The Walt Disney Company held an earnings call today to discuss the results of its second fiscal quarter of 2020.
In addition to addressing the financial effects of the temporary closure, Disney’s CEO, Bob Chapek, made several key announcements. Shanghai Disneyland will be officially re-opening May 11th and we finally know some of the safety measures Disney parks will be implementing when they re-open. But let’s take a look at what the Walt Disney Company had to say about their current finances as they work towards re-opening!
Words of Encouragement from Bob Iger
Former Disney CEO and current executive chairman, Bob Iger, was the first to speak. He stated he was confident in the company’s ability to recover successfully from this disruption. He said Disney itself was “especially resilient” and even amidst all of the recent adversity, he’s seen the best in humanity shine through.
He commended courageous healthcare providers working on the front lines and also praised key Cast Members who are safeguarding and maintaining the Disney parks during this time.
Disney’s Second Quarter Only Includes Two Weeks of the U.S. Parks’ Closures
Before going too much further in, these Q2 results only reflect about 2 weeks of the parks being closed in the U.S.. The Walt Disney Company’s third quarter is also likely to be impacted by these uncertain times.
Bob Chapek Stated It’s Still too Early for U.S. Disney Parks to Re-Open
Current Disney CEO, Bob Chapek spoke next stating it was still too early to predict when Disney World and Disneyland would re-open. Chapek said when it comes time to discuss re-opening the U.S. parks, the decision would be made cautiously, sensibly, and deliberately.
He also said Disney would not re-open any park unless it could make a positive contribution to the company’s overhead cost and could operate while generating a profit.
With over 100,000 employees furloughed, Chapek answered the question, “How will you re-staff parks when they open?” by saying, Disney will staff them according to their expected capacity levels. This will give them the ability to make decisions on a sliding variable basis.
Some Bad Financial News…
The Walt Disney Company’s Parks, Experience, and Products segment fell 10% in this quarter when compared to the same quarter last year.
Disney’s second-quarter per-share earnings did not meet expectations and fell 63% from $1.61 a share (from the previous year) to 60 cents a share. The loss was mostly attributed to the company’s suspended operations.
…But Some Good Financial News, Too
Still, the Walt Disney Company is reporting a 21% revenue growth of $18.01 billion for its second fiscal quarter.
Don’t forget, Disney’s second-quarter — although greatly disrupted by the virus — still had many of its operations intact. We’re curious to see what it’s third-quarter will look like.
CFO Christine McCarthy Said Disney Would Be Withholding Dividends…For Now
Moving forward, CFO Christine McCarthy announced Disney would be suspending its dividend payout for the first half of the fiscal year which would have been payable in July. This would reserve $1.6 billion in cash assuming the dividend held constant at 88 cents per share.
Total operating income was $2.42 billion in the quarter, down from $3.82 billion, reflecting a 37% drop. Disney would like to revisit the dividend over the next six months once the company has a fuller picture of the closures’ impacts.
Over $1 Billion Dollars in Estimated Losses
At this time, Disney estimates its operating income is at a loss of revenue equal to almost $1 billion — mostly due to closures. The company also reported it has experienced a 58% drop in operating income for this segment of the quarter when compared to the same period last year.
About half of this billion dollar-estimated loss is attributed to the first 2 weeks the U.S. parks were closed while the remainder is attributed to international parks and the Disney Cruise Line shutting down.
Other Key Sources of Disney’s Revenue
The Walt Disney Company also shared second quarter revenues from these four segments:
- Media Networks: $7.26 billion, up 28%
- Parks, Experiences and Products: $5.54 billion, down 10%
- Studio Entertainment: $2.54 billion, up 18%
- Direct-to-Consumer and International: $4.12 billion, up more than 100%
How Disney’s Streaming Services and Films Are Factoring In
Last month, the company shared it had reached over 50 million Disney+ subscribers, but CFO McCarthy announced today that number has increased to over 54.5 million Disney+ subscribers as of May 4th. This number is only expected to grow as Disney+ will begin rolling out in Japan next month along with other countries and regions in the following months.
Disney’s other streaming platform, Hulu, had over 32.1 million subscribers as of March 28th, which puts it up 27% when compared to this time last year.
Chapek emphasized the strength of several new theatrical releases including Mulan. He hopes in spite of diminished capacity in movie theaters Disney’s new films will still perform well.
He acknowledged Disney might need to change its overall theatrical strategy and will review each film on a case by case basis.
Disney’s ESPN is Preparing for Live Sports to Resume
Due to the loss of live sporting events, Disney’s ESPN has suffered some major losses. Advertising revenue was down about 8%, but McCarthy pointed to signs of “meaningful pent up demand.” She stated the recently televised NFL draft was one of the most-watched live sporting events ever broadcasted, with more than 55 million viewers tuning in over the three days it took place. Michael Jordan’s docu-series, The Last Dance, also received a record number of views.
McCarthy did not comment on the NBA finishing their 2020 season at Disney World but remarked instead, “We are working very very closely with the leagues and the conference partners.”
This meeting may have only reflected two weeks of Disney closures, but Disney’s second quarter financials speak to the toll the latest events have taken on the Walt Disney Company. We expect to see a fuller picture of the closures’ impact on Disney at their third quarter financial meeting. We’ll continue to follow this story and report more information when Disney releases additional details!
Did you watch Disney’s financial report? Let us know what you thought in the comments!