Walt Disney said revenue last quarter was $11.87 billion, lower than expected and down 42% from the year before with the theme park division taking a $3.5 billion hit.
But diluted earnings per share (EPS) after items came in at $0.08, down from $1.34 the year before but still in positive territory. It beating Wall streeet expectations and drove the share higher in after-hours trading.
A massive $5 billion restructuring and impariment charge related mostly to international channels resulting in a loss on continuing operating of $4.72 billion.
The numbers were hotly anticipated as a measure of how partial reopenings of parks, stalled production and live sports – all slowly returning — are impacting the business. An earnings call after the numbers was the first with no trace of executive chairman and former CEO Bob Iger.
“Despite the ongoing challenges of the pandemic, we’ve continued to build on the incredible success of Disney+ as we grow our global direct-to-consumer businesses,” said current CEO Bob Chapek. “The global reach of our full portfolio of direct-to-consumer services now exceeds an astounding 100 million paid subscriptions — a significant milestone and a reaffirmation of our DTC strategy, which we view as key to the future growth of our company.”
Disney said the most significant impact in the current quarter from COVID-19 was an approximately $3.5 billion adverse impact on operating income at the Parks, Experiences and Products segment due to revenue lost as a result of closures. That was partially offset by a positive impact at Media Networks as the cost of sports programming rights were deferred to future quarters.
The impacts at Direct-to-Consumer & International and Studio Entertainment were less significant as well as lower advertising revenue at DTC & International was partially offset by the deferral of sports programming costs, while lower amortization, marketing and distribution costs at Studio Entertainment were largely offset by lower revenues as a result of theater closures.
In total, it estimated the net adverse impact of COVID-19 on our current quarter segment operating income across all of our businesses was approximately $2.9 billion, inclusive of the impact at Parks, Experiences and Products.
Parks have traditionally made up a third of revenue, with the lion’s share from U.S. locations. But they were shuttered mid-March. Walt Disney World and international parks have mostly reopened (except Hong Kong, which opened and closed again) but all at limited capacity, and not flagship Disneyland in Anaheim. That still has no set opening date as the pandemic surged in the state.
Last quarter, the company reported a 58% drop in operating income for the segment and a $1 billion hit.
The lack of live sports has been a major blow to ESPN but Disney has been hosting the NBA in Walt Disney World in Orlando.
Disney has also continued to shift its release schedule with Mulan set for August 21. Its slate includes New Mutants on Aug. 28, The King’s Man Sept. 18 and Death on the Nile on Oct. 23. Black Widow and Soul don’t arrive until November.
Disney explained that there were $4.9 billion in impairments of goodwill and intangible assets at its international channels, which underperfromed, and $94 million of restructuring costs. The former reflected the impacts of COVID-19 and of the ongoing shift of film and television distribution from licensing of linear channels to a direct-to-consumer business model on the international channel businesses. Disney has recently shuttered more than 20 channels in the APAC – outside India — and EMEA regions and is moving to a DTC model.
Restructuring costs were primarily for severance and contract termination charges in connection with the integration of TFCF.
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.