Disney is hurting for cash

[bookwormde]

This post is complete conjecture and nonsense.

Wall Street average estimates for the Quarter from April 1 - June 30 is a $1bn loss.

Disney had $14bn cash on hand on March 31st.

The end.

not sure earnings is the best metric, I will be looking at cash flow less financing benefit, as well as short term callable debt vs cash on hand and burn rate

Like many big companies Disney bought back stock at a heavy level (25b) over the past 5 years, instead of maintaining a strong downturn reserve

The good side of this is that they should have a large amount of treasury stock that they could convert to cash if they were willing to take to profit dilutions and related stock price impact. It is interesting that during times of negative earnings, dilution actually makes the issues look less sever on the surface. Of course this only works as lang as the markets have confidence in longevity.

Once the April through June quarter data is out in August we will have a much better idea of how long Disney can weather the current downturn without more cash infusions.

It is also important to remember that Disney cap ex is about 1.2B per quarter so even if a significant portion of that is curtailed it only addresses a limited portion of the cash flow issues.

My guess is that we are going to see about 5b cash burn rate for the quarter with 2.5b of that from the parks side (exclusive of financing and any government benefit)

As for what is going in in management discussion, it is easy to assume they are lively, with ongoing concern risk vs future earnings at the center

 

[skeeter31]

Looking at a lot of the photos from AK yesterday I'd be surprised if they achieved positive contribution yesterday, on opening day.

What's that gonna be like in a week when the vloggers and die hard fans have had their fix?

I still wouldn't be surprised if they temporarily re-shut AK and maybe Epcot due to lack of guests.

Thats assuming they don't just shut everything down again due to the covid rates.

I don’t think they’d close 2 parks when APs can’t get into any park until basically September at this point anyway.

 

[RivShore]

They are number one at the box office this week...

https://nypost.com/2020/07/12/star-warsthe-empire-strikes-back-tops-box-office-in-23-years/

ETA: Better than nothin' !

 

[anthony2k7]

I don’t think they’d close 2 parks when APs can’t get into any park until basically September at this point anyway.

They probably just need to fix the bucket sizes for that issue though.

Or allow APs a % of the walk up bucket each day.

 

[RivShore]

Disney spent too much on acquisitions

I assume your talking about the Fox acquisition since the others will pay (or have already) for themselves many times over (Pixar, Marvel, Lucas).

As for Fox, it's way to early to say they overpaid. The content that came over helped make Dis+ and Hulu's growth possible. Combined they have about half of netflix subscribers and they did it in a few months vs many years. And their ~$71B purchase price was far less after divesting some of the Fox's assets that came over. In the end, they may have overpaid but just saying it's way too early to say for sure.

 

[anthony2k7]

Will be interesting to see if the apple buyout rumours return in the future.

 

[New Mouse]

I assume your talking about the Fox acquisition since the others will pay (or have already) for themselves many times over (Pixar, Marvel, Lucas).

As for Fox, it's way to early to say they overpaid. The content that came over helped make Dis+ and Hulu's growth possible. Combined they have about half of netflix subscribers and they did it in a few months vs many years. And their ~$71B purchase price was far less after divesting some of the Fox's assets that came over. In the end, they may have overpaid but just saying it's way too early to say for sure.

Disney + numbers will not be real data until after 1 year and 3 years due to all the free and discounted subscriptions out there.

Disney did over pay significantly for fox, but they also did it to block Comcast.

 

[Marthasor]

Chapek didn't say "profitable", he said "positive contribution", which means income is more than the additional costs of opening the parks vs. staying closed.

Yes, you're right. I found the quote, "Well, I had said earlier that we would not open a park unless we could at least cover our variable costs of operating and make a contribution towards fixed costs and overhead, and that is the case at Walt Disney World as well. So, we believe that we will be at least able to cover our costs of opening up our parks, but at the same time work them incrementally as either we become better at putting more folks inside the parks or the guidelines loosen up a little bit. So, we’ll slowly but surely make baby steps towards improving the number of guests that we can accommodate in our parks while always ensuring that we open up responsibly."

I guess time and financial numbers will tell if they have achieved this.

 

[RivShore]

Disney + numbers will not be real data until after 1 year and 3 years due to all the free and discounted subscriptions out there.

Disney did over pay significantly for fox, but they also did it to block Comcast.

Actually the 50M plus subscribers are paid subscribers. And you are right, there will be some churn the next 2-3 years but I would think that launching in more countries will more than offset (they are only in a few countries currently).

To say they overpaid when there were other intangibles like, as you noted, keeping Comcast from becoming THE giant in the industry certainly has some value.

And to say they overpaid, we need to now what the net cost of the purchase was. Don't forget they sold off billions of sports networks and other assets, got all of Hulu from Comcast, got a major streamer in Inida, etc., etc. Their net cost could be approching half the headline number, did they still over pay at that price?

 

[skeeter31]

Actually the 50M plus subscribers are paid subscribers. And you are right, there will be some churn the next 2-3 years but I would think that launching in more countries will more than offset (they are only in a few countries currently).

To say they overpaid when there were other intangibles like, as you noted, keeping Comcast from becoming THE giant in the industry certainly has some value.

And to say they overpaid, we need to now what the net cost of the purchase was. Don't forget they sold off billions of sports networks and other assets, got all of Hulu from Comcast, got a major streamer in Inida, etc., etc. Their net cost could be approching half the headline number, did they still over pay at that price?

Yeah, but I think what the other poster was referring to is that a ton of the original subscribers took the D23 deal for 3 years and are paying a drastically reduced rate per year than advertised.

 

[New Mouse]

Yeah, but I think what the other poster was referring to is that a ton of the original subscribers took the D23 deal for 3 years and are paying a drastically reduced rate per year than advertised.

People from Verizon are almost all getting a free subscription right now when they sign up for service. Verizon is paying pennies on the dollar for those subscriptions, but they count as part of those paid subscribers. The actual number of free and heavily discounted subscriptions is substantial. Disney offered them as both a hook and a pr plug to make it seem like the service was so great everyone was paying for it. I think some would be quite shocked at what the acutal paid subscriber count is.

The service launched with nowhere near enough main stream content and unless they fix that before year 1 is over and then again for year 3, they are gonna take a huge hit.

 

[RivShore]

People from Verizon are almost all getting a free subscription right now when they sign up for service. Verizon is paying pennies on the dollar for those subscriptions, but they count as part of those paid subscribers. The actual number of free and heavily discounted subscriptions is substantial. Disney offered them as both a hook and a pr plug to make it seem like the service was so great everyone was paying for it. I think some would be quite shocked at what the acutal paid subscriber count is.

The service launched with nowhere near enough main stream content and unless they fix that before year 1 is over and then again for year 3, they are gonna take a huge hit.

Disney did say at one point that 20% of subs came from Verizon. If true, international growth may offset that possible loss in a year or 2. Also, for the 3 year deal, you had to be a D23 member. If your that into Disney that you joined the fan club, I would think most will stick around at less than 6 bucks a month in year 4.

 

[rteetz]

Disney did say at one point that 20% of subs came from Verizon. If true, international growth may offset that possible loss in a year or 2. Also, for the 3 year deal, you had to be a D23 member. If your that into Disney that you joined the fan club, I would think most will stick around at less than 6 bucks a month in year 4.

There is a free version of D23 membership and they were eligible for the deal as well.

 

[RivShore]

There is a free version of D23 membership and they were eligible for the deal as well.

True. I was just pointing out that if you went thru the effort to join, your probably more than a casual fan/viewer that won't stick around after the price goes up a few dollars a month.

 

[jerry557]

Um...
View attachment 508959

This is skewed largely due to Star Wars and Marvel and relying on that cult following. Take those movies out and the profits are not as high. And even some fans of those franchises have started showing signs of fatigue. Disney has made a number of bombs in recent years. And some of the projects coming down the pike are real risky.

Would you spend $100-200 million for another pirates movie without Johnny Depp but staring Margot Robbie as a new female pirate? I wouldn't. Not if it was my money.

 

[mamaofsix]

Right now, I'm assuming, WDW has a very high proportion of drive-in state and local guests. When fall comes along and many kids go back to school, that guest count is going to further nose dive (IMHO). Until FL gets its numbers under control and domestic and international travel restrictions are lifted, I'm not seeing a very rosy picture here. I'm the first to admit that I know nothing about theme park operations, but I don't know how long you can operate without turning a profit. I just went into the park reservation system and every day I checked is wide open to make a reservation, so, even with lowered capacity and the opening of 2020 ticket sales, they don't seem to have much demand. I really don't see how they are generating enough revenue in the parks to justify operating?! Chapek himself said they wouldn't open parks unless they knew it would be profitable. Quite honestly, I'm more interested in seeing the Q4 numbers, because, I think those will better reflect what happens financially in WDW from July - Sept.

Considering they have cut out some of their highest daily operation costs (fireworks and night-time spectaculars are estimated to cost $50,000 a pop, parades, character meet and greets, drastically reduced hours, reduced staffing, etc), I think they're still likely bringing in more in ticket, merch and food sales than it costs to operate.

 

[CastAStone]

This is skewed largely due to Star Wars and Marvel and relying on that cult following. Take those movies out and the profits are not as high. And even some fans of those franchises have started showing signs of fatigue. Disney has made a number of bombs in recent years. And some of the projects coming down the pike are real risky.

Yes, if you take away the 6 billion dollar+ movies you are left with a bunch of movies that made less.

 

[Doug M]

When are the next shoes going to drop? I am talking about other attractions that will be "cancelled" such as COP, IASW, or other attractions that will be deemed insensitive by people. Two major attractions have already been changed or will be, but the goalposts are constantly in motion. This at a time when the company is hemorrhaging money at all fronts. I wish I could say the future for Disney looks bright, but there is likely to be more strife to look forward to. My plans for coming next year are probably a pipe dream now.

 

[Searc]

I don’t think they’d close 2 parks when APs can’t get into any park until basically September at this point anyway.

You can, you just have to buy another ticket, according to Disney, anyway.

 

[Searc]

Disney + numbers will not be real data until after 1 year and 3 years due to all the free and discounted subscriptions out there.

Disney did over pay significantly for fox, but they also did it to block Comcast.

Agree, there were companies offering a free year for their customers (Verizon, being one of them, which I took advantage of). When that year is up, I'm cancelling. I've watched Disney + a handful of times since the beginning and it isn't worth the monthly expense to me for something we don't use.