What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2024-02-07 · 766 added, 281 removed, 677 unchanged (61% of the section changed)

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• Current Quarter Results Compared to Prior-Year Quarter

• Current Six-Month Period Results Compared to Prior-Year Six-Month Period

• Seasonality

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• Financial Condition

• Market Risk

• Commitments and Contingencies

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• Supplemental Guarantor Financial Information

• Market Risk

CONSOLIDATED RESULTS

Quarter Ended % Change

(in millions, except per share data) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions, except per share data) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Services $ 19,757 $ 19,586 1 % $ 40,732 $ 40,583 — %

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Restructuring and impairment charges ( 2,052 ) ( 152 ) >(100) % ( 2,052 ) ( 221 ) >(100) %

Other expense, net — ( 42 ) 100 %

Other income, net — 149 (100) % — 107 (100) %

Interest expense, net ( 311 ) ( 322 ) 3 % ( 557 ) ( 622 ) 10 %

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Net income attributable to noncontrolling interests ( 236 ) ( 217 ) (9) % ( 476 ) ( 299 ) (59) %

Net income attributable to Disney $ 1,911 $ 1,279 49 %

Diluted earnings per share attributable to Disney

$ 1.04 $ 0.70 49 %

Net income (loss) attributable to Disney

$ (20) $ 1,271 nm $ 1,891 $ 2,550 (26) %

Diluted earnings (loss) per share attributable to Disney

$ (0.01) $ 0.69 nm $ 1.03 $ 1.39 (26) %

CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER

Revenues for the quarter were comparable to the prior-year quarter at $23.5 billion;

net income attributable to Disney increased to $1.9 billion in the current quarter compared to $1.3 billion in the prior-year quarter;

and diluted earnings per share (EPS) attributable to Disney increased to $1.04 compared to $0.70 in the prior-year quarter.

The EPS increase was primarily due to higher operating income at Entertainment, Experiences and, to a lesser extent, Sports.

Revenues for the quarter increased 1%, or $0.3 billion, to $22.1 billion;

net income attributable to Disney decreased to a loss of $20 million in the current quarter compared to income of $1.3 billion in the prior-year quarter;

and diluted earnings per share (EPS) attributable to Disney decreased to a loss of $0.01 compared to income of $0.69 in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Service revenues for the quarter were comparable to prior-year quarter at $21.0 billion as lower theatrical distribution revenue and, to a lesser extent, lower TV/VOD distribution revenue were largely offset by higher DTC subscription revenue and increased revenues at our theme parks and resorts.

decrease was due to goodwill impairments in the current quarter, partially offset by higher operating income at Entertainment and Experiences.

Service revenues for the quarter increased 1%, or $0.2 billion, to $19.8 billion resulting from higher DTC subscription revenue and increased revenue at our theme parks and resorts.

These increases were partially offset by lower theatrical distribution revenue and, to a lesser extent, lower TV/VOD distribution revenue.

Product revenues for the quarter increased 4%, or $0.1 billion, to $2.3 billion due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

Costs and expenses

Cost of services for the quarter decreased 6%, or $0.9 billion, to $13.9 billion primarily due to lower programming and production costs and, to a lesser extent, lower technical support costs, partially offset by the impact of inflation and increased volumes at our theme parks and resorts.

The decrease in programming and production costs was due to lower amortization resulting from lower theatrical and TV/VOD distribution revenue and a decrease in programming and production cost amortization at Entertainment Linear Networks and Direct-to-Consumer, partially offset by Sports.

Cost of products for the quarter increased 4%, or $0.1 billion, to $1.7 billion due to higher sales volumes of merchandise, food and beverage and cost inflation at our theme parks and resorts.

Selling, general, administrative and other costs decreased 1% to $3.8 billion, primarily due to lower marketing costs.

Depreciation and amortization decreased 5% to $1.2 billion due to lower TFCF and Hulu acquisition amortization and lower depreciation at Experiences.

Cost of services for the quarter decreased 4%, or $0.5 billion, to $12.7 billion due to lower programming and production costs and, to a lesser extent, lower distribution costs at Entertainment, partially offset by the impact of inflation and increased volumes at our theme parks and resorts.

Cost of products for the quarter increased 4%, or $0.1 billion, to $1.5 billion due to inflation and higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

Selling, general, administrative and other costs increased 5%, or $0.2 billion, to $3.8 billion, primarily due to higher marketing costs.

Depreciation and amortization decreased 5%, or $0.1 billion, to $1.2 billion driven by lower TFCF and Hulu acquisition amortization.

Restructuring and impairment charges

In the prior-year quarter, the Company recognized charges of $69 million related to exiting our businesses in Russia.

Other expense, net

Other expense, net in the prior-year quarter included a DraftKings loss of $70 million, partially offset by a $28 million gain on the sale of a business.

In the current quarter, the Company recorded charges of $2,052 million due to goodwill impairments related to the Star India Transaction and entertainment linear networks.

In the prior-year quarter, the Company recognized charges of $152 million primarily for severance.

Other income, net

Other income, net in the prior-year quarter included a DraftKings gain of $149 million.

Interest expense, net

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Quarter Ended

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

2023 % Change

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Interest expense, net $ (311) $ (322) 3 %

The increase in interest expense was due to higher average rates, partially offset by lower average debt balances.

The increase in interest income, investment income and other was driven by higher interest income on cash balances reflecting an increase in interest rates.

Equity in the Income of Investees

Income from equity investees decreased $32 million, to $141 million from $173 million, due to lower income from A+E Television Networks.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Quarter Ended

2023 December 31,

2024 April 1,

Income before income taxes

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67.1 % 29.9 %

The increase in the effective income tax rate was due to the impact of adjustments related to prior years, which was unfavorable in the current quarter and favorable in the prior-year quarter, partially offset by lower effective tax rates on foreign earnings compared to the prior-year quarter.

The increase in the effective income tax rate was due to an unfavorable impact from the goodwill impairments recognized in the current quarter, which are not tax deductible, partially offset by a benefit from adjustments related to prior years, which were favorable in the current quarter and unfavorable in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Noncontrolling Interests

Quarter Ended

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

2023 % Change

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$ (236) $ (217) (9) %

The increase in net income attributable to noncontrolling interests was primarily due to improved results at our Asia Theme Parks, the accretion of Hulu’s noncontrolling interest to the amount paid to NBCU in December 2023 (see Note 1 to the Condensed Consolidated Financial Statements) and, to a lesser extent, improved results at ESPN, partially offset by the comparison to the impact of the prior year purchase of Major League Baseball’s 15% interest in BAMTech LLC.

The increase in net income attributable to noncontrolling interests was primarily due to improved results at Hong Kong Disneyland Resort, partially offset by the comparison to the accretion of NBCU’s interest in Hulu in the prior-year quarter with no accretion in the current quarter as we had fully accreted to the amount paid in December 2023 (see Note 1 to the Condensed Consolidated Financial Statements).

Net income attributable to noncontrolling interests is determined on income after royalties and management fees, financing costs and income taxes, as applicable.

Certain Items Impacting Results in the Quarter

Results for the quarter ended December 30, 2023 were impacted by the following:

Results for the quarter ended March 30, 2024 were impacted by the following:

• Restructuring and impairment charges of $2,052 million

• TFCF and Hulu acquisition amortization of $434 million

Results for the quarter ended December 31, 2022 were impacted by the following:

Results for the quarter ended April 1, 2023 were impacted by the following:

• TFCF and Hulu acquisition amortization of $558 million

• Impairment charges of $69 million

• Other expense, net of $42 million due to the DraftKings loss of $70 million, partially offset by a $28 million gain on the sale of a business

• Restructuring and impairment charges of $152 million

• Other income of $149 million due to the DraftKings gain

A summary of the impact of these items on EPS is as follows:

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After-Tax Income (Loss) EPS Favorable (Adverse) (2)

Quarter Ended December 30, 2023:

Quarter Ended March 30, 2024:

Restructuring and impairment charges $ (2,052) $ 121 $ (1,931) $ (1.06)

TFCF and Hulu acquisition amortization

(434) 101 (333) (0.17)

Quarter Ended December 31, 2022:

Total $ (2,486) $ 222 $ (2,264) $ (1.22)

Quarter Ended April 1, 2023:

TFCF and Hulu acquisition amortization

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Restructuring and impairment charges (152) 35 (117) (0.06)

Other expense, net

Other income (expense), net

149 (35) 114 0.06

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Total may not equal the sum of the column due to rounding.

The Company’s businesses are subject to the effects of seasonality.

Consequently, the operating results for the quarter ended December 30, 2023 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

CURRENT SIX-MONTH PERIOD RESULTS COMPARED TO PRIOR-YEAR SIX-MONTH PERIOD

Revenues for the current period increased $0.3 billion, to $45.6 billion;

net income attributable to Disney decreased $0.7 billion, to $1.9 billion;

and EPS decreased to $1.03 from $1.39 in the prior-year period.

The EPS decrease was due to goodwill impairments in the current period, partially offset by higher operating income at Entertainment and Experiences.

Service revenues for the current period increased $0.1 billion to $40.7 billion, resulting from higher DTC subscription revenue and increased revenue at our theme parks and resorts.

These increases were largely offset by lower theatrical distribution revenue and, to a lesser extent, lower TV/VOD distribution revenue.

Product revenues for the current period increased 3%, or $0.2 billion, to $4.9 billion, due to higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Costs and expenses

Cost of services for the current period decreased 5%, or $1.4 billion, to $26.6 billion, primarily due to lower programming and production costs and, to a lesser extent, lower distribution costs at Entertainment, partially offset by the impact of inflation and increased volumes at our theme parks and resorts.

Cost of products for the current period increased 4%, or $0.1 billion, to $3.2 billion, due to inflation and higher sales volumes of merchandise, food and beverage at our theme parks and resorts.

Depreciation and amortization decreased 5%, or $0.1 billion, to $2.5 billion due to lower TFCF & Hulu intangible amortization.

Restructuring and impairment charges

In the current period, the Company recorded charges of $2,052 million due to goodwill impairments related to the Star India Transaction and entertainment linear networks.

In the prior-year period, the Company recorded charges of $221 million primarily for severance and costs related to exiting our businesses in Russia.

Other income, net

Other income, net in the prior-year period included a DraftKings gain of $79 million and a $28 million gain on the sale of a business.

Interest expense, net

Interest expense, net is as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

2023 % Change

Better (Worse)

Interest expense $ (1,029) $ (969) (6) %

Interest income, investment income and other 472 347 36 %

Interest expense, net $ (557) $ (622) 10 %

The increase in interest expense was due to higher average rates, partially offset by higher capitalized interest.

The increase in interest income, investment income and other resulted from from higher interest income on cash balances and a favorable comparison of pension and postretirement benefit costs, other than service cost.

Equity in the Income of Investees

Income from equity investees decreased $42 million, to $322 million from $364 million, due to lower income from A+E Television Networks.

Effective Income Tax Rate

Six Months Ended

2024 April 1,

Income from continuing operations before income taxes $ 3,528 $ 3,896

Income tax on continuing operations 1,161 1,047

Effective income tax rate - continuing operations 32.9% 26.9%

The increase in the effective income tax rate was due to an unfavorable impact from the goodwill impairments recognized in the current period, which are not tax deductible, partially offset by a lower effective tax rate on foreign earnings in the current period.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Noncontrolling Interests

Six Months Ended

(in millions) March 30,

2024 April 1,

2023 % Change

Better (Worse)

Net income from continuing operations attributable to noncontrolling interests $ (476) $ (299) (59) %

The increase in net income from continuing operations attributable to noncontrolling interests was due to improved results at our Asia Theme Parks, the accretion of Hulu’s noncontrolling interest to the amount paid in December 2023 (see Note 1 to the Condensed Consolidated Financial Statements) and improved results at ESPN, partially offset by the impact of the purchase of Major League Baseball’s 15% interest in BAMtech LLC in the prior-year period.

Certain Items Impacting Results in the Six Month Period

Results for the six months ended March 30, 2024 were impacted by the following:

• Restructuring and impairment charges of $2,052 million

• TFCF and Hulu acquisition amortization of $885 million

Results for the six months ended April 1, 2023 were impacted by the following:

• TFCF and Hulu acquisition amortization of $1,137 million

• Restructuring and impairment charges of $221 million

• Other income of $107 million due to the DraftKings gain of $79 million and a gain on the sale of a business of $28 million

A summary of the impact of these items on EPS is as follows:

(in millions, except per share data) Pre-Tax Income (Loss) Tax Benefit

(Expense) (1)

After-Tax Income (Loss) EPS Favorable

(Adverse) (2)

Six Months Ended March 30, 2024:

Restructuring and impairment charges $ (2,052) $ 121 $ (1,931) $ (1.06)

TFCF and Hulu acquisition amortization (885) 206 (679) (0.36)

Total $ (2,937) $ 327 $ (2,610) $ (1.41)

Six Months Ended April 1, 2023:

TFCF and Hulu acquisition amortization $ (1,137) $ 264 $ (873) $ (0.47)

Restructuring and impairment charges (221) 43 (178) (0.10)

Other income (expense), net

107 (18) 89 0.05

Total $ (1,251) $ 289 $ (962) $ (0.52)

(1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item.

(2) EPS is net of noncontrolling interest share, where applicable.

Total may not equal the sum of the column due to rounding.

The Company’s businesses are subject to the effects of seasonality.

Consequently, the operating results for the six months ended March 30, 2024 for each business segment, and for the Company as a whole, are not necessarily indicative of results to be expected for the full year.

Entertainment revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, timing and performance of film releases in the theatrical and home entertainment markets, and the timing of and demand for film and television programs.

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biannually, quadrennially).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Experiences revenues fluctuate with changes in theme park attendance and resort occupancy resulting from the seasonal nature of vacation travel and leisure activities, which generally results in higher revenues during the Company’s first and fourth fiscal quarters, the opening of new guest offerings and pricing and promotional offers.

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In addition, licensing revenues fluctuate with the timing and performance of our film and television content.

BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter

BUSINESS SEGMENT RESULTS

The Company evaluates the performance of its operating businesses based on segment revenue and segment operating income.

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Entertainment $ 9,796 $ 10,309 (5) % $ 19,777 $ 20,984 (6) %

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Entertainment operating income $ 781 $ 455 72 % $ 1,655 $ 800 >100 %

Sports operating loss (103) (164) 37 %

Sports operating income

778 794 (2) % 675 630 7 %

Experiences operating income 2,286 2,036 12 % 5,391 4,898 10 %

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Restructuring and impairment charges (2,052) (152) >(100) % (2,052) (221) >(100) %

Other expense, net — (42) 100 %

Other income, net

— 149 (100) % — 107 (100) %

Interest expense, net (311) (322) 3 % (557) (622) 10 %

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Entertainment $ 169 $ 150 (13) % $ 332 $ 304 (9) %

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Entertainment $ 14 $ 30 53 % $ 27 $ 64 58 %

Sports — — nm

Sports — — nm — — nm

Experiences 27 27 — % 54 54 — %

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Total amortization of intangible assets $ 403 $ 465 13 % $ 823 $ 943 13 %

BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter

Entertainment

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Linear Networks $ 2,765 $ 2,999 (8) %

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Linear Networks $ 752 $ 959 (22) %

Direct-to-Consumer (138) (984) 86 %

Content Sales/Licensing and Other (224) (1) >(100) %

Direct-to-Consumer 47 (587) nm

Content Sales/Licensing and Other (18) 83 nm

$ 781 $ 455 72 %

The decrease in Entertainment revenues was due to lower theatrical distribution revenue and, to a lesser extent, decreases in TV/VOD distribution, advertising and affiliate revenue.

These decreases were partially offset by subscription revenue growth.

The decrease in Entertainment revenues was primarily due to lower theatrical distribution revenue and, to a lesser extent, a decrease in TV/VOD distribution revenue, partially offset by subscription revenue growth.

Operating income

The increase in operating income was due to improved results at Direct-to-Consumer, partially offset by a decline at Content Sales/Licensing and Other.

The increase in operating income in the current quarter compared to the prior-year quarter was due to improved results at Direct-to-Consumer, partially offset by declines at Linear Networks and Content Sales/Licensing and Other.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Affiliate fees $ 1,759 $ 1,925 (9) %

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Domestic $ 1,506 $ 1,609 (6) %

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$ 1,759 $ 1,925 (9) %

The decrease in domestic affiliate revenue was due to a decrease of 10% from fewer subscribers, including the impact of the non-carriage of certain networks by an affiliate, partially offset by an increase of 5% from higher contractual rates.

Lower international affiliate revenue was primarily attributable to a decrease of 7% from fewer subscribers.

The decrease in domestic affiliate revenue was primarily due to a decrease of 12% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 7% from higher contractual rates.

Lower international affiliate revenue was primarily attributable to decreases of 11% from fewer subscribers and 4% from lower contractual rates.

Revenues - Advertising

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Domestic $ 743 $ 813 (9) %

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$ 974 $ 1,031 (6) %

The decline in domestic advertising revenue reflected decreases of 15% from fewer impressions, driven by a decrease at ABC Network, and 11% from lower rates primarily attributable to a decrease in political advertising at the owned television stations.

Fewer network impressions were in part due to the impact of the guild strikes on our programming schedule primarily due to a shift of units to the Sports segment reflecting the simulcast of certain NFL games.

Revenues - Other

Other revenue decreased $19 million, to $43 million from $62 million, primarily due to an unfavorable movement of the U.S.

dollar against major currencies including the impact of our hedging program (Foreign Exchange Impact).

The decline in domestic advertising revenue was due to a decrease of 12% from fewer impressions, partially offset by an increase of 3% from higher rates primarily due to increased political advertising at the owned television stations.

The decrease in impressions was due to lower average viewership.

Higher international advertising revenue was attributable to an increase of 10% from higher rates, partially offset by a decrease of 3% from an unfavorable foreign exchange impact.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Programming and production costs

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$ (1,458) $ (1,515) 4 %

The decrease in domestic programming and production costs was primarily due to fewer hours of scripted programming in the current quarter, reflecting the impact of the guild strikes.

Scripted programming was primarily replaced with lower average cost non-scripted programming as well as ESPN on ABC sports programming, the costs of which are recognized in the Sports segment.

International programming and production costs increased primarily due to inflation.

The decrease in other operating expenses included lower technology and distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $34 million, to $557 million from $591 million, due to lower marketing costs.

The decrease in domestic programming and production costs was due to a lower average cost mix of programming at ABC Network, partially offset by an increase in the average cost of programming at FX Channels.

The decrease in other operating expenses was primarily due to lower technology and distribution costs.

Equity in the Income of Investees

Income from equity investees decreased $20 million, to $173 million from $193 million, primarily due to lower income from A+E Television Networks driven by decreases in advertising and affiliate revenue, partially offset by a gain on the sale of an investment.

Income from equity investees decreased $19 million, to $140 million from $159 million, due to lower income from A+E Television Networks attributable to decreases in advertising and affiliate revenue.

Operating Income from Linear Networks

Operating income from Linear Networks decreased $94 million, to $1,236 million from $1,330 million, due to decreases at our domestic and international businesses and lower income from equity investees.

Operating income from Linear Networks decreased $207 million, to $752 million from $959 million, due to decreases at our domestic and international businesses.

Supplemental revenue and operating income

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Subscription fees $ 4,805 $ 4,225 14 %

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Depreciation and amortization (75) (85) 12 %

Operating Loss $ (138) $ (984) 86 %

Operating Income (Loss)

$ 47 $ (587) nm

Revenues - Subscription fees

Growth in subscription fees in the current quarter compared to the prior-year quarter reflected increases of 13% from higher rates attributable to increases in retail pricing at Disney+ Core and, to a lesser extent, Hulu, and 4% from more subscribers, due to growth at Disney+ Core and Hulu.

Growth in subscription fees in the current quarter compared to the prior-year quarter reflected increases of 9% from higher rates attributable to increases in retail pricing at Disney+ Core and Hulu, and 6% from more subscribers due to growth at Disney+ Core.

Revenues - Advertising

Higher advertising revenue in the current quarter compared to the prior-year quarter reflected an increase of 23% from higher impressions, partially offset by a decrease of 11% from lower rates attributable to a decrease at Hulu.

The increase in impressions was due to airing more hours of International Cricket Council (ICC) cricket programming compared to the prior-year quarter, growth of the U.S.

ad-supported Disney+ service, which launched in December 2022, and higher impressions at Hulu due to more units delivered.

Revenues - Other

The decrease in other revenue was due to an unfavorable Foreign Exchange Impact.

Higher advertising revenue in the current quarter compared to the prior-year quarter reflected an increase of 25% from higher impressions, partially offset by a decrease of 17% from lower rates.

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of Disney+ (1) and Hulu (1) , and we believe these metrics are useful to investors in analyzing the business:

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% Change Better (Worse)

(in millions) December 30,

2023 September 30,

(in millions) March 30,

2024 December 30,

2023 April 1,

Domestic (U.S.

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Quarter Ended % Change Better (Worse)

2023 September 30,

2024 December 30,

30, 2023 Dec.

2023 April 1,

30, 2023 Mar.

Domestic (U.S.

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Live TV + SVOD 95.01 93.61 92.32 1 % 3 %

(1) See discussion on page 50 —DTC Product Descriptions, Key Definitions and Supplemental Information.

(1) See discussion on pages 71-72 —DTC Product Descriptions, Key Definitions and Supplemental Information.

(2) Total may not equal the sum of the column due to rounding.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.50 to $8.15 due to increases in retail pricing, partially offset by a higher mix of subscribers to promotional offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber decreased from $6.10 to $5.91 due to a higher mix of subscribers to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.70 to $1.28 due to higher advertising revenue and increases in retail pricing, partially offset by a higher mix of subscribers from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.11 to $12.29 due to increases in retail pricing, partially offset by lower per-subscriber advertising revenue and a higher mix of subscribers to promotional offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.08 to $93.61 due to increases in retail pricing.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2023

Domestic Disney+ average monthly revenue per paid subscriber increased from $5.95 to $8.15 due to increases in retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers to multi-product offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.62 to $5.91 due to increases in retail pricing and a favorable Foreign Exchange Impact, partially offset by a higher mix of subscribers to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.74 to $1.28 due to higher advertising revenue and increases in retail pricing, partially offset by a higher mix of subscribers from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.46 to $12.29 reflecting lower per-subscriber advertising revenue, a higher mix of subscribers to multi-product offerings, lower per-subscriber premium add-on revenue and a higher mix of subscribers to promotional offerings, partially offset by increases in retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $87.90 to $93.61 due to increases in retail pricing, partially offset by lower per-subscriber advertising revenue.

Average Monthly Revenue Per Paid Subscriber - Second Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2024

Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.15 to $8.00 due to a higher mix of wholesale subscribers, partially offset by increases in retail pricing.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.91 to $6.66 due to increases in retail pricing and a lower mix of subscribers to promotional offerings.

Disney+ Hotstar average monthly revenue per paid subscriber decreased from $1.28 to $0.70 due to lower advertising revenue.

Hulu SVOD Only average monthly revenue per paid subscriber decreased from $12.29 to $11.84 due to lower advertising revenue, partially offset by increases in retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $93.61 to $95.01 due to increases in retail pricing and a lower mix of subscribers to promotional offerings, partially offset by lower advertising revenue.

Average Monthly Revenue Per Paid Subscriber - Second Quarter of Fiscal 2024 Comparison to Second Quarter of Fiscal 2023

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.14 to $8.00 due to increases in retail pricing, partially offset by a higher mix of wholesale subscribers and of subscribers to multi-product offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.93 to $6.66 due to increases in retail pricing, partially offset by the addition of subscribers to ad-supported offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.59 to $0.70 due to increases in retail pricing, partially offset by a higher mix of subscribers from lower-priced markets and lower advertising revenue.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $11.73 to $11.84 reflecting increases in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings and to promotional offerings, lower premium add-on revenue and a higher mix of wholesale subscribers.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $92.32 to $95.01 due to increases in retail pricing, partially offset by lower advertising and premium add-on revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Programming and production costs

5 unchanged sentences

$ (4,414) $ (4,530) 3 %

Higher programming and production costs at Hulu in the current quarter compared to the prior-year quarter were due to more content provided on the service and higher subscriber-based fees for programming the Live TV service.

These increases were partially offset by lower average costs per hour of content available on the service.

The increase in subscriber-based fees for programming the Live TV service was attributable to rate increases and more subscribers.

The decrease in programming and production costs at Disney+ and other in the current quarter compared to the prior-year quarter was due to lower average costs per hour of content available on Disney+, partially offset by more content provided on the service and higher costs for ICC cricket programming.

The increase in costs for ICC cricket programming was attributable to higher average costs per match and more matches aired.

The decrease in other operating expense was due to lower technology and distribution spend reflecting the impact of cost saving initiatives.

Higher programming and production costs at Hulu in the current quarter compared to the prior-year quarter were primarily due to higher subscriber-based fees for programming the Hulu Live TV service and more programming provided on the service, partially offset by lower average costs per hour of content available on the service.

The increase in Hulu Live TV subscriber-based fees was attributable to rate increases and more subscribers.

Programming and production costs at Disney+ and other in the current quarter were comparable to the prior-year quarter as lower average costs per hour of content available was offset by more content provided on the service.

The decrease in other operating expense was due to lower distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $34 million, to $1,121 million from $1,087 million, due to an increase in marketing costs at Hulu.

Depreciation and amortization

Depreciation and amortization decreased $26 million, to $70 million from $96 million driven by assets that were fully depreciated.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $846 million, to $138 million from $984 million, due to a lower loss at Disney+ and higher operating income at Hulu.

Selling, general, administrative and other costs increased $151 million, to $1,106 million from $955 million, due to higher marketing costs.

Operating Income (Loss) from Direct-to-Consumer

Operating results from Direct-to-Consumer increased $634 million, to income of $47 million from a loss of $587 million, due to improved results at Disney+.

Content Sales/Licensing and Other

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

TV/VOD distribution $ 470 $ 790 (41) %

7 unchanged sentences

Equity in the income (loss) of investees (2) 1 nm

Operating Loss $ (224) $ (1) >(100) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating Income (Loss)

$ (18) $ 83 nm

Revenues - TV/VOD distribution

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Revenues - Theatrical distribution

The decrease in theatrical distribution revenue was due to the performance of The Marvels in the current quarter compared to Avatar:

The Way of Water and Black Panther:

Wakanda Forever in the prior-year quarter.

Other titles released in the current quarter included Wish while the prior-year quarter included Strange World .

Revenues - Other

The increase in other revenue was driven by higher revenue at Lucasfilm’s special effects business.

Theatrical distribution revenue was lower as there were no significant titles released in the current quarter compared to Ant-Man And The Wasp:

Quantumania in the prior-year quarter.

The prior-year quarter also included the benefit of the ongoing performance of Avatar:

The Way of Water , which was released in December 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating expenses

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Programming and production costs $ (762) $ (1,392) 45 %

1 unchanged sentence

$ (926) $ (1,612) 43 %

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and, to a lesser extent, TV/VOD distribution revenues, partially offset by an increase in film cost impairments.

The decrease in distribution costs and cost of goods sold was driven by lower theatrical distribution costs, partially offset by an increase at Lucasfilm’s special effects business.

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and TV/VOD distribution revenues, partially offset by higher film cost impairments in the current quarter.

The decrease in distribution costs and cost of goods sold was attributable to lower theatrical distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $137 million, to $585 million from $722 million, primarily due to lower theatrical marketing costs reflecting fewer significant releases in the current quarter.

Operating Loss from Content Sales/Licensing and Other

Operating loss from Content Sales/Licensing and Other increased $223 million to $224 million from $1 million primarily due to lower theatrical distribution results.

Selling, general, administrative and other costs decreased $168 million, to $382 million from $550 million, driven by lower theatrical marketing costs reflecting the absence of significant releases in the current quarter.

Operating Income (Loss) from Content Sales/Licensing and Other

Operating results from Content Sales/Licensing and Other decreased $101 million, to a loss of $18 million from income of $83 million due to lower theatrical distribution results and higher film cost impairments.

Items Excluded from Segment Operating Income Related to Entertainment

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Restructuring and impairment charges (1)

$ (717) $ (112) >(100) %

TFCF and Hulu acquisition amortization (2)

(343) (459) 25 %

Restructuring and impairment charges (2)

Gain on sale of a business

(1) Charges for the current quarter were due to a goodwill impairment related to linear networks.

Charges for the prior-year quarter were primarily for severance.

(2) In the current quarter, amortization of intangible assets was $271 million and amortization of step-up on film and television costs was $69 million.

In the prior-year quarter, amortization of intangible assets was $309 million and amortization of step-up on film and television costs was $147 million.

(2) Charges for the prior-year quarter related to exiting our businesses in Russia.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Affiliate fees $ 2,678 $ 2,766 (3) %

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Equity in the income of investees 6 16 (63) %

Operating Loss

Operating Income

$ 778 $ 794 (2) %

1 unchanged sentence

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Domestic $ 2,369 $ 2,435 (3) %

1 unchanged sentence

2,615 2,703 (3) %

Star (India) 65 69 (6) %

$ 2,678 $ 2,766 (3) %

Domestic ESPN affiliate revenue was comparable to the prior-year quarter as an increase of 6% from higher contractual rates was offset by a decrease of 6% from fewer subscribers.

The increase in international ESPN affiliate revenue was due to an increase of 41% from higher contractual rates, partially offset by decreases of 20% from fewer subscribers and 13% from an unfavorable Foreign Exchange Impact.

Lower domestic ESPN affiliate revenue was driven by a decrease of 8% from fewer subscribers, partially offset by an increase of 6% from higher contractual rates.

The decrease in international ESPN affiliate revenue was due to decreases of 47% from an unfavorable foreign exchange impact and 7% from fewer subscribers, partially offset by an increase of 46% from higher contractual rates.

Revenues - Advertising

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Domestic $ 870 $ 701 24 %

1 unchanged sentence

$ 950 $ 781 22 %

Star (India) 184 72 >100 %

$ 1,351 $ 1,262 7 %

Lower domestic ESPN advertising revenue was due to decreases of 1% from lower rates and 1% from fewer impressions.

These decreases reflected the timing of College Football Playoff (CFP) games relative to our fiscal period, partially offset by the benefits from the timing of the week 17 NFL game that aired in the current quarter compared to the second quarter of the prior year and the simulcast of certain NFL games on the ABC Network.

The timing of CFP games reflected the airing of three CFP host games compared to the airing of two host games and two semi-final games in the prior-year quarter.

The increase in domestic ESPN advertising revenue was primarily due to increases of 15% from higher rates and 3% from higher average viewership.

These increases included the benefits from an additional College Football Playoff (CFP) game due to timing and an additional NFL playoff game in the current quarter.

In the current quarter, we aired the CFP championship game, two semi-final games and one host game compared to the CFP championship game and two host games in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The increase in Star advertising revenue in the current quarter compared to the prior-year quarter was due to higher impressions, partially offset by lower rates.

Higher impressions were due to increases in average units delivered and average viewership, both of which reflected the airing of more hours of ICC cricket programming compared to the prior-year quarter.

Revenues - Subscription fees

Subscription fees increased $36 million, to $415 million from $379 million, due to increases of 6% from higher rates and 3% from more subscribers.

Subscription fees increased $37 million, to $417 million from $380 million, due to higher rates.

Revenues - Other

Other revenue increased $54 million, to $400 million from $346 million, due to higher sub-licensing fees from ICC cricket programming.

Other revenue decreased $32 million, to $267 million from $299 million, due to the comparison to sub-licensing fees from Board of Control for Cricket in India (BCCI) programming in the prior-year quarter as we did not renew the rights for the current fiscal year, and lower Ultimate Fighting Championship (UFC) pay-per-view fees primarily attributable to the impact of airing one less event in the current quarter compared to the prior-year quarter.

These decreases were partially offset by higher fees received from the Entertainment segment to program sports on Star+.

In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of ESPN+ (1) , and we believe these metrics are useful to investors in analyzing the business:

Quarter Ended % Change Better (Worse)

2023 September 30,

2024 December 30,

30, 2023 Dec.

2023 April 1,

30, 2023 Mar.

Paid subscribers (1) at (in millions)

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(1) See discussion on page 71-72 —DTC Product Descriptions, Key Definitions and Supplemental Information.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to Fourth Quarter of Fiscal 2023

Average Monthly Revenue Per Paid Subscriber - Second Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2024

ESPN+ average monthly revenue per paid subscriber increased from $6.09 to $6.30 due to increases in retail pricing and higher advertising revenue.

Average Monthly Revenue Per Paid Subscriber - First Quarter of Fiscal 2024 Comparison to First Quarter of Fiscal 2023

Average Monthly Revenue Per Paid Subscriber - Second Quarter of Fiscal 2024 Comparison to Second Quarter of Fiscal 2023

ESPN+ average monthly revenue per paid subscriber increased from $5.64 to $6.30 due to increases in retail pricing and higher advertising revenue.

1 unchanged sentence

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Programming and production costs

2 unchanged sentences

(2,876) (2,655) (8) %

Star (India) (684) (326) >(100) %

(102) (195) 48 %

(2,978) (2,850) (4) %

Other operating expenses (236) (222) (6) %

$ (3,214) $ (3,072) (5) %

Domestic ESPN programming and production costs decreased in the current quarter compared to the prior-year quarter due to lower CFP rights costs attributable to the timing of games relative to our fiscal periods.

Higher international ESPN programming and production costs were attributable to a new contract for soccer programming rights and an increase in production costs due to inflation, partially offset by a favorable Foreign Exchange Impact.

The increase in Star programming and production costs reflected higher rights costs for ICC cricket programming due to an increase in average costs per match and more matches aired.

Domestic ESPN programming and production costs increased in the current quarter compared to the prior-year quarter due to higher CFP rights costs attributable to the additional game in the current quarter.

International ESPN programming and production costs were comparable to the prior-year quarter due to a favorable foreign exchange impact, largely offset by inflation and higher costs for soccer programming.

The decrease in Star India programming and production costs reflected the comparison to costs for BCCI cricket programming in the prior-year quarter, partially offset by an increase in Indian Premier League (IPL) cricket programming costs due to more matches aired in the current quarter compared to the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Other operating expenses decreased $36 million, to $220 million from $256 million, primarily due to lower technology and distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $45 million, to $341 million from $296 million, reflecting the comparison to the gain on the sale of an interest in our X Games business in the prior-year quarter and an unfavorable Foreign Exchange Impact.

Operating Loss from Sports

Operating loss decreased $61 million, to $103 million from $164 million, due to an improvement at domestic ESPN, partially offset by lower results at Star and, to a lesser extent, international ESPN.

Selling, general, administrative and other costs decreased $42 million, to $315 million from $357 million, reflecting a favorable foreign exchange impact.

Operating Income from Sports

Operating income decreased $16 million, to $778 million from $794 million, reflecting a decrease at domestic ESPN, largely offset by improved results at Star India.

Supplemental revenue and operating income

1 unchanged sentence

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

2 unchanged sentences

4,207 4,099 3 %

Star (India) 399 233 71 %

105 127 (17) %

$ 4,312 $ 4,226 2 %

Supplemental operating income (loss) detail

Domestic $ 255 $ (41) nm

International (56) 3 nm

Star (India) (315) (129) >(100) %

Domestic $ 780 $ 858 (9) %

International 19 19 — %

799 877 (9) %

(27) (99) 73 %

Equity in the income of investees 6 16 (63) %

3 unchanged sentences

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

TFCF acquisition amortization (1)

$ (89) $ (97) 8 %

Restructuring and impairment charges

(1) Amortization of intangible assets

3 unchanged sentences

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Theme park admissions $ 2,806 $ 2,428 16 %

7 unchanged sentences

Depreciation and amortization (635) (651) 2 %

Equity in the loss of investees — (2) nm

Operating Income $ 2,286 $ 2,036 12 %

1 unchanged sentence

Theme park admissions revenue growth was due to increases of 12% from higher average per capita ticket revenue and 4% from attendance growth.

Attendance growth reflected an increase at our international parks attributable to higher attendance at Shanghai Disney Resort and Hong Kong Disneyland Resort, partially offset by a decrease in attendance at Disneyland Paris.

Shanghai Disney Resort was open for all of the current quarter compared to 58 days in the prior-year quarter as a result of COVID-19 related closures.

At our domestic parks, an increase in attendance at Disneyland Resort was largely offset by a decrease at Walt Disney World Resort.

Attendance growth was due to an increase at our international parks attributable to higher attendance at Hong Kong Disneyland Resort, which benefited from the park being open for more days in the current quarter, Shanghai Disney Resort and, to a lesser extent, Disneyland Paris.

Growth in attendance at our domestic parks was due to an increase in attendance at Disneyland Resort.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was primarily due to increases of 3% from higher average ticket prices for cruise line sailings and 2% from additional passenger cruise days.

Higher resorts and vacations revenue was due to increases of 5% from higher average ticket prices for cruise line sailings, 2% from higher occupied hotel room nights and 2% from an increase in average daily hotel room rates.

Revenues - Park & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth reflected increases of 5% from higher volume and 1% from guest spending growth.

Higher volume was attributable to an increase at our international parks and experiences due to growth at Shanghai Disney Resort and, to a lesser extent, at Hong Kong Disneyland Resort.

Parks & Experiences merchandise, food and beverage revenue growth resulted from increases of 4% from higher volumes and 2% from guest spending growth.

Higher volumes were primarily attributable to an increase at our international parks and experiences reflecting growth at Hong Kong Disneyland Resort.

Revenues - Merchandise licensing and retail

Lower merchandise licensing and retail revenue was due to decreases of 4% from retail and 1% from an unfavorable Foreign Exchange Impact, partially offset by an increase of 4% from licensing.

Lower retail revenue was due to a decrease in online sales.

The increase in licensing revenue was attributable to higher sales of products based on Spider-Man and Mickey and Friends, partially offset by a decrease in sales of products based on Star Wars.

Merchandise licensing and retail revenue was comparable to the prior-year quarter as an increase of 5% from licensing was largely offset by decreases of 2% from retail and 2% from an unfavorable foreign exchange impact.

The increase in licensing revenue was driven by higher sales of products based on Spider-Man and Mickey and Friends, partially offset by a decrease in sales of products based on Star Wars.

Revenues - Parks Licensing and Other

The increase in parks licensing and other revenue was driven by higher sponsorship revenues and a favorable foreign exchange impact.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Operating labor $ (2,068) $ (1,826) (13) %

4 unchanged sentences

Higher operating labor was primarily due to inflation.

The increase in infrastructure costs was driven by higher operations support costs and increased costs for new guest offerings.

Higher other operating expense was primarily attributable to inflation, increased costs for new guest offerings and higher operations support costs.

The increase in infrastructure costs was driven by higher costs for new guest offerings and an increase in operations support costs.

Cost of goods sold and distribution costs increased due to higher volumes.

The increase in other operating expense was attributable to volume growth, higher operations support costs and inflation.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Selling, general, administrative and other

Selling, general, administrative and other costs increased $26 million, to $925 million from $899 million.

The increase included the impact of inflation and higher costs for new guest offerings, partially offset by the comparison to a loss in the prior-year quarter on the disposal of our ownership interest in Villages Nature.

Selling, general, administrative and other costs increased $110 million, to $963 million from $853 million driven by higher marketing costs.

Depreciation and amortization

1 unchanged sentence

Operating Income from Experiences

Segment operating income increased from $2,862 million to $3,105 million due to growth at our international parks and resorts.

Segment operating income increased from $2,036 million to $2,286 million due to growth at our international and domestic parks and experiences.

Supplemental revenue and operating income

1 unchanged sentence

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

10 unchanged sentences

$ 2,286 $ 2,036 12 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

BUSINESS SEGMENT RESULTS - Current Period Six-Month Results Compared to the Prior-Year Six-Month Period

Entertainment

Revenue and operating results for the Entertainment segment are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Linear Networks $ 5,568 $ 6,201 (10) %

Direct-to-Consumer 11,188 9,805 14 %

Content Sales/Licensing and Other 3,021 4,978 (39) %

$ 19,777 $ 20,984 (6) %

Segment operating income (loss):

Linear Networks $ 1,988 $ 2,289 (13) %

Direct-to-Consumer (91) (1,571) 94 %

Content Sales/Licensing and Other (242) 82 nm

$ 1,655 $ 800 >100 %

The decrease in Entertainment revenues was due to lower theatrical distribution revenue and, to a lesser extent, decreases in TV/VOD distribution, advertising and affiliate revenue.

These decreases were partially offset by subscription revenue growth.

Operating income

The increase in operating income was due to improved results at Direct-to-Consumer, partially offset by declines at Content Sales/Licensing and Other and Linear Networks.

Linear Networks

Operating results for Linear Networks are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Affiliate fees $ 3,525 $ 3,798 (7) %

Advertising 1,968 2,298 (14) %

Other 75 105 (29) %

Total revenues 5,568 6,201 (10) %

Operating expenses (2,629) (2,977) 12 %

Selling, general, administrative and other (1,241) (1,263) 2 %

Depreciation and amortization (23) (24) 4 %

Equity in the income of investees 313 352 (11) %

Operating Income $ 1,988 $ 2,289 (13) %

Revenues - Affiliate fees

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

$ 2,986 $ 3,166 (6) %

International

539 632 (15) %

$ 3,525 $ 3,798 (7) %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The decrease in domestic affiliate revenue was due to a decline of 11% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 6% from higher contractual rates.

Lower international affiliate revenue was attributable to decreases of 10% from fewer subscribers and 2% from lower contractual rates.

Revenues - Advertising

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

$ 1,449 $ 1,793 (19) %

International

$ 1,968 $ 2,298 (14) %

The decline in domestic advertising revenue was due to decreases of 13% from fewer impressions and 5% from lower rates.

The decrease in impressions was due to lower average viewership and, to a lesser extent, fewer units delivered.

Higher international advertising revenue was due to an increase of 6% from higher rates, partially offset by a decrease of 3% from an unfavorable foreign exchange impact.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Programming and production costs

$ (1,808) $ (2,095) 14 %

International

(361) (341) (6) %

Total programming and production costs

(2,169) (2,436) 11 %

Other operating expenses

(460) (541) 15 %

$ (2,629) $ (2,977) 12 %

The decrease in domestic programming and production costs was due to fewer hours of scripted programming in the current period, reflecting the impact of guild strikes.

Scripted programming was primarily replaced with lower average cost non-scripted programming as well as ESPN on ABC sports programming, the costs of which are recognized in the Sports segment.

International programming and production costs increased due to inflation.

The decrease in other operating expenses was driven by lower technology and distribution costs.

Equity in the Income of Investees

Income from equity investees decreased $39 million, to $313 million from $352 million, due to lower income from A+E Television Networks attributable to decreases in advertising and affiliate revenue, partially offset by a gain on the sale of an investment.

Operating Income from Linear Networks

Operating income from Linear Networks decreased $301 million, to $1,988 million from $2,289 million, due to decreases at our domestic and international businesses.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income detail for Linear Networks:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

$ 4,479 $ 5,005 (11) %

International

1,089 1,196 (9) %

$ 5,568 $ 6,201 (10) %

Supplemental operating income detail

$ 1,358 $ 1,514 (10) %

International

317 423 (25) %

Equity in the income of investees 313 352 (11) %

$ 1,988 $ 2,289 (13) %

Direct-to-Consumer

Operating results for Direct-to-Consumer are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Subscription fees $ 9,312 $ 8,086 15 %

Advertising 1,736 1,572 10 %

140 147 (5) %

Total revenues 11,188 9,805 14 %

Operating expenses (8,907) (9,153) 3 %

Selling, general, administrative and other (2,227) (2,042) (9) %

Depreciation and amortization (145) (181) 20 %

Operating Loss $ (91) $ (1,571) 94 %

Revenues - Subscription fees

Growth in subscription fees reflected an increase of 10% from higher rates attributable to increases in retail pricing at Disney+ Core and, to a lesser extent, Hulu, and 5% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu.

Revenues - Advertising

Higher advertising revenue reflected an increase of 28% from higher impressions, partially offset by a decrease of 18% from lower rates.

The increase in impressions was due to growth of the ad-supported Disney+ service, which launched in December 2022, airing more hours of International Cricket Council (ICC) cricket programming compared to the prior-year period and higher impressions at Hulu.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Average Monthly Revenue Per Paid Subscriber:

Six Months Ended % Change

2024 April 1,

Domestic (U.S.

and Canada) $ 8.07 $ 6.56 23 %

International (excluding Disney+ Hotstar) 6.28 5.78 9 %

Disney+ Core 7.06 6.13 15 %

Disney+ Hotstar 1.00 0.67 49 %

SVOD Only 12.06 12.10 — %

Live TV + SVOD 94.30 90.11 5 %

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.56 to $8.07 due to increases in retail pricing, partially offset by a higher mix of wholesale subscribers.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.78 to $6.28 due to increases in retail pricing, partially offset by the addition of subscribers to ad-supported offerings.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.67 to $1.00 due to increases in retail pricing and higher advertising revenue.

The average monthly revenue per paid subscriber for Hulu SVOD Only was comparable to the prior-year period as a higher mix of subscribers to promotional offerings, decreases in advertising revenue and premium add-on revenue, and a higher mix of subscribers to multi-product offerings were largely offset by increases in retail pricing.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.11 to $94.30 due to increases in retail pricing, partially offset by decreases in advertising revenue and premium add-on revenue.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Programming and production costs

Hulu $ (4,295) $ (4,234) (1) %

Disney+ and other

(2,767) (2,865) 3 %

Total programming and production costs (7,062) (7,099) 1 %

Other operating expense (1,845) (2,054) 10 %

$ (8,907) $ (9,153) 3 %

Higher programming and production costs at Hulu were due to higher subscriber-based fees for programming the Hulu Live TV service and more programming provided on the service, partially offset by lower average costs per hour of content available on the service.

The increase in Hulu Live TV subscriber-based fees was attributable to rate increases and more subscribers.

The decrease in programming and production costs at Disney+ and other was attributable to a decrease in non-sports content costs, largely offset by higher costs for ICC cricket programming due to higher average costs per match and more matches aired.

The decrease in non-sports content costs was due to lower average cost per hour of content available, partially offset by more content provided on the service.

Other operating expenses decreased due to lower distribution costs.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $185 million, to $2,227 million from $2,042 million, due to higher marketing costs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Depreciation and amortization

Depreciation and amortization decreased $36 million, from $181 million to $145 million, primarily due to assets that were fully depreciated.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $1,480 million, to $91 million from $1,571 million, due to a lower loss at Disney+ and, to a lesser extent, higher operating income at Hulu.

Content Sales/Licensing and Other

Operating results for Content Sales/Licensing and Other are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

TV/VOD distribution

$ 992 $ 1,503 (34) %

Theatrical distribution 374 1,907 (80) %

Home entertainment distribution

Other 1,257 1,181 6 %

Total revenues 3,021 4,978 (39) %

Operating expenses (2,101) (3,462) 39 %

Selling, general, administrative and other (967) (1,272) 24 %

Depreciation and amortization (191) (163) (17) %

Equity in the income (loss) of investees (4) 1 nm

Operating Income (Loss)

$ (242) $ 82 nm

Revenues - TV/VOD distribution

The decrease in TV/VOD distribution revenue was attributable to lower sales of episodic content.

Revenues - Theatrical distribution

The decrease in theatrical distribution revenue was due to the performance of Wish and The Marvels in the current period compared to Avatar:

The Way of Water , Black Panther:

Wakanda Forever and Ant-Man and the Wasp:

Quantumania in the prior-year period.

Other titles released in the current period included Poor Things , while the prior-year period included The Menu and Strange World .

Revenues - Other

The increase in other revenue was attributable to higher music revenues and an increase in revenue at Lucasfilm’s special effects business primarily due to more projects.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Programming and production costs $ (1,752) $ (2,997) 42 %

Distribution costs and cost of goods sold

(349) (465) 25 %

$ (2,101) $ (3,462) 39 %

Lower distribution costs and cost of goods sold were driven by decreased theatrical distribution costs, partially offset by an increase at Lucasfilm’s special effects business due to more projects.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $305 million, to $967 million from $1,272 million, primarily due to lower theatrical marketing costs reflecting fewer significant releases in the current period.

Depreciation and amortization

Depreciation and amortization increased $28 million, to $191 million from $163 million, attributable to increased investment in technology assets.

Operating Loss from Content Sales/Licensing and Other

The operating results from Content Sales/Licensing and Other decreased $324 million, to a loss of $242 million from income of $82 million due to lower theatrical distribution results and higher film cost impairments.

Items Excluded from Segment Operating Income Related to Entertainment

The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Restructuring and impairment charges (1)

$ (717) $ (181) >(100) %

TFCF and Hulu acquisition amortization (2)

(696) (939) 26 %

Gain on sale of a business — 28 (100) %

(1) Charges for the current period were due to a goodwill impairment related to linear networks.

Charges for the prior-year period were due to severance and exiting our businesses in Russia.

(2) In the current period, amortization of intangible assets was $553 million and amortization of step-up on film and television costs was $137 million.

In the prior-year period, amortization of intangible assets was $627 million and amortization of step-up on film and television costs was $306 million.

Operating results for Sports are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Affiliate fees $ 5,347 $ 5,419 (1) %

Advertising 2,301 2,043 13 %

Subscription fees 832 759 10 %

Other 667 645 3 %

Total revenues 9,147 8,866 3 %

Operating expenses (7,813) (7,573) (3) %

Selling, general, administrative and other (656) (653) — %

Depreciation and amortization (22) (29) 24 %

Equity in the income of investees 19 19 — %

Operating Income $ 675 $ 630 7 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues - Affiliate fees

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Domestic $ 4,708 $ 4,763 (1) %

International 511 524 (2) %

5,219 5,287 (1) %

128 132 (3) %

$ 5,347 $ 5,419 (1) %

The decrease in domestic ESPN affiliate revenue was primarily due to a decline of 7% from fewer subscribers, partially offset by an increase of 6% from higher contractual rates.

The decrease in international ESPN affiliate revenue was primarily attributable to decreases of 30% from an unfavorable foreign exchange impact and 6% from fewer subscribers, partially offset by an increase of 35% from higher contractual rates.

Revenues - Advertising

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Domestic $ 1,988 $ 1,839 8 %

International 92 98 (6) %

2,080 1,937 7 %

221 106 >100 %

$ 2,301 $ 2,043 13 %

The increase in domestic ESPN advertising revenue was due to increases of 5% from higher rates and 2% from an increase in sponsorship revenue.

Growth in Star India advertising revenue in the current period compared to the prior-year period was due to higher impressions, partially offset by lower rates.

Higher impressions were due to increases in units delivered and average viewership, both of which reflected more hours of ICC cricket programming compared to the prior-year period.

Revenues - Subscription fees

Subscription fees increased $73 million, to $832 million from $759 million, due to increases of 8% from higher rates and 2% from more subscribers.

Six Months Ended % Change

2024 April 1,

Average Monthly Revenue per Paid Subscriber for the period

$ 6.20 $ 5.58 11 %

ESPN+ average monthly revenue per paid subscriber increased from $5.58 to $6.20 due to increases in retail pricing and higher advertising revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Programming and production costs

Domestic $ (6,005) $ (6,041) 1 %

International (566) (533) (6) %

(6,571) (6,574) — %

(786) (521) (51) %

(7,357) (7,095) (4) %

Other operating expenses (456) (478) 5 %

$ (7,813) $ (7,573) (3) %

Programming and production costs at domestic ESPN decreased in the current period compared to the prior-year period due to a lower cost mix of college football programming rights in the current period, partially offset by contractual rate increases.

The increase in international ESPN programming and production costs was attributable to higher soccer rights costs and production cost inflation, partially offset by a favorable foreign exchange impact.

The increase in soccer rights costs was due to higher rates and new rights.

Higher Star India programming and production costs were attributable to higher rights costs for ICC and, to a lesser extent, IPL cricket programming in the current period compared to the prior-year period.

The increase in ICC cricket programming costs was due to an increase in average costs per match and more matches aired, while the increase in costs for IPL cricket programming was due to more matches aired.

These increases were partially offset by the comparison to costs for BCCI cricket programming in the prior-year period as we did not renew the rights for the current fiscal year.

Operating Income from Sports

Operating income from Sports increased $45 million, to $675 million from $630 million, due to growth at domestic ESPN, partially offset by lower results at Star India and international ESPN.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental revenue and operating income

The following table provides supplemental revenue and operating income (loss) detail for Sports:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

Domestic $ 7,939 $ 7,782 2 %

International 704 724 (3) %

8,643 8,506 2 %

$ 9,147 $ 8,866 3 %

Supplemental operating income detail

Domestic $ 1,035 $ 817 27 %

International (37) 22 nm

(342) (228) (50) %

Equity in the income of investees 19 19 — %

$ 675 $ 630 7 %

Items Excluded from Segment Operating Income Related to Sports

The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

TFCF acquisition amortization (1)

$ (185) $ (194) 5 %

Restructuring and impairment charges

(1) Amortization of intangible assets

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating results for the Experiences segment are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Theme park admissions $ 5,788 $ 5,069 14 %

Resorts and vacations 4,219 3,929 7 %

Parks & Experiences merchandise, food and beverage 4,132 3,883 6 %

Merchandise licensing and retail 2,230 2,236 — %

Parks licensing and other 1,156 1,074 8 %

Total revenues 17,525 16,191 8 %

Operating expenses (8,989) (8,245) (9) %

Selling, general, administrative and other (1,888) (1,752) (8) %

Depreciation and amortization (1,257) (1,294) 3 %

Equity in the loss of investees — (2) 100 %

Operating Income $ 5,391 $ 4,898 10 %

Revenues - Theme park admissions

The increase in theme park admissions revenue was due to increases of 11% from higher average per capita ticket revenue and 3% from attendance growth.

Attendance growth at our international parks was attributable to higher attendance at Shanghai Disney Resort and Hong Kong Disneyland Resort, which benefited from the park being open for more days in the current period.

Growth in attendance at our domestic parks was due to an increase in attendance at Disneyland Resort, partially offset by lower attendance at Walt Disney World Resort.

Revenues - Resorts and vacations

Higher resorts and vacations revenue was attributable to increases of 4% from higher average ticket prices for cruise line sailings, 1% from increased occupied hotel room nights and 1% from higher average daily hotel room rates.

Revenues - Park & Experiences merchandise, food and beverage

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 4% from higher volumes and 2% from increased average guest spending.

Revenues - Merchandise licensing and retail

Merchandise licensing and retail revenue was comparable to the prior-year period as decreases of 3% from retail and 2% from an unfavorable foreign exchange impact were largely offset by an increase of 4% from merchandise licensing.

Lower retail revenue was due to a decrease in online sales.

The increase in merchandise licensing revenue was due to higher sales of merchandise based on Spider-Man and Mickey and Friends, partially offset by lower sales of merchandise based on Star Wars.

Revenues - Parks licensing and other

The increase in parks licensing and other revenue was due to an increase in sponsorship revenue and higher royalties from Tokyo Disney Resort.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Domestic International Total

Six Months Ended Six Months Ended Six Months Ended

Increase (decrease)

Attendance 1 % 9 % 22 % 52 % 7 % 19 %

Per Capita Guest Spending 4 % 6 % 13 % 22 % 4 % 5 %

Occupancy 88 % 89 % 83 % 70 % 86 % 84 %

Available Hotel Room Nights (in thousands) 5,098 5,038 1,592 1,587 6,690 6,625

Change in Per Room Guest Spending (1)

2 % 1 % 9 % 13 % 2 % 2 %

(1) In the third quarter of the prior fiscal year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue.

The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms.

If we had applied the new method in the prior-year period, the impact would have been a decrease of approximately $26 million in the prior-year period.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Operating labor $ (4,068) $ (3,615) (13) %

Infrastructure costs (1,609) (1,472) (9) %

Cost of goods sold and distribution costs (1,702) (1,679) (1) %

Other operating expense (1,610) (1,479) (9) %

$ (8,989) $ (8,245) (9) %

The increase in operating labor was attributable to inflation, higher volumes and increased operations support costs, partially offset by cost saving initiatives.

The increase in infrastructure costs was driven by higher operations support costs and increased costs for new guest offerings.

Cost of goods sold and distribution costs increased due to higher volumes.

Other operating expense increased primarily due to inflation, higher operations support costs and volume growth.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $136 million, to $1,888 million from $1,752 million, driven by inflation and increased marketing costs for new guest offerings, partially offset by the comparison to a loss in the prior-year period on the disposal of our ownership interest in Villages Nature.

Depreciation and amortization

Depreciation and amortization decreased $37 million, to $1,257 million from $1,294 million, due to lower depreciation at our domestic parks and experiences.

Operating Income from Experiences

Segment operating income increased from $4.9 billion to $5.4 billion due to growth at our international parks and experiences and, to a lesser extent, at our consumer products business and domestic parks and experiences.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental revenue and operating income

The following table presents supplemental revenue and operating income (loss) detail for the Experiences segment:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Supplemental revenue detail

Parks & Experiences

Domestic $ 12,255 $ 11,644 5 %

International 2,998 2,278 32 %

Consumer Products 2,272 2,269 — %

$ 17,525 $ 16,191 8 %

Supplemental operating income (loss) detail

Parks & Experiences

Domestic $ 3,684 $ 3,632 1 %

International 620 235 >100 %

Consumer Products 1,087 1,031 5 %

$ 5,391 $ 4,898 10 %

CORPORATE AND UNALLOCATED SHARED EXPENSES

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

Corporate and unallocated shared expenses $ (391) $ (279) (40) % $ (699) $ (559) (25) %

Corporate and unallocated shared expenses increased $28 million for the quarter, from $280 million to $308 million, primarily due to higher rent expense and inflation.

Corporate and unallocated shared expenses increased $112 million for the quarter, from $279 million to $391 million, primarily attributable to higher costs related to our proxy solicitation and annual shareholder meeting, increased compensation costs and, to a lesser extent, other cost inflation.

Corporate and unallocated shared expenses for the current six-month period increased $140 million, from $559 million to $699 million, primarily attributable to increased compensation and human resource-related costs, higher costs related to our proxy solicitation and annual shareholder meeting, and other cost inflation.

FINANCIAL CONDITION

The change in cash and cash equivalents is as follows:

Quarter Ended % Change

(in millions) December 30,

2023 December 31,

Cash provided by (used in) operations $ 2,185 $ (974) nm

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Cash provided by operations $ 5,851 $ 2,262 >100 %

Cash used in investing activities (2,553) (2,541) — %

2 unchanged sentences

Change in cash, cash equivalents and restricted cash $ (7,509) $ (1,208) >(100) %

Operating Activities

Cash provided by operations increased $3.6 billion from $2.3 billion in the prior-year period to $5.9 billion for the current period.

The increase was due to lower film and television production spending and the timing of payments for sports rights.

The increase also reflected lower collateral payments related to our hedging program, a payment in the prior-year period related to the termination of content licenses in fiscal 2022 and higher operating cash flow at Experiences.

The increase in operating cash flow at Experiences was due to higher operating cash receipts attributable to revenue growth, partially offset by higher operating cash payments.

These increases were partially offset by payment in the current period of fiscal 2023 federal and California income taxes, which were deferred pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Operating Activities

Cash provided by operations increased $3,159 million to $2,185 million for the current quarter compared to cash used in operations of $974 million in the prior-year quarter.

The increase was due to lower film and television production spending reflecting the impact of the guild strikes in the current quarter, the timing of payments for sports rights and lower collateral payments related to our hedging program.

These increases were partially offset by the deferral of fiscal 2023 federal and California tax payments into the current quarter pursuant to relief provided by the Internal Revenue Service and California State Board of Equalization as a result of 2023 winter storms in California.

Produced and licensed programming costs

4 unchanged sentences

Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities.

The Company’s film and television production and programming activity for the quarters ended December 30, 2023 and December 31, 2022 are as follows:

Quarter Ended

(in millions) December 30,

2023 December 31,

The Company’s film and television production and programming activity for the six months ended March 30, 2024 and April 1, 2023 are as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

Beginning balances:

4 unchanged sentences

Produced film and television content 4,376 7,336

11,182 14,834

Amortization:

3 unchanged sentences

Change in produced and licensed content costs (1,699) 824

Produced and licensed content costs reclassified to assets held for sale

Other non-cash activity 414 12

8 unchanged sentences

Investing activities consist principally of investments in parks, resorts and other property and acquisition and divestiture activity.

The Company’s investing activities for the quarters ended December 30, 2023 and December 31, 2022 are as follows:

Quarter Ended

(in millions) December 30,

2023 December 31,

The Company’s investing activities for the six months ended March 30, 2024 and April 1, 2023 are as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

Investments in parks, resorts and other property:

9 unchanged sentences

Capital expenditures at the Experiences segment are principally for theme park and resort expansion, new attractions, cruise ships, capital improvements and technology.

The increase in the current quarter compared to the prior-year quarter was due to higher spend on new attractions and cruise ship fleet expansion.

The increase in the current period compared to the prior-year period was due to higher spend on new attractions and cruise ship fleet expansion.

Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment.

2 unchanged sentences

Financing Activities

Financing activities for the quarters ended December 30, 2023 and December 31, 2022 are as follows:

Quarter Ended

(in millions) December 30,

2023 December 31,

Financing activities for the six months ended March 30, 2024 and April 1, 2023 are as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

Change in borrowings

$ (470) $ (216)

Activities related to noncontrolling and redeemable noncontrolling interest (1)

Repurchases of common stock

Activities related to noncontrolling and redeemable noncontrolling interests (1)

(8,610) (722)

2 unchanged sentences

$ (10,824) $ (1,126)

(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current and prior-year quarter were due to payments for redeemable noncontrolling interests in Hulu and BAMTech, respectively (see Note 1 to the Condensed Consolidated Financial Statements).

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the quarter ended December 30, 2023 and information regarding the Company’s bank facilities.

(1) Activities related to noncontrolling and redeemable noncontrolling interests in the current and prior-year period were due to payments for redeemable noncontrolling interests in Hulu and BAMTech, respectively (see Note 1 to the Condensed Consolidated Financial Statements).

See Note 6 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the six months ended March 30, 2024 and information regarding the Company’s bank facilities.

The Company may use cash balances, operating cash flows, commercial paper borrowings up to the amount of its unused $12.25 billion bank facilities and incremental term debt issuances to retire or refinance other borrowings before or as they come due.

See Note 11 to the Condensed Consolidated Financial Statements for a summary of dividends declared and shares authorized for repurchase in fiscal 2024.

There were no dividends or share repurchases in fiscal 2023.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control.

We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital

See Note 12 to the Condensed Consolidated Financial Statements for a summary of dividends and share repurchases in fiscal 2024.

There were no dividends paid or share repurchases in fiscal 2023.

The Company is targeting a total of $3 billion in share repurchases in fiscal 2024.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

expenditures related to the expansion of existing businesses and development of new projects.

The Company’s operating cash flow and access to the capital markets can be impacted by factors outside of its control.

In addition, the Company could undertake other measures to ensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends;

reducing or stopping share repurchases;

reducing capital spending;

2 unchanged sentences

The Company’s borrowing costs can also be impacted by short- and long-term debt ratings assigned by nationally recognized rating agencies, which are based, in significant part, on the Company’s performance as measured by certain credit metrics such as leverage and interest coverage ratios.

As of December 30, 2023, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

As of March 30, 2024, Moody’s Investors Service’s long- and short-term debt ratings for the Company were A2 and P-1 (Stable), respectively, Standard and Poor’s long- and short-term debt ratings for the Company were A- and A-2 (Positive), respectively, and Fitch’s long- and short-term debt ratings for the Company were A- and F2 (Stable), respectively.

The Company’s bank facilities contain only one financial covenant, relating to interest coverage of three times earnings before interest, taxes, depreciation and amortization, including both intangible amortization and amortization of our film and television production and programming costs.

On December 30, 2023, the Company met this covenant by a significant margin.

On March 30, 2024, the Company met this covenant by a significant margin.

The Company’s bank facilities also specifically exclude certain entities, including the Asia Theme Parks, from any representations, covenants or events of default.

5 unchanged sentences

By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages.

Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flow in order to allow management to focus on core business issues and challenges.

Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flows in order to allow management to focus on core business issues and challenges.

Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S.

15 unchanged sentences

The Company does not enter into these transactions or any other hedging transactions for speculative purposes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

As disclosed in Note 14 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

1 unchanged sentence

Contractual Commitments

See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

See Note 14 to the Condensed Consolidated Financial Statements and Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

OTHER MATTERS

22 unchanged sentences

If projected usage changes we may need to accelerate or slow the recognition of amortization expense.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Cost of content that is predominantly monetized as a group is tested for impairment by comparing the present value of the discounted cash flows of the group to the aggregate unamortized costs of the group.

1 unchanged sentence

If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group.

If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

estimated fair value.

If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value.

Licensed content is included as part of the group within which it is monetized for purposes of impairment testing.

25 unchanged sentences

The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit.

The quantitative assessment compares the fair value of each goodwill reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities to reporting units including goodwill, and the determination of fair value of the reporting units.

The quantitative assessment compares the fair value of each reporting unit to its carrying amount, and to the extent the carrying amount exceeds the fair value, an impairment of goodwill is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

The impairment test for goodwill requires judgment related to the identification of reporting units, the assignment of assets and liabilities including goodwill to reporting units, and the determination of fair value of the reporting units.

To determine the fair value of our reporting units, we generally use a present value technique (discounted cash flows) corroborated by market multiples when available and as appropriate.

The discounted cash flow analyses are sensitive to our estimated projected future cash flows as well as the discount rates used to calculate their present value.

Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry growth projections.

Discount rates for each reporting unit are determined based on the inherent risks of each reporting unit’s underlying operations.

We believe our estimates are consistent with how a marketplace participant would value our reporting units.

As discussed in our Critical Accounting Policies and Estimates section of our fiscal 2023 Annual Report on Form 10-K, the carrying amounts of our entertainment and international sports linear networks reporting units exceeded their fair values and we recorded non-cash goodwill impairment charges of approximately $0.7 billion in the fourth quarter of fiscal 2023.

The entertainment linear networks reporting unit goodwill after impairment is approximately $8 billion and the international sports

Our future cash flows are based on internal forecasts for each reporting unit, which consider projected inflation and other economic indicators, as well as industry

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

linear networks reporting unit goodwill was fully impaired.

In addition, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%.

growth projections.

Discount rates are determined based on the inherent risks of the underlying operations.

We believe our estimates are consistent with how a marketplace participant would value our businesses.

As discussed in Note 17 to the Condensed Consolidated Financial Statements, the Company recorded a non-cash goodwill impairment charge at our entertainment linear networks reporting unit of $0.7 billion.

The entertainment linear networks reporting unit goodwill after impairment is approximately $6 billion.

After impairment, our entertainment linear networks reporting unit does not have excess fair value over carrying amount, and a 25 basis point increase in the discount rate or a 1% reduction in projected annual cash flows used to determine fair value would each result in an incremental impairment charge of approximately $0.3 billion.

In addition, as discussed in our Critical Accounting Policies and Estimates section of our fiscal 2023 Annual Report on Form 10-K, the fair value of our entertainment DTC services reporting unit exceeded its carrying amount by less than 10%.

Goodwill of the entertainment DTC services reporting unit is approximately $45 billion.

Based on our annual assessment performed in the fourth quarter of fiscal 2023, for our entertainment linear networks reporting unit, a 25 basis point increase in the discount rate or a 1% reduction in projected cash flows used to determine fair value would result in an incremental impairment charge of approximately $0.3 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would result in an impairment of $0.5 billion, and a 1% reduction in projected cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine fair value would eliminate the excess fair value over carrying amount, and a 1% reduction in projected annual cash flows would result in a decrease in the excess fair value over carrying amount by approximately $0.9 billion.

Significant judgments and assumptions in the discounted cash flow model used to determine fair value relate to future revenues and certain operating expenses, terminal growth rates and discount rates.

Changes to these assumptions, shifts in market trends, or the impact of macroeconomic events could produce test results in the future that differ, and we could be required to record additional impairment charges.

In addition, changes to our business strategy, including entering into a joint venture arrangement or the sale of a business, could result in impairment charges.

To test other indefinite-lived intangible assets for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of each of its indefinite-lived intangible assets exceeds its fair value.

12 unchanged sentences

Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, estimates of future cash flows and the discount rate used to determine fair values.

As discussed in Note 4 to the Condensed Consolidated Financial Statements, the Company recorded a non-cash goodwill impairment charge related to the Star India Transaction of $1.3 billion to reflect Star India at its estimated fair value less costs to sell.

The fair value and carrying amount of Star India are subject to change depending on developments and results of operations for the duration that Star India is classified as held for sale and we may be required to record additional impairment charges.

The Company has investments in equity securities.

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Allowance for Credit Losses

We evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions, and reasonable and supportable forecasts of future economic conditions.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

conditions, and reasonable and supportable forecasts of future economic conditions.

In times of economic turmoil, including COVID-19, our estimates and judgments with respect to the collectability of our receivables are subject to greater uncertainty than in more stable periods.

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We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings.

These estimates are based upon an analysis of potential results,

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate.

These estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies and have been developed in consultation with outside counsel as appropriate.

From time to time, we are also involved in other contingent matters for which we accrue estimates for a probable and estimable loss.

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In Latin America, if a subscriber has either the standalone Disney+ or Star+ service or subscribes to Combo+, the subscriber is counted as one Disney+ paid subscriber.

Subscribers include those who receive a service through wholesale arrangements including those for which the service is distributed to each subscriber of an existing content distribution tier.

Subscribers include those who receive an entitlement to a service through wholesale arrangements, including those for which the service is available to each subscriber of an existing content distribution tier.

When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions.

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Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period.

Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Pay-Per-View revenue.

Advertising revenue generated by content of one streaming service that is accessed through another streaming service (for example, Hulu content accessed through Disney+) is allocated between both services.

Revenue includes subscription fees, advertising (excluding

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Pay-Per-View revenue.

Advertising revenue generated by content on one DTC streaming service that is accessed through another DTC streaming service by subscribers to both streaming services is allocated between both streaming services.

The average revenue per paid subscriber is net of discounts on offerings that carry more than one service.

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In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Supplemental information about paid subscribers:

(in millions) December 30,

2023 September 30,

(in millions) March 30,

2024 December 30,

2023 April 1,

Domestic (U.S.

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149.1 142.7 137.0

(1) At December 30, 2023, there were 19.8 million and 3.9 million subscribers to three-service and two-service multi-product offerings, respectively.

At September 30, 2023, there were 20.3 million and 2.3 million subscribers to three-service and two-service multi-product offerings, respectively.

(1) At March 30, 2024, there were 19.4 million and 4.8 million subscribers to three-service and two-service multi-product offerings, respectively.

At December 30, 2023, there were 19.8 million and 3.9 million subscribers to three-service and two-service multi-product offerings, respectively.

At April 1, 2023, there were 20.0 million and 1.4 million subscribers to three-service and two-service multi-product offerings, respectively.

(2) Disney+ Hotstar is not included in any of the Company’s multi-product offerings.

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Other subsidiaries of the Company do not guarantee the registered debt securities of either TWDC or Legacy Disney (such subsidiaries are referred to as the “non-Guarantors”).

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at December 30, 2023 was as follows:

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at March 30, 2024 was as follows:

TWDC Legacy Disney

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The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities.

The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations.

In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations.

Operations are conducted almost entirely through the Company’s subsidiaries.

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This summarized financial information has been prepared and presented pursuant to the Securities and Exchange Commission Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with GAAP.

Results of operations (in millions) Quarter Ended December 30, 2023

Results of operations (in millions) Six Months Ended March 30, 2024

Costs and expenses —

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Net income (loss) attributable to TWDC shareholders (419)

Balance Sheet (in millions) December 30, 2023 September 30, 2023

Balance Sheet (in millions) March 30,

2024 September 30,

Current assets $ 2,975 $ 8,544

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis