacts of COVID-19 will continue to affect financial results at least through fiscal 2021.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed February 11, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $15.61B$18.02B | −13.4% |
| SG&A Expenses | $3.11B$3.39B | −8.3% |
| Operating Expenses | $14.17B$16.66B | −15.0% |
| Operating Income | $2.46B$2.41B | +2.4% |
| Interest Expense | $415.00M$365.00M | +13.7% |
| Net Income | $901.00M$460.00M | +95.9% |
| EPS (Basic) | $0.50$0.25 | +100.0% |
| EPS (Diluted) | $0.49$0.25 | +96.0% |
| Shares Outstanding (Basic) | 1.82B1.81B | +0.5% |
| Shares Outstanding (Diluted) | 1.83B1.82B | +0.7% |
05—Questions
Frequently Asked Questions
What was the primary driver of the significant decrease in revenue and net income?
The primary driver was the ongoing impact of the COVID-19 pandemic, which severely affected the Disney Parks, Experiences and Products segment due to closures, reduced operating capacity, and suspension of cruise sailings. This led to a substantial revenue decline and an operating loss for that segment.
How did the Direct-to-Consumer (DTC) segment perform?
The Direct-to-Consumer segment showed strong performance, with revenues increasing by 73%. This growth was primarily fueled by significant subscriber expansion across Disney+, Hulu, and ESPN+. Disney+ alone saw its subscriber base grow to 94.9 million.
What is the company's outlook for the near future, particularly regarding COVID-19?
Management expects that the adverse impacts of COVID-19 will continue to affect financial results at least through fiscal year 2021. They are implementing mitigation strategies to manage these impacts.
What is the company's liquidity position?
Disney maintained a strong liquidity position, ending the quarter with $17.1 billion in cash and cash equivalents. This provides substantial resources to navigate the current economic environment.
06—Continue