NEWS: Disney Execs Detail the Current State of The Walt Disney Company in Q2 Earnings Call

The Walt Disney Company’s Fiscal Second Quarter 2020 Financial Results Conference Call just wrapped up, and included a lot of information about the state of the company.

Disney executives Bob Iger (Executive Chairman), Bob Chapek (CEO), and Christine McCarthy (Senior Executive Vice President and CFO) spoke on Disney’s financial situation with emphasis on plans for the theme parks, film production, and broadcasting. Here’s what was said!

Acknowledging the Present

Iger started out by acknowledging the unprecedented current situation of the world, making sure to thank medical professionals and Disney employees internationally.

Chapek echoed these sentiments, speaking on the significance of current times and the sacrifices and personal impacts that have been felt by all. The CEO also specifically noted appreciation for the ABC news team for reporting the facts, the ESPN team for creating content in the absence of sports, and security teams for protecting the theme parks.

Looking to the Future

The executives also looked to the future of the situation. Iger acknowledged that there has been a drastic change of the world but that he has “absolute confidence” that Disney will get through these times and recover successfully thanks to the strength and emotional connection of the brands.

Later, Chapek explained their expectation that customer loyalty will remain, as customers believe that Disney is acting responsibly to protect them against the “woes that have plagued the industry.”

Overall Financial Situation

For the meat of the call, McCarthy reported on the financial situation of the company in quarter 2. Adjusted earnings per share fell from $1.61 to 60 cents from the prior year.

Though the balance sheet and liquidity of the company remain strong, there has been significant financial loss. Thus, the board has decided to forego payment of dividends (which would have been payable in July) for the first half of the fiscal year.

Beyond the next quarter where they are not paying dividends, the company will readdress the decision in six months.

Chapek mentioned that due to the financial downturn, the reduction in senior-level compensation would remain until the company sees significant economic recovery.

Disney Theme Parks, Retail, and Cruise Line

Financial Impact of Park Closures

One of the questions for the execs wondered how much the company had lost thanks to the international park closures.

McCarthy mentioned that the situation is fluid, but with Q2 reflecting just 2 weeks of the parks being closed in the US, an estimated half-billion-dollar loss is attributed to the US closures. The remainder is attributed to international parks and cruises.

Reopening the Disneyland Shanghai

Chapek surprised by announcing that Shanghai Disneyland is set to open on May 11th with guest capacity and density control measures as well as significant health and safety protocols.

He specifically explained some measures such as the use of masks for Shanghai guests AND employees, temperature screenings, and contact tracings. Face characters will not wear masks but will be kept at a distance from guests.

In regard to capacity limits, Shanghai’s usual capacity is around 80,000 per day, but the government wants Disney to limit to around 24,000 per day (or 30%). The park instead will be opening far below that figure for training and to figure out processes.

Disney executives hope to see the parks up to 30% capacity as restrictions lift further in a few weeks. To contend with such lowered capacity, the resort will utilize a reservation system for Annual Passholders and dated tickets to reduce the disappointment of someone showing up after the park is full for the day.

Further Reopenings

Beyond that, McCarthy explained that there is limited visibility into reopening the rest of the parks, cruise ships, and stores. Every site is different, but they would not reopen any item unless it would make a positive contribution to overhead and operating profit.

As for staffing the theme parks, Chapek mentioned that they will staff accordingly based on their expected capacity levels, making the decisions on a sliding variable basis.

Cruises are expected to be the most affected. Chapek said that the cruise line will probably be the last of their travel-oriented businesses to return.

When asked about the financial ramifications of this, McCarthy explained that cruises represent a relatively small percentage of operating income in the segment, but that they are highly rated among consumers.

For the domestic parks, the teams at Disney acknowledge the difference between Disneyland and Walt Disney World guest types (locals and tourists). Chapek mentioned that both parks have robust annual pass holder programs, but the breakdown of local versus travelers is very different. This is all being considered when it comes to park reopenings.

Walt Disney Studios, Disney+, and More

The call included some discussion of Disney production through Walt Disney Studios, Disney+, and Hulu. As of now, post-production work is still continuing for the various production companies.

Still, Walt Disney Studios saw the rescheduling of a number of tentpole films such as Mulan. The company has “fingers crossed” that the film will do well between limited seating in theaters and pent-up demand.

Disney+ has done well this quarter as many around the world have spent more time streaming as things are shut down. Disney+ exceeded expectation on its launch in western Europe and India.

In 5 months, the brand new streaming service surpassed 50 million subscribers globally with about 54.5 million subscribers as of May 4th. Disney+ will also begin rolling out in Japan in June, with some other countries and regions later in the year.

As production resumes, Disney is looking to follow the same process with productions as they will with their parks. Employees and filmmakers will be put first. This means that there are no projections on when production will resume.

ESPN and Broadcasting

ESPN was another segment of the business that did well. The recent Michael Jordan documentary is currently the most viewed ESPN documentary ever. The NFL draft saw success as the most-watched ever with almost 55 million viewers.

Despite the cancellations of sports, ESPN primetime viewership actually rose in April.

Keep an eye on AllEars as we examine the implications of the current financial situation and what it means for our parks and movies!

What do you think about what was said during the call? Tell us in the comments!

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