Disney (DIS) -) on Wednesday posted better-than-expected fiscal-third-quarter earnings but revenue fell light of forecasts as it continued to lose subscribers to its international streaming service.
Adjusted earnings for the three months ended in June came in at $1.03 per share, down 5.5% from the year-earlier period but firmly ahead of the Wall Street consensus forecast of 95 cents per share.
Group revenue, Disney said, rose 3.9% to $22.33 billion, narrowly missing the Wall Street consensus forecast of a $22.5 billion tally.
Parks, Experiences and Products saw revenue rise 13% from a year earlier to $8.33 billion, topping forecasts, while Media and Entertainment Distribution revenue was down 1% to $14 billion, again shy of estimates.
Overall Disney+ paid subscribers fell by 11.7 million from the previous quarter to 146 million, the company said, with 800,000 new U.S. additions but a loss of around 12.5 million in India thanks to the loss of live rights to cricket broadcasts.
Streaming-division losses were pegged at $512 million, down from around $1.1 billion last year and well inside the Wall Street estimate of around $759 million.
Iger: Disney 'Transformation' in Progress
“Our results this quarter are reflective of what we’ve accomplished through the unprecedented transformation we’re undertaking at Disney to restructure the company, improve efficiencies, and restore creativity to the center of our business,” said CEO Bob Iger.
“In the eight months since my return, these important changes are creating a more cost-effective, coordinated, and streamlined approach to our operations that has put us on track to exceed our initial goal of $5.5 billion in savings as well as improved our direct-to-consumer operating income by roughly $1 billion in just three quarters," he added.
"While there is still more to do, I’m incredibly confident in Disney’s long-term trajectory because of the work we’ve done, the team we now have in place, and because of Disney’s core foundation of creative excellence and popular brands and franchises.”
Disney shares were marked 1.9% lower in after-hours trading immediately following the earnings release to indicate a Thursday opening bell price of $85.66 each.
Iger, 72, detailed sweeping changes on his return, including a major cost-cutting drive and a new three-part organizational structure focused on Parks, Entertainment and ESPN. He also said Disney would restore its regular dividend, which it suspended during the peak of the pandemic in 2020, by the end of the calendar year.
Iger's cost-cutting effort is starting to bear fruit. So is his vision for finding a content partner for ESPN that will help offset the ongoing decline in ad revenue and profit from Disney's linear networks division.
He said Disney would launch an ad-supported service, priced at €5.99 ($6.58) and £4.99 ($6.36) per month in Europe and the U.K. respectively, and C$7.99 (US$5.96) in Canada, on Nov. 1.
Iger said 3.3 million people have signed up for the ad-supported service.
Disney Books Content Charges, Severance Pay
Disney booked around $2.65 billion in charges over the quarter, most of which were linked to removing content from its streaming platforms and killing existing licensing agreements. It also paid out $210 million in severance to laid-off workers.
Disney, in fact, has agreed terms with Penn Entertainment. The deal will see the gambling group pay $1.5 billion over 10 years, as well as an equity kicker, in exchange for the use of brand rights, promotions and other forms of cooperation as it relaunches under the a new name: ESPN Bet.
"We see the licensing agreement as a step forward for ESPN as it provides better monetization opportunities vs. only a marketing partnership and can better utilize ESPN's broad reach and brand recognition," KeyBanc Capital Markets analyst Brandon Nispel had said in a June report.
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