01—Abstract
Summary
Summary of the 10-Q filed February 9, 2022. Cited figures are marked; the original filing is the authoritative source.
The Walt Disney Company reported strong revenue growth for the first quarter of fiscal year 2022, driven by a significant rebound in its Parks, Experiences and Products (DPEP) segment.
Total revenues increased by 34% year-over-year to $21.8 billiona. This growth was primarily fueled by the DPEP segment, which saw revenues more than double, benefiting from the easing of COVID-19 restrictions and increased attendance and spending at theme parks and resorts. The Disney Media and Entertainment Distribution (DMED) segment also experienced revenue growth, up 15% to $14.6 billion, largely due to increased subscription revenue from Disney+, Hulu, and ESPN+, as well as higher theatrical and TV/SVOD distribution revenues.
Despite revenue growth in DMED, operating income for the segment declined due to higher programming and production costs. The company reported a substantial increase in net income attributable to Disney, rising to $1.1 billionb from $17 million in the prior year, with diluted EPS from continuing operations at $0.63 compared to $0.02.
Key factors impacting profitability included increased marketing costs and a significant non-cash loss related to an investment in DraftKings. The company reaffirmed its strong financial position and continued to invest in content and experiences, with projected content spend and capital expenditures for fiscal year 2022 indicating ongoing strategic investments.
02—Key points
Key Highlights
- Total revenues surged by 34% year-over-year to $21.8 billion, beating prior-year performance significantly.
- The Parks, Experiences and Products (DPEP) segment experienced a robust recovery, with revenues more than doubling to $7.2 billion, driven by increased park attendance and guest spending.
- Disney Media and Entertainment Distribution (DMED) revenues grew 15% to $14.6 billion, boosted by Direct-to-Consumer (DTC) subscription growth across Disney+, Hulu, and ESPN+.
- Net income attributable to Disney swung to a profit of $1.1 billion, or $0.63 per diluted share from continuing operations, a substantial improvement from $17 million in the prior year.
- The Direct-to-Consumer (DTC) segment, while growing revenue by 34% to $4.7 billion, saw its operating loss widen to $593 million from $466 million due to increased programming and production costs.
- The company reported a $432 million non-cash loss from the adjustment of its investment in DraftKings to fair value, impacting 'Other expense, net'.
- Content spend is projected to increase significantly in fiscal year 2022, with an expected spend of up to $33 billion, up from $25 billion in fiscal year 2021, reflecting continued investment in content for DTC services.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed February 9, 2022Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $19.25B$15.61B | +23.3% |
| SG&A Expenses | $3.77B$3.11B | +21.0% |
| Operating Expenses | $17.65B$14.17B | +24.6% |
| Operating Income | $3.70B$2.46B | +50.1% |
| Interest Expense | $374.00M$415.00M | −9.9% |
| Net Income | $470.00M$901.00M | −47.8% |
| EPS (Basic) | $0.26$0.50 | −48.0% |
| EPS (Diluted) | $0.26$0.49 | −46.9% |
| Shares Outstanding (Basic) | 1.82B1.82B | +0.3% |
| Shares Outstanding (Diluted) | 1.83B1.83B | −0.1% |
05—Questions
Frequently Asked Questions
What drove the significant increase in revenue and net income for Disney in this quarter?
The substantial improvement in revenue and net income was primarily driven by the strong recovery of the Parks, Experiences and Products (DPEP) segment, which benefited from the easing of COVID-19 restrictions and increased guest spending. Additionally, the Direct-to-Consumer (DTC) segment continued to grow its subscriber base, contributing to overall revenue growth, although at the cost of increased operating losses due to content investments.
How is the Direct-to-Consumer (DTC) business performing, particularly Disney+?
The DTC business saw significant subscriber growth across Disney+, Hulu, and ESPN+. Total Disney+ subscribers reached 129.8 million, an increase of 37% year-over-year. While revenues from DTC increased by 34%, the segment's operating loss widened to $593 million from $466 million in the prior year, reflecting increased investment in content and marketing to support subscriber acquisition and retention.
What is the impact of the DraftKings investment on Disney's financials?
Disney recognized a non-cash loss of $432 million in 'Other expense, net' during this quarter due to the adjustment of its investment in DraftKings to fair value. This had a notable impact on the quarter's net income.
What are Disney's plans for future content and capital spending?
Disney expects its fiscal year 2022 spend on produced and licensed content to be around $33 billion, an increase from $25 billion in fiscal year 2021, to support its DTC expansion. Capital expenditures are also projected to increase to approximately $6.1 billion, up from $3.6 billion in fiscal year 2021, driven by investments in cruise ships, corporate facilities, and production facilities.
06—Continue