2/8/2023: Disney Earnings Beat Expectations
Revenue, EPS, subscribers were better than expected
Disney reports Q4 2022 earnings after market close today. Revenue was $23.51B vs. $23.37B expected. EPS was $0.99 vs. $0.78 expected. Disney+ total subscribers were 161.8 millions vs. 161.1 millions expected.Their park revenue was up 21% YoY while the media portion was only up 1%. Their park operating income was up 25% while the media portion went from earning $808M to losing $10M. This is the first earnings report after Bob Iger returns. In the earnings report, Mr. Iger makes the following statement:
After a solid first quarter, we are embarking on a significant transformation, one that will maximize the potential of our world-class creative teams and our unparalleled brands and franchises. … We believe the work we are doing to reshape our company around creativity, while reducing expenses, will lead to sustained growth and profitability for our streaming business, better position us to weather future disruption and global economic challenges, and deliver value for our shareholders.
As part of the cost reduction plan, Mr. Iger announced during the earnings call that they would reorganize into 3 major divisions (Disney Entertainment, Disney Parks, and ESPN), cut thousands of jobs and slash $5.5 billion in costs.
I suppose the days of Netflix, Disney, and Amazon spending unlimited amounts of money on video programming are over. Everyone is focusing on cost cutting and profitability right now and I believe this is a good thing. For any business to sustain, they have to grow responsibly and be profitable. The way the streaming giants competed with one another by throwing money around was not sustainable. They will be more profitable when they pull back on the production budget. Consumers will have less shows to watch but honestly I don’t believe consumers will really feel the difference. There are already too many things on Netflix and Disney+ that I doubt many people have enough time to watch them all.
Disney has a pretty big problem. Burning 2B fcf a quarter, 35-45b net debt. Not sure where revenue growth is coming from here, there are finite limits on park revenue. Their 5B cost restructure doesn't take them to fcf positive.