Walt Disney 10-Q 2024-12-28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 28, 2024

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number 001-38842

500 South Buena Vista Street

Burbank, California 91521

Address of Principal Executive Offices and Zip Code

(818) 560-1000

Registrant’s Telephone Number, Including Area Code

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

There were 1,807,788,865 shares of common stock outstanding as of January 29, 2025.

THE WALT DISNEY COMPANY

Form 10-Q

For the Fiscal Quarter Ended December 28, 2024

TABLE OF CONTENTS

Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance and may include statements concerning, among other things, financial results; business plans (including statements regarding new services and products and future expenditures, costs and investments); future liabilities and other obligations; impairments and amortization; estimates of the financial impact of certain items, accounting treatment, events or circumstances; competition and seasonality on our businesses and results of operations; and capital allocation, including share repurchases and dividends. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “could,” “intends,” “target,” “projects,” “forecasts,” “believes,” “estimates,” “anticipates,” “potential,” “continue,” “assumption” or “judgment” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These statements reflect our current views with respect to future events and are based on assumptions as of the date of this report. These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements.

Such differences may result from actions taken by the Company, including restructuring or strategic initiatives (including capital investments, asset acquisitions or dispositions, new or expanded business lines or cessation of certain operations), our execution of our business plans (including the content we create and intellectual properties (IP) we invest in, our pricing decisions, our cost structure and our management and other personnel decisions), our ability to quickly execute on cost rationalization while preserving revenue, the discovery of additional information or other business decisions, as well as from developments beyond the Company’s control, including:

• the occurrence of subsequent events;

• deterioration in domestic and global economic conditions or failure of conditions to improve as anticipated;

• deterioration in or pressures from competitive conditions, including competition to create or acquire content, competition for talent and competition for advertising revenue;

• consumer preferences and acceptance of our content, offerings, pricing model and price increases, and corresponding subscriber additions and churn, and the market for advertising sales on our direct-to-consumer services and linear networks;

• health concerns and their impact on our businesses and productions;

• international, political or military developments;

• regulatory and legal developments;

• technological developments;

• labor markets and activities, including work stoppages;

• adverse weather conditions or natural disasters; and

• availability of content.

Such developments may further affect entertainment, travel and leisure businesses generally and may, among other things, affect (or further affect, as applicable):

• our operations, business plans or profitability, including direct-to-consumer profitability;

• demand for our products and services;

• the performance of the Company’s content;

• our ability to create or obtain desirable content at or under the value we assign the content;

• the advertising market for programming;

• taxation; and

• performance of some or all Company businesses either directly or through their impact on those who distribute our products.

Additional factors include those described in our 2024 Annual Report on Form 10-K, including under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” in our subsequent quarterly reports on Form 10-Q, including under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in our subsequent filings with the Securities and Exchange Commission.

A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances. You should not place undue reliance on the forward-looking statements. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made.

PART I. FINANCIAL INFORMATION

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited; in millions, except per share data)

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited; in millions)

See Notes to Condensed Consolidated Financial Statements

THE WALT DISNEY COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited; in millions, except per share data)

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ORGANIZATION OF INFORMATION

Management’s Discussion and Analysis provides a narrative of the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections:

• Consolidated Results

• Current Quarter Results Compared to Prior-Year Quarter

• Seasonality

• Business Segment Results

• Corporate and Unallocated Shared Expenses

• Financial Condition

• Market Risk

• Commitments and Contingencies

• Other Matters

• DTC Product Descriptions, Key Definitions and Supplemental Information

• Supplemental Guarantor Financial Information

CONSOLIDATED RESULTS

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter increased 5%, or $1.1 billion, to $24.7 billion; net income attributable to Disney increased to $2.6 billion compared to $1.9 billion; and diluted earnings per share (EPS) attributable to Disney increased to $1.40 compared to $1.04 in the prior-year quarter. The EPS increase was due to higher operating income at Entertainment.

On November 14, 2024, the Company and RIL completed the Star India Transaction (see Note 4 to the Condensed Consolidated Financial Statements). After November 14, 2024, the Company began recognizing its 37% share of the India joint venture’s results in “Equity in the income of investees.” Star India results in the current quarter through November 14, 2024 and results in the prior-year quarter are consolidated in the Company’s financial results for those periods and reported in the Entertainment and Sports segments.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues

Service revenues for the quarter increased 5%, or $1.1 billion, to $22.0 billion, due to higher subscription and theatrical distribution revenue and, to a lesser extent, growth in theme park admissions and resorts and vacations revenues. Service revenues reflected an approximate 3 percentage point decrease due to Star India and an approximate 1 percentage point decrease due to an unfavorable movement of the U.S. dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).

Costs and expenses

Cost of services for the quarter decreased 1% to $13.8 billion due to lower sports programming and production costs, partially offset by the impact of inflation and increased volumes at our parks and experiences businesses as well as higher non-sports programming and production costs. Cost of services reflected an approximate 6 percentage point decrease due to Star India and an approximate 1 percentage point decrease due to a favorable Foreign Exchange Impact.

Selling, general, administrative and other costs increased 4% to $3.9 billion driven by a legal settlement and higher marketing costs. Selling, general and administrative and other costs reflected an approximate 1 percentage point decrease due to Star India and an approximate 3 percentage point decrease due to a favorable Foreign Exchange Impact.

Depreciation and amortization increased 3% to $1.3 billion due to higher depreciation at Experiences, partially offset by lower TFCF and Hulu Acquisition Amortization.

Restructuring and impairment charges

In the current quarter, the Company recorded a $143 million loss in connection with the Star India Transaction.

Interest expense, net

Interest expense, net is as follows:

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See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 15 to the Condensed Consolidated Financial Statements.

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of December 28, 2024, the principal executive officer and principal financial officer of the Company have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective.

Changes in Internal Controls – There have been no changes in our internal control over financial reporting during the first quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company is engaged in certain legal matters, and the disclosure set forth in Note 13 to the Condensed Consolidated Financial Statements relating to certain legal matters is incorporated herein by reference.

For an enterprise as large and complex as the Company, a wide range of factors could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in our filings with the SEC, the most significant factors affecting our business include the factors discussed in our 2024 Annual Report on Form 10-K under Item 1A, “Risk Factors”.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c)The following table provides information about Company purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the quarter ended December 28, 2024:

(1)Amounts exclude the one percent excise tax on stock repurchases imposed by the Inflation Reduction Act of 2022.

(2)Under a share repurchase program implemented effective February 7, 2024, the Company is authorized to repurchase a total of 400 million shares of its common stock. The repurchase program does not have an expiration date.

On October 9, 2024, 271,037 shares of common stock were issued in a privately negotiated sale to a service provider, at a price of $92.2382 per share, which was determined by applying a volume weighted average price over a period of 30 business days, in satisfaction of contractual obligations of the Company undertaken in a commercial agreement entered into in the ordinary course of business. The shares were offered and issued in accordance with Section 4(a)(2) of the Securities Act of 1933, as amended. The shares issued are subject to restrictions which, among other things, are designed to assure that any resales will occur in reliance on an applicable exemption under the Securities Act.

Rule 10b5-1 Trading Arrangements

On December 13, 2024, Brent A. Woodford, the Company’s Executive Vice President, Controllership, Financial Planning and Tax, adopted a trading plan intended to satisfy the affirmative defense of Rule 10b5-1(c) under the Securities Exchange Act of 1934, as amended. Mr. Woodford’s trading plan provides for the potential exercise of vested stock options granted to Mr. Woodford on December 17, 2015, December 21, 2016 and December 19, 2017, which will expire on December 17, 2025, December 21, 2026 and December 19, 2027, respectively, and the associated sale of up to 61,245 shares of the Company’s common stock, excluding any shares used to effect a cashless exercise or withheld to satisfy tax withholding obligations in connection with the exercise or net settlement of the option awards. Mr. Woodford’s trading plan is scheduled to terminate on December 21, 2026, subject to early termination.

INDEX OF EXHIBITS

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

February 5, 2025

Burbank, California