Disney (DIS) Rebounds on First Quarter Results

Disney+ subscriptions knock out expectations

The Walt Disney Company (DIS) beat estimates in the first quarter of fiscal 2022 (the period ended Jan. 1, 2022), with 11.8 million new Disney+ subscriptions and revenues from Parks, Experiences and Products hitting $7.2 billion. The stock rose by 8% in extended trading after the earnings release. Earnings per share (EPS) came in at $1.06 on revenue of $21.82 billion.

Key Takeaways

  • Disney reported record revenue based on growth in Disney+ subscriptions and reopening parks.
  • While a few international locations continue to be affected by COVID restrictions, most parks and hotels are filling up.
  • The company plans to increase spending on its streaming services in the second quarter.

Disney+

First quarter subscription growth for streaming service Disney+ surprised, as earlier guidance from the company had indicated that growth would pick up in the second half of 2022. Subscription revenues increased due to new subscribers and due to increased retail pricing. The average revenue per user (ARPU) in the U.S. and Canada was $6.68 per month compared to $5.80 a year ago.

Unlike recent guidance from Netflix, Inc. (NFLX) for slower subscription growth, Disney CEO Bob Chapek repeated the company's expectation for Disney+ subscriptions to reach 230 million to 260 million by 2024. The company also announced its plans to increase spending on its streaming services in the second quarter of fiscal 2022.

Revenue Breakdown

Revenues from Disney Media and Entertainment Distribution were higher at $14.6 billion compared with $12.7 billion in first quarter of fiscal 2021.

Higher revenues were matched by a higher operating loss in the Direct-to-Consumer segment due to higher production, marketing, and technology costs that were only partly offset by higher subscription revenues. The company realized theatrical distribution losses from titles released during the quarter such as West Side Story, Encanto, Nightmare Alley, and The Last Duel, which were partially offset by revenues from the co-production of Spider Man: No Way Home.

Revenues from Disney Parks, Experiences and Products were $7.2 billion, up from $3.6 billion in the first quarter of fiscal 2021. Higher revenues were driven by higher volumes of guests at the parks, higher rates of occupied hotel rooms and cruise ships, and higher revenues from ticket sales for the parks. The company stated that some of its international locations continue to be affected by COVID restrictions. Even its domestic parks are yet to see international guests reach pre-pandemic levels. Disney's consumer products also realized lower revenue since several of its retail stores were closed in 2021.

Disney's long-standing content library as well as several existing and emerging revenue streams along with its most recent record-breaking performance augur well as the company seeks to gain traction in its media and entertainment distribution business and as parks fill up. As per its website, Disney's spring break passes are beginning to sell out already.

The appointment of Alexia Quadrani, former Wall Street media analyst, as Disney's head of investor relations as the company begins its second century of its existence also is a reminder of the several successful mergers and acquisitions Disney has made in the past.

Article Sources
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  1. Disney. "Disney's Q1 2022 Earnings Results Webcast."

  2. Nasdaq. "The Walt Disney Company Reports First Quarter Earnings for Fiscal 2022."

  3. BlogMickey. "Spring Break Disney Passes Begin to Sell Out."

  4. Investopedia. "Seven Companies Owned by Disney."

  5. Reuters. "Disney Names Alexia Quadrani to Lead Investor Relations."

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