What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-07 compared with 2024-05-07 · 467 added, 484 removed, 959 unchanged (50% of the section changed)

5 unchanged sentences

• Current Quarter Results Compared to Prior-Year Quarter

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

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

• Seasonality

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Quarter Ended % Change

(Worse) Six Months Ended % Change

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

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions, except per share data) June 29,

2023 June 29,

Services $ 20,836 $ 20,008 4 % $ 61,568 $ 60,591 2 %

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Restructuring and impairment charges — ( 2,650 ) 100 % ( 2,052 ) ( 2,871 ) 29 %

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

Other income (expense), net ( 65 ) ( 11 ) >(100) % ( 65 ) 96 nm

Interest expense, net ( 342 ) ( 305 ) (12) % ( 899 ) ( 927 ) 3 %

Equity in the income of investees 146 191 (24) % 468 555 (16) %

Income before income taxes 657 2,123 (69) % 3,528 3,896 (9) %

Income (loss) before income taxes 3,093 (134) nm 6,621 3,762 76 %

Income taxes ( 251 ) ( 19 ) >(100) % ( 1,412 ) ( 1,066 ) (32) %

Net income 216 1,488 (85) % 2,367 2,849 (17) %

Net income (loss) 2,842 (153) nm 5,209 2,696 93 %

Net income attributable to noncontrolling interests ( 221 ) ( 307 ) 28 % ( 697 ) ( 606 ) (15) %

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Revenues for the quarter increased 4%, or $0.8 billion, to $23.2 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.

net income attributable to Disney increased to income of $2.6 billion in the current quarter compared to a loss of $0.5 billion in the prior-year quarter;

and diluted earnings per share (EPS) attributable to Disney increased to income of $1.43 compared to a loss of $0.25 in the prior-year quarter.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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.

increase was due to the comparison to the Content Impairment in the prior-year quarter and higher operating income at Entertainment in the current quarter.

Service revenues for the quarter increased 4%, or $0.8 billion, to $20.8 billion resulting from higher DTC subscription revenue and, to a lesser extent, higher advertising revenue.

Costs and expenses

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.

Cost of services for the quarter increased 2%, or $0.3 billion, to $13.2 billion due to higher sports programming and production costs as well as increased volumes and the impact of inflation at our parks and experiences businesses, partially offset by lower non-sports programming and production costs.

Depreciation and amortization decreased 9%, or $0.1 billion, to $1.2 billion due to lower depreciation at our domestic theme parks and resorts and lower TFCF and Hulu Acquisition Amortization.

Restructuring and impairment charges

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.

In the prior-year quarter, the Company recorded charges of $2,650 million due to the Content Impairment and severance.

Other income (expense), net

Other expense in the current quarter reflected a charge of $65 million related to a legal ruling.

Other expense, net in the prior-year quarter included a charge of $101 million related to a legal ruling, largely offset by the DraftKings Gain of $90 million.

Interest expense, net

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Quarter Ended

(in millions) March 30,

2024 April 1,

(in millions) June 29,

2023 % Change

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Interest expense, net $ (342) $ (305) (12) %

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

The decrease in interest income, investment income and other reflected the impact of lower cash and cash equivalent balances, partially offset by a favorable comparison of pension and postretirement benefit costs, other than service cost.

Equity in the Income of Investees

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Quarter Ended

2024 April 1,

Income before income taxes

Income (loss) before income taxes

$ 3,093 $ (134)

Income tax expense

Effective income tax rate

8.1 % (14.2)%

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.

The prior-year quarter loss before income taxes included the $2,440 million Content Impairment.

In the prior-year quarter, income taxes included a benefit of approximately $568 million related to this charge.

Due to the significance of this charge on pre-tax results, the effective tax rate for the prior-year quarter was negative 14.2%.

In the current quarter, the Company recognized a $418 million tax benefit related to prior years’ tax matters (Income Tax Reserve Adjustments).

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended

(in millions) March 30,

2024 April 1,

(in millions) June 29,

2023 % Change

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$ (221) $ (307) 28 %

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).

The decrease in net income attributable to noncontrolling interests was primarily due to the comparison to the accretion of NBC Universal’s interest in Hulu in the prior-year quarter as we had accreted to the full guaranteed redemption value by December 2023.

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 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 April 1, 2023 were impacted by the following:

Results for the quarter ended June 29, 2024 were impacted by the following:

• Income Tax Reserve Adjustments of $418 million

• TFCF and Hulu Acquisition Amortization of $397 million

• Other expense of $65 million related to a legal ruling

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

• Restructuring and impairment charges of $2,650 million

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

• TFCF and Hulu Acquisition Amortization of $432 million

• Other expense, net of $11 million reflecting a charge of $101 million related to a legal ruling, partially offset by a DraftKings Gain of $90 million

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 March 30, 2024:

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

TFCF and Hulu acquisition amortization

Quarter Ended June 29, 2024:

Income Tax Reserve Adjustments

$ — $ 418 $ 418 $ 0.23

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

Quarter Ended April 1, 2023:

TFCF and Hulu Acquisition Amortization

(397) 93 (304) (0.16)

Other expense

(65) 11 (54) (0.03)

Total $ (462) $ 522 $ 60 $ 0.04

Quarter Ended July 1, 2023:

Restructuring and impairment charges $ (2,650) $ 617 $ (2,033) $ (1.10)

Other income (expense), net

TFCF and Hulu Acquisition Amortization

(432) 101 (331) (0.18)

Other expense, net

Total $ (3,093) $ 723 $ (2,370) $ (1.28)

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

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

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

Revenues for the current period increased $1.1 billion, to $68.8 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.

net income attributable to Disney increased $2.4 billion, to $4.5 billion;

and EPS increased to $2.46 from $1.14 in the prior-year period.

The EPS increase was due to higher operating income at Entertainment, a lower effective income tax rate, which included the benefit from the Income Tax Reserve Adjustments, and, to a lesser extent, growth at Experiences.

Service revenues for the current period increased 2%, or $1.0 billion to $61.6 billion, resulting from higher DTC subscription revenue and increased revenues at our parks and experiences businesses.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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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.

Cost of services for the current period decreased 3%, or $1.1 billion, to $39.8 billion, primarily due to lower non-sports programming and production costs, and, to a lesser extent, lower technical support costs, partially offset by higher sports programming and production costs and the impact of inflation and increased volumes at our parks and experiences businesses.

Depreciation and amortization decreased 6%, or $0.3 billion, to $3.7 billion due to lower TFCF and Hulu Acquisition Amortization and lower depreciation at our domestic theme parks and resorts.

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.

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

In the prior-year period, the Company recorded $2,871 million of charges including the Content Impairment, severance and costs related to exiting our businesses in Russia.

Other income (expense), net

Other expense in the current period reflected a charge of $65 million related to a legal ruling.

Other income, net in the prior-year period included a DraftKings Gain of $169 million and a $28 million gain on the sale of a business, partially offset by a charge of $101 million related to a legal ruling.

Interest expense, net

Interest expense, net is as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

Nine Months Ended

(in millions) June 29,

2023 % Change

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Interest expense, net $ (899) $ (927) 3 %

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.

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 a favorable comparison of pension and postretirement benefit costs, other than service cost, and larger investment gains in the current period compared to the prior-year period.

Equity in the Income of Investees

Income from equity investees decreased $87 million, to $468 million from $555 million, due to lower income from A+E Television Networks.

Nine Months Ended

Income before income taxes

$ 6,621 $ 3,762

Income tax expense

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.

The effective income tax rate in the current period was comparable to the U.S.

statutory rate as an unfavorable impact from the current period goodwill impairments, which are not tax deductible, was largely offset by a benefit from the Income Tax Reserve Adjustments.

The effective income tax rate in the prior-year period was higher than the U.S.

statutory rate primarily due to a higher effective tax rate on foreign earnings.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Noncontrolling Interests

Six Months Ended

(in millions) March 30,

2024 April 1,

Nine Months Ended

(in millions) June 29,

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:

Net income attributable to noncontrolling interests

$ (697) $ (606) (15) %

The increase in net income attributable to noncontrolling interests was due to improved results at our Asia Theme Parks and ESPN, partially offset by the comparison to the accretion for Major League Baseball’s interest in BAMTech LLC and NBCU’s interest in Hulu.

We had accreted to the redemption value for BAMTech LLC by November 2022 and to the guaranteed redemption value for Hulu by December 2023.

Certain Items Impacting Results in the Nine Month Period

Results for the nine months ended June 29, 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:

• Income Tax Reserve Adjustments of $418 million

• TFCF and Hulu Acquisition Amortization of $1,282 million

• Other expense of $65 million related to a legal ruling

Results for the nine months ended July 1, 2023 were impacted by the following:

• Restructuring and impairment charges of $2,871 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

• TFCF and Hulu Acquisition Amortization of $1,569 million

• Other income, net of $96 million reflecting a DraftKings Gain of $169 million and a gain on the sale of a business of $28 million, partially offset by a charge of $101 million related to a legal ruling

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

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(Adverse) (2)

Six Months Ended March 30, 2024:

Nine Months Ended June 29, 2024:

Restructuring and impairment charges $ (2,052) $ 121 $ (1,931) $ (1.05)

TFCF and Hulu Acquisition Amortization

(1,282) 299 (983) (0.52)

Other expense

(65) 11 (54) (0.03)

Income Tax Reserve Adjustments

— 418 418 0.23

Total $ (3,399) $ 849 $ (2,550) $ (1.37)

Six Months Ended April 1, 2023:

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

Nine Months Ended July 1, 2023:

Restructuring and impairment charges $ (2,871) $ 660 $ (2,211) $ (1.20)

Other income (expense), net

TFCF and Hulu Acquisition Amortization

(1,569) 365 (1,204) (0.65)

Other income, net

96 (13) 83 0.05

Total $ (4,344) $ 1,012 $ (3,332) $ (1.80)

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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.

Consequently, the operating results for the nine months ended June 29, 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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Theatrical release dates are determined by several factors, including competition and the timing of vacation and holiday periods.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Sports revenues are subject to seasonal advertising patterns, changes in viewership and subscriber levels, and the availability of and demand for sports programming.

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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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Quarter Ended % Change

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

Entertainment $ 10,580 $ 10,127 4 % $ 30,357 $ 31,111 (2) %

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Revenues $ 23,155 $ 22,330 4 % $ 68,787 $ 67,657 2 %

(1) Reflects fees paid by Direct-to-Consumer to Sports and other Entertainment businesses for the right to air their linear networks on Hulu Live and fees paid by Entertainment to Sports to program sports on the ABC Network and Star+.

The following table presents income from our operating segments and other components of income before income taxes:

The following table presents income from our operating segments and other components of income (loss) before income taxes:

Quarter Ended % Change

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

Entertainment operating income $ 1,201 $ 408 >100 % $ 2,856 $ 1,208 >100 %

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Restructuring and impairment charges — (2,650) 100 % (2,052) (2,871) 29 %

Other income, net

— 149 (100) % — 107 (100) %

Other income (expense), net

(65) (11) >(100) % (65) 96 nm

Interest expense, net (342) (305) (12) % (899) (927) 3 %

TFCF and Hulu Acquisition Amortization

Income before income taxes $ 657 $ 2,123 (69) % $ 3,528 $ 3,896 (9) %

(397) (432) 8 % (1,282) (1,569) 18 %

Income (loss) before income taxes

$ 3,093 $ (134) nm $ 6,621 $ 3,762 76 %

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

Entertainment $ 171 $ 174 2 % $ 503 $ 478 (5) %

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Quarter Ended % Change

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

Entertainment $ 13 $ 9 (44) % $ 40 $ 73 45 %

Sports — — nm — — nm

Experiences 27 28 4 % 81 82 1 %

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Linear Networks $ 2,663 $ 2,872 (7) %

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Linear Networks $ 966 $ 1,025 (6) %

Direct-to-Consumer 47 (587) nm

Direct-to-Consumer (19) (505) 96 %

Content Sales/Licensing and Other 254 (112) nm

$ 1,201 $ 408 >100 %

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.

The increase in Entertainment revenues was due to subscription revenue growth.

Operating income

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.

The increase in Entertainment operating income in the current quarter compared to the prior-year quarter was due to improved results at Direct-to-Consumer and Content Sales/Licensing and Other.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Affiliate fees $ 1,726 $ 1,833 (6) %

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Domestic $ 1,451 $ 1,523 (5) %

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$ 1,726 $ 1,833 (6) %

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.

The decrease in domestic affiliate revenue was due to a decline of 13% 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 effective rates.

Lower international affiliate revenue was attributable to decreases of 8% from fewer subscribers and 4% from an unfavorable foreign exchange impact.

Revenues - Advertising

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Domestic $ 672 $ 762 (12) %

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$ 907 $ 1,005 (10) %

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.

The decline in domestic advertising revenue was due to a decrease of 15% from lower impressions attributable to a decline in average viewership, partially offset by an increase of 1% from higher rates.

Lower international advertising revenue was primarily due to a decrease of 7% from an unfavorable foreign exchange impact, partially offset by an increase of 5% from higher rates.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Programming and production costs

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$ (1,209) $ (1,331) 9 %

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.

The decrease in domestic programming and production costs was attributable to a lower average cost mix of programming and a decrease in program write-downs.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $73 million, to $604 million from $677 million due to lower marketing costs and a favorable foreign exchange impact.

Equity in the Income of Investees

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.

Income from equity investees decreased $49 million, to $127 million from $176 million, due to lower income from A+E Television Networks attributable to a decrease in advertising revenue, higher marketing costs and lower affiliate revenue.

Operating Income from Linear Networks

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

Operating income from Linear Networks decreased $59 million, to $966 million from $1,025 million, due to lower income from equity investees.

Supplemental revenue and operating income

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Supplemental revenue detail

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Subscription fees $ 4,729 $ 4,157 14 %

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Depreciation and amortization (85) (69) (23) %

Operating Income (Loss)

$ 47 $ (587) nm

Operating Loss

$ (19) $ (505) 96 %

Revenues - Subscription fees

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.

Growth in subscription fees reflected increases of 10% from higher rates attributable to increases in retail pricing at Disney+ Core and Hulu, and 7% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu, partially offset by a decrease of 3% from an unfavorable foreign exchange impact.

Revenues - Advertising

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.

Higher advertising revenue reflected an increase of 29% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 10% from lower rates.

Higher impressions at Disney+ reflected an increase at Disney+ Core and the benefit of airing the International Cricket Council (ICC) T20 World Cup on Disney+ Hotstar in the current quarter.

The previous ICC T20 World Cup occurred in the first quarter of fiscal 2023.

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

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% Change Better (Worse)

(in millions) March 30,

2024 December 30,

2023 April 1,

(in millions) June 29,

2024 March 30,

2023 June 29, 2024 vs.

June 29, 2024 vs.

Domestic (U.S.

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Quarter Ended % Change Better (Worse)

2024 December 30,

2023 April 1,

30, 2023 Mar.

2024 March 30,

2023 June 29, 2024 vs.

30, 2024 June 29, 2024 vs.

Domestic (U.S.

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

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.

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

Domestic Disney+ average monthly revenue per paid subscriber decreased from $8.00 to $7.74 due to the impact of subscriber mix shifts.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $6.66 to $6.78 due to increases in retail pricing, partially offset by an unfavorable foreign exchange impact.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.70 to $1.05 due to higher advertising revenue.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $11.84 to $12.73 due to higher advertising revenue.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $95.01 to $96.11 due to higher advertising revenue.

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

Domestic Disney+ average monthly revenue per paid subscriber increased from $7.31 to $7.74 due to increases in retail pricing and, to a lesser extent, higher advertising revenue, partially offset by a higher mix of subscribers to multi-product, wholesale and ad-supported offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $6.01 to $6.78 due to increases in retail pricing.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.59 to $1.05 due to increases in retail pricing and higher advertising revenue, partially offset by a higher mix of subscribers from lower-priced markets.

Hulu SVOD Only average monthly revenue per paid subscriber increased from $12.39 to $12.73 due to increases in retail pricing, partially offset by a higher mix of subscribers to multi-product offerings.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $91.80 to $96.11 due to increases in retail pricing, partially offset by a decrease in advertising revenue.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Programming and production costs

5 unchanged sentences

$ (4,542) $ (4,490) (1) %

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.

Higher programming and production costs at Hulu in the current quarter compared to the prior-year quarter were due to higher subscriber-based fees for programming the Hulu Live TV service primarily attributable to rate increases.

The increase in programming and production costs at Disney+ and other in the current quarter compared to the prior-year quarter was driven by the timing of the ICC T20 World Cup, partially offset by lower costs for non-sports content available on Disney+ Core.

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

Selling, general, administrative and other

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+.

Selling, general, administrative and other costs increased $206 million, to $1,197 million from $991 million, driven by higher marketing costs.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $486 million, to $19 million from $505 million, due to improved results at Disney+.

Content Sales/Licensing and Other

1 unchanged sentence

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

TV/VOD distribution $ 664 $ 560 19 %

6 unchanged sentences

Depreciation and amortization (88) (99) 11 %

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

Equity in the loss of investees

(4) (2) (100) %

Operating Income (Loss)

1 unchanged sentence

Revenues - TV/VOD distribution

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

The increase in TV/VOD distribution revenue was due to higher sales of episodic content.

Revenues - Theatrical distribution

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.

The decrease in theatrical distribution revenue reflected fewer significant releases in the current quarter compared to the prior-year quarter.

The current quarter included Inside Out 2 and Kingdom of The Planet of the Apes .

The prior-year quarter included Guardians of the Galaxy Vol.

3 , The Little Mermaid , Elemental and Indiana Jones And The Dial Of Destiny , which was released in most territories in the last few days of June 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenues - Home entertainment distribution

The decrease in home entertainment distribution revenue was due to lower unit sales and a decrease in average net effective pricing resulting from a lower mix of new releases, which have a higher relative sales price compared to catalog titles.

Operating expenses

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Programming and production costs $ (1,017) $ (1,252) 19 %

1 unchanged sentence

$ (1,204) $ (1,469) 18 %

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.

The decrease in programming and production costs was due to lower production cost amortization attributable to the decreases in theatrical and home entertainment distribution revenues.

The decrease in distribution costs and cost of goods sold was primarily due to lower home entertainment unit sales.

Selling, general, administrative and other

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.

Selling, general, administrative and other costs decreased $190 million, to $562 million from $752 million, primarily attributable to lower theatrical marketing costs reflecting fewer 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.

Operating results from Content Sales/Licensing and Other increased $366 million, to income of $254 million from a loss of $112 million due to higher theatrical and TV/VOD distribution results.

Items Excluded from Segment Operating Income Related to Entertainment

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Restructuring and impairment charges (1)

2 unchanged sentences

(322) (333) 3 %

(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.

(1) Charges for the prior-year quarter were due to the Content Impairment and, to a lesser extent, severance.

(2) In the current quarter, amortization of intangible assets was $251 million and amortization of step-up on film and television costs was $68 million.

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Affiliate fees $ 2,571 $ 2,633 (2) %

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Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Domestic $ 2,239 $ 2,294 (2) %

2 unchanged sentences

$ 2,571 $ 2,633 (2) %

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.

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

The increase in international ESPN affiliate revenue was attributable to higher effective rates.

The decrease in Star India affiliate revenue was due to lower effective rates.

Revenues - Advertising

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Domestic $ 1,071 $ 918 17 %

1 unchanged sentence

1,122 971 16 %

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.

$ 1,339 $ 1,153 16 %

The increase in domestic ESPN advertising revenue was due to increases of 9% from higher rates and 5% from sponsorship revenue growth.

Higher Star India advertising revenue was attributable to the timing of the ICC T20 World Cup.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

3 unchanged sentences

Revenues - Other

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+.

Other revenue increased $65 million, to $234 million from $169 million, primarily due to higher Ultimate Fighting Championship (UFC) pay-per-view fees reflecting one more UFC event in the current quarter compared to the prior-year quarter.

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

Quarter Ended % Change Better (Worse)

2024 December 30,

2023 April 1,

30, 2023 Mar.

2024 March 30,

2023 June 29, 2024 vs.

30, 2024 June 29, 2024 vs.

Paid subscribers at (in millions)

2 unchanged sentences

$ 6.23 $ 6.30 $ 5.45 (1) % 14 %

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

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 - Second Quarter of Fiscal 2024 Comparison to Second Quarter of Fiscal 2023

(1) See discussion on pages 72-73 —DTC Product Descriptions, Key Definitions and Supplemental Information.

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

ESPN+ average monthly revenue per paid subscriber increased from $5.45 to $6.23 due to increases in retail pricing and higher advertising revenue.

1 unchanged sentence

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Programming and production costs

6 unchanged sentences

$ (3,482) $ (3,164) (10) %

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.

Domestic ESPN programming and production costs increased in the current quarter compared to the prior-year quarter primarily due to higher NBA rights costs reflecting contractual rate increases, an increase in UFC pay-per-view fees and current quarter costs to air the Stanley Cup Finals, for which we have the rights every two years.

The increase in UFC pay-per-view fees was attributable to airing one more event in the current quarter.

Higher programming and production costs at international ESPN were due to new soccer rights.

The increase in Star India programming and production costs was attributable to the timing of the ICC T20 World Cup.

The increase in other operating expense was primarily attributable to higher technology and distribution costs.

Operating Income from Sports

Operating income decreased $52 million, to $802 million from $854 million, due to a decrease at Star India, partially offset by improved results at international ESPN.

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 $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

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

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

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Supplemental revenue detail

3 unchanged sentences

$ 4,558 $ 4,335 5 %

$ 4,312 $ 4,226 2 %

Supplemental operating income (loss) detail

Domestic $ 1,085 $ 1,077 1 %

International 19 19 — %

International 5 (27) nm

1,090 1,050 4 %

5 unchanged sentences

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

TFCF Acquisition Amortization (1)

2 unchanged sentences

(1) Amortization of intangible assets

(2) Charges for the prior-year quarter were due to severance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Theme park admissions $ 2,780 $ 2,731 2 %

10 unchanged sentences

Theme park admissions revenue growth was due to increases of 1% from higher average per capita ticket revenue and 1% from attendance growth.

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 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.

Higher resorts and vacations revenue was primarily due to increases of 3% from higher average ticket prices for cruise line sailings, 1% from an increase in average daily hotel room rates and 1% from additional passenger cruise days.

Revenues - Park & Experiences merchandise, food and beverage

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.

Parks & Experiences merchandise, food and beverage revenue growth resulted from increases of 1% from guest spending growth and 1% from higher volumes.

Revenues - Merchandise licensing and retail

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.

Lower merchandise licensing and retail revenue was due to decreases of 4% from merchandise licensing and 1% from retail.

The decrease in merchandise licensing revenue was due to lower minimum guarantee shortfall recognition, partially offset by higher royalties from merchandise sales.

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.

The increase in parks licensing and other revenue was due to a favorable foreign exchange impact and higher real estate sales.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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(6) Per room guest spending is used to analyze guest spending at our hotels and is defined as total revenue from room rentals and sales of food, beverage and merchandise at our hotels, divided by total occupied hotel room nights.

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 quarter, the impact would have been a decrease of approximately $9 million in the prior-year quarter.

Operating expenses

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Operating labor $ (2,154) $ (1,938) (11) %

3 unchanged sentences

$ (4,573) $ (4,279) (7) %

Higher operating labor was primarily due to inflation.

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.

Higher operating labor was primarily due to inflation and, to a lesser extent, increased volumes, partially offset by cost saving initiatives.

The increase in infrastructure costs was primarily attributable to higher technology spending.

Cost of goods sold and distribution costs decreased primarily due to lower third-party royalty expense.

The increase in other operating expense was due to higher costs for new guest offerings, increased operations support costs and inflation.

Selling, general, administrative and other

Selling, general, administrative and other costs increased $42 million, to $942 million from $900 million due to higher marketing costs.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Selling, general, administrative and other

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

Depreciation and amortization

Depreciation and amortization decreased $16 million, to $635 million from $651 million, due to lower depreciation at our domestic parks and experiences.

Depreciation and amortization decreased $73 million, to $649 million from $722 million, due to lower depreciation at our domestic parks and experiences attributable to the comparison to depreciation in the prior-year quarter related to the closure of Star Wars:

Galactic Starcruiser.

Operating Income from Experiences

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

Segment operating income decreased from $2,297 million to $2,222 million due to a decrease at our domestic parks and resorts, partially offset by growth at our experiences businesses.

Our international parks and experiences results were comparable to the prior-year quarter as a decrease at Shanghai Disney Resort and growth at Hong Kong Disneyland Resort largely offset.

Supplemental revenue and operating income

1 unchanged sentence

Quarter Ended % Change

(in millions) March 30,

2024 April 1,

(in millions) June 29,

Supplemental revenue detail

10 unchanged sentences

$ 2,222 $ 2,297 (3) %

Items Excluded from Segment Operating Income Related to Experiences

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

Quarter Ended % Change

(in millions) June 29,

Charge related to a legal ruling

$ (65) $ (101) 36 %

Restructuring and impairment charges (1)

TFCF Acquisition Amortization

(1) Charges for the prior-year quarter were due to severance.

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

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

Nine Months Ended % Change

(in millions) June 29,

Linear Networks $ 8,231 $ 9,073 (9) %

7 unchanged sentences

$ 2,856 $ 1,208 >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.

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

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.

The increase in Entertainment operating income was due to improved results at Direct-to-Consumer, partially offset by a decline at Linear Networks.

Linear Networks

Operating results for Linear Networks are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Affiliate fees $ 5,251 $ 5,631 (7) %

8 unchanged sentences

Revenues - Affiliate fees

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

$ 4,437 $ 4,689 (5) %

4 unchanged sentences

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.

Lower international affiliate revenue was attributable to decreases of 9% from fewer subscribers driven by channel closures, 2% from an unfavorable foreign exchange impact and 2% from lower effective rates.

Revenues - Advertising

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

$ 2,121 $ 2,555 (17) %

3 unchanged sentences

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.

Lower rates were primarily attributable to a decrease in political advertising at the owned television stations.

International advertising revenue was comparable to the prior-year period as an increase of 6% from higher rates was offset by decreases of 4% from an unfavorable foreign exchange impact and 2% from fewer impressions.

The decrease in impressions reflected the impact of channel closures.

Revenues - Other

Other revenue decreased $34 million, to $105 million from $139 million driven by an unfavorable foreign exchange impact.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

7 unchanged sentences

$ (3,838) $ (4,308) 11 %

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.

The decrease in domestic programming and production costs was primarily due to a lower average cost mix of programming and, to a lesser extent, a decrease in program write-downs.

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

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $95 million to $1,845 million from $1,940 million, due to lower marketing costs and a favorable foreign exchange impact.

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.

Income from equity investees decreased $88 million, to $440 million from $528 million, due to lower income from A+E Television Networks attributable to decreases in advertising and affiliate revenues.

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.

Operating income from Linear Networks decreased $360 million, to $2,954 million from $3,314 million, due to decreases at our domestic and international businesses and lower income from equity investees.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

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

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Supplemental revenue detail

11 unchanged sentences

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

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Subscription fees $ 14,041 $ 12,243 15 %

Advertising 2,740 2,411 14 %

140 147 (5) %

Total revenues 16,993 14,850 14 %

5 unchanged sentences

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 6% from more subscribers due to growth at Disney+ Core and, to a lesser extent, Hulu.

These increases were partially offset by a decrease of 1% from an unfavorable foreign exchange impact.

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.

Higher advertising revenue reflected an increase of 26% from higher impressions at Disney+ and Hulu, partially offset by a decrease of 12% from lower rates.

At Disney+, the increase in impressions was due to Disney+ Core growth and airing more cricket programming on Disney+ Hotstar compared to the prior-year period.

There were two significant cricket tournaments in the current period compared to one in the prior-year period.

The growth at Disney+ Core reflected the launches of the ad-supported Disney+ service domestically in December 2022 and internationally in November 2023.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Average Monthly Revenue Per Paid Subscriber:

Six Months Ended % Change

2024 April 1,

Nine Months Ended % Change

Domestic (U.S.

5 unchanged sentences

Live TV + SVOD 94.89 90.66 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.

Domestic Disney+ average monthly revenue per paid subscriber increased from $6.80 to $7.96 due to increases in retail pricing, partially offset by a higher mix of subscribers to multi-product and wholesale offerings.

International Disney+ (excluding Disney+ Hotstar) average monthly revenue per paid subscriber increased from $5.82 to $6.46 due to increases in retail pricing.

Disney+ Hotstar average monthly revenue per paid subscriber increased from $0.65 to $1.02 due to higher advertising revenue and increases in retail pricing.

The average monthly revenue per paid subscriber for Hulu SVOD Only was comparable to the prior-year period as increases in retail pricing were largely offset by the impact of subscriber mix shifts.

Hulu Live TV + SVOD average monthly revenue per paid subscriber increased from $90.66 to $94.89 due to increases in retail pricing, partially offset by lower advertising revenue and a higher mix of subscribers to multi-product offerings.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

5 unchanged sentences

$ (13,449) $ (13,643) 1 %

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.

Higher programming and production costs at Hulu were due to an increase in subscriber-based fees for programming the Hulu Live TV service driven by rate increases, partially offset by lower costs for SVOD content.

The decrease in programming and production costs at Disney+ and other was due to lower costs for non-sports content available on Disney+ Core, largely offset by higher costs for cricket programming.

The increase in cricket programming costs reflected two significant tournaments in the current period compared to one in the prior-year period.

Other operating expenses decreased due to lower distribution and technology 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.

Selling, general, administrative and other costs increased $391 million, to $3,424 million from $3,033 million, primarily due to higher marketing costs.

Operating Loss from Direct-to-Consumer

The operating loss from Direct-to-Consumer decreased $1,966 million, to $110 million from $2,076 million, due to improved results at Disney+.

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,

Nine Months Ended % Change

(in millions) June 29,

TV/VOD distribution

2 unchanged sentences

Home entertainment distribution

540 639 (15) %

Other 1,839 1,741 6 %

3 unchanged sentences

Depreciation and amortization (279) (262) (6) %

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

Equity in the loss of investees

(8) (1) >(100) %

Operating Income (Loss)

1 unchanged sentence

Revenues - TV/VOD distribution

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

The decrease in TV/VOD distribution revenue was primarily due 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 decrease in theatrical distribution revenue reflected fewer significant releases in the current period compared to the prior-year period.

Significant titles in the current period included Inside Out 2 , Kingdom of the Planet of the Apes , Wish and The Marvels.

Significant titles in the prior-year period included 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 .

Wakanda Forever , Guardians of the Galaxy Vol.

3 , The Little Mermaid and Ant-Man and the Wasp:

Quantumania .

Revenues - Home entertainment distribution

The decrease in home entertainment distribution revenue was due to lower unit sales.

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.

Other revenue increased $98 million to $1,839 million from $1,741 million primarily attributable to an increase in revenue at Lucasfilm’s special effects business due to more projects and higher rates.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs $ (2,769) $ (4,249) 35 %

2 unchanged sentences

$ (3,305) $ (4,931) 33 %

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.

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)

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.

Lower distribution costs and cost of goods sold were driven by decreases in theatrical distribution costs and, to a lesser extent, home entertainment unit sales, partially offset by an increase at Lucasfilm’s special effects business due to more projects.

Selling, general, administrative and other

Selling, general, administrative and other costs decreased $495 million, to $1,529 million from $2,024 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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

Operating results from Content Sales/Licensing and Other increased $42 million, to income of $12 million from a loss of $30 million.

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,

Nine Months Ended % Change

(in millions) June 29,

Restructuring and impairment charges (1)

4 unchanged sentences

(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.

Charges for the prior-year period were due to the Content Impairment and, to a lesser extent, severance and costs to exit our businesses in Russia.

(2) In the current period, amortization of intangible assets was $804 million and amortization of step-up on film and television costs was $205 million.

1 unchanged sentence

Operating results for Sports are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Affiliate fees $ 7,918 $ 8,052 (2) %

8 unchanged sentences

Operating Income $ 1,477 $ 1,484 — %

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,

Nine Months Ended % Change

(in millions) June 29,

Domestic $ 6,947 $ 7,057 (2) %

3 unchanged sentences

$ 7,918 $ 8,052 (2) %

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.

The decrease in domestic ESPN affiliate revenue was primarily attributable to a decline of 8% from fewer subscribers, partially offset by an increase of 6% from higher effective rates.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

International ESPN affiliate revenue was comparable to the prior-year period as higher effective rates were largely offset by fewer subscribers.

Lower Star India affiliate revenue was attributable to a decrease in effective rates and fewer subscribers.

Revenues - Advertising

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Domestic $ 3,059 $ 2,757 11 %

2 unchanged sentences

$ 3,640 $ 3,196 14 %

$ 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.

The increase in domestic ESPN advertising revenue was attributable to increases of 6% from higher rates and 3% from sponsorship revenue growth.

Higher Star India advertising revenue was due to the airing of two significant cricket tournaments in the current period compared to one in 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,

Subscription fees increased $107 million, to $1,246 million from $1,139 million, due to an increase of 9% from higher rates.

Revenues - Other

Other revenue increased $87 million, to $901 million from $814 million, driven by higher fees received from the Entertainment segment to program sports on Disney+ in Latin America and on the ABC Network, partially offset by an unfavorable foreign exchange impact.

Nine Months Ended % Change

Average Monthly Revenue per Paid Subscriber for the period

1 unchanged sentence

ESPN+ average monthly revenue per paid subscriber increased from $5.54 to $6.21 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,

Nine Months Ended % Change

(in millions) June 29,

Programming and production costs

6 unchanged sentences

$ (11,295) $ (10,737) (5) %

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)

Programming and production costs at domestic ESPN increased in the current period compared to the prior-year period driven by contractual rate increases and programming additions.

These increases were partially offset by lower college football rights costs in the current period.

The increase in international ESPN programming and production costs was due to new soccer rights.

Higher Star India programming and production costs were attributable to an increase in cricket programming costs due to airing two significant tournaments in the current period compared to one in the prior-year period.

Operating Income from Sports

Operating income from Sports was comparable to the prior-year period as an increase at domestic ESPN and lower results at Star India largely offset.

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,

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

Nine Months Ended % Change

(in millions) June 29,

Supplemental revenue detail

3 unchanged sentences

$ 13,705 $ 13,201 4 %

Supplemental operating income detail

Supplemental operating income (loss) detail

Domestic $ 2,120 $ 1,894 12 %

International (37) 22 nm

International (32) (5) >(100) %

2,088 1,889 11 %

(656) (444) (48) %

Equity in the income of investees 45 39 15 %

2 unchanged sentences

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,

Nine Months Ended % Change

(in millions) June 29,

TFCF Acquisition Amortization (1)

2 unchanged sentences

(1) Amortization of intangible assets

(2) Charges for the prior-year period were due to severance

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Operating results for the Experiences segment are as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Theme park admissions $ 8,568 $ 7,800 10 %

11 unchanged sentences

The increase in theme park admissions revenue was due to increases of 7% 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.

Higher attendance was due to increases at Shanghai Disney Resort and Disneyland 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.

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

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.

Parks & Experiences merchandise, food and beverage revenue growth was due to increases of 3% from higher volumes and 2% from an increase in 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.

Lower merchandise licensing and retail revenue was due to decreases of 2% from retail and 2% from an unfavorable foreign exchange impact, partially offset by an increase of 2% from merchandise licensing.

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

The increase in merchandise licensing revenue was due to higher royalties from merchandise sales, partially offset by lower minimum guarantee shortfall recognition.

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.

The increase in parks licensing and other revenue was due to an increase in sponsorship revenue, a favorable foreign exchange impact and higher royalties from Tokyo Disney Resort.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Domestic International Total

Six Months Ended Six Months Ended Six Months Ended

Nine Months Ended Nine Months Ended Nine Months Ended

Increase (decrease)

7 unchanged sentences

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.

If we had applied the new method in the first six months of the prior-year period, the impact would have been a decrease of approximately $30 million in the prior-year period.

Operating expenses

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Operating labor $ (6,222) $ (5,553) (12) %

4 unchanged sentences

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.

The increase in infrastructure costs was due to higher technology spending and increased operations support costs.

Cost of goods sold and distribution costs were comparable to the prior-year period as cost saving initiatives and lower third-party royalty expense were offset by increased costs due to higher volumes.

Other operating expense increased due to inflation, higher volumes and increased operations support costs.

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.

Selling, general, administrative and other costs increased $178 million, to $2,830 million from $2,652 million, driven by higher marketing costs, 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.

Depreciation and amortization decreased $110 million, to $1,906 million from $2,016 million, due to the comparison to depreciation in the prior-year period related to the closure of Star Wars:

Galactic Starcruiser.

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.

Segment operating income increased from $7.2 billion to $7.6 billion due to growth at our international parks and experiences.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

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,

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

Nine Months Ended % Change

(in millions) June 29,

Supplemental revenue detail

4 unchanged sentences

$ 25,911 $ 24,389 6 %

Supplemental operating income (loss) detail

Supplemental operating income detail

Parks & Experiences

3 unchanged sentences

$ 7,613 $ 7,195 6 %

Items Excluded from Segment Operating Income Related to Experiences

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

Nine Months Ended % Change

(in millions) June 29,

Charge related to a legal ruling $ (65) $ (101) 36 %

Restructuring and impairment charges (1)

TFCF Acquisition Amortization

(1) Charges for the prior-year period were due to severance.

CORPORATE AND UNALLOCATED SHARED EXPENSES

Quarter Ended % Change

(Worse) Six Months Ended % Change

(in millions) March 30,

2024 April 1,

2023 March 30,

2024 April 1,

(Worse) Nine Months Ended % Change

(in millions) June 29,

2023 June 29,

Corporate and unallocated shared expenses $ (328) $ (295) (11) % $ (1,027) $ (854) (20) %

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.

Corporate and unallocated shared expenses increased $33 million for the quarter, from $295 million to $328 million, driven by increased compensation costs and other cost inflation.

Corporate and unallocated shared expenses for the current nine-month period increased $173 million, from $854 million to $1,027 million, primarily due to increased compensation costs, higher costs related to our proxy solicitation and other cost inflation.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

FINANCIAL CONDITION

The change in cash and cash equivalents is as follows:

Six Months Ended % Change

(in millions) March 30,

2024 April 1,

Nine Months Ended % Change

(in millions) June 29,

Cash provided by operations $ 8,453 $ 5,064 67 %

1 unchanged sentence

Cash used in financing activities (11,722) (2,127) >(100) %

Impact of exchange rates on cash, cash equivalents and restricted cash 17 197 (91) %

Impact of exchange rates on cash, cash equivalents and restricted cash (14) 174 nm

Change in cash, cash equivalents and restricted cash $ (8,186) $ (148) >(100) %

1 unchanged sentence

Cash provided by operations increased $3.4 billion from $5.1 billion in the prior-year period to $8.5 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.

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

The increase also reflected collateral receipts related to our hedging program in the current period compared to collateral payments in the prior-year period and the comparison to a payment in the prior-year period related to the termination of content licenses in fiscal 2022.

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)

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 six months ended March 30, 2024 and April 1, 2023 are as follows:

Six Months Ended

(in millions) March 30,

2024 April 1,

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

The Company’s film and television production and programming activity for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

Beginning balances:

10 unchanged sentences

Change in produced and licensed content costs (1,121) 1,861

Content Impairment

Produced and licensed content costs reclassified to assets held for sale

5 unchanged sentences

The Company currently expects its fiscal 2024 spend on produced and licensed content, including sports rights, to be approximately $24 billion compared to fiscal 2023 spend of $27 billion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Investing Activities

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

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,

The Company’s investing activities for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

Investments in parks, resorts and other property:

8 unchanged sentences

Capital expenditures at the Entertainment segment primarily reflect investments in technology and in facilities and equipment for expanding and upgrading broadcast centers, production facilities and television station facilities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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 period compared to the prior-year period 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 cruise ship fleet expansion and new attractions.

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

The Company currently expects its fiscal 2024 capital expenditures to total approximately $6 billion compared to fiscal 2023 capital expenditures of $5 billion.

The increase in capital expenditures is primarily due to higher spending at Experiences, in part due to continued investment in our Disney Cruise Line business.

The decrease in the current period compared to the prior-year period was due to lower spend on facilities.

The Company currently expects its fiscal 2024 capital expenditures to be approximately $6 billion compared to fiscal 2023 capital expenditures of $5 billion.

Other Investing Activities

Cash used in other investing activities was $980 million for the current period reflecting an investment in Epic Games, Inc.

Cash provided by other investing activities was $336 million for the prior-year period reflecting proceeds from the sale of investments.

Financing Activities

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,

Financing activities for the nine months ended June 29, 2024 and July 1, 2023 are as follows:

Nine Months Ended

(in millions) June 29,

Change in borrowings

6 unchanged sentences

$ (11,722) $ (2,127)

(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 prior-year period was partially offset by a contribution related to BAMTech (see Note 1 to the Condensed Consolidated Financial Statements).

(2) Primarily consists of dividends to noncontrolling interest holders and equity award activity.

See Note 5 to the Condensed Consolidated Financial Statements for a summary of the Company’s borrowing activities during the nine months ended June 29, 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.

1 unchanged sentence

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)

The Company is targeting approximately $3 billion in share repurchases in fiscal 2024.

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

6 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 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.

As of June 29, 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 March 30, 2024, the Company met this covenant by a significant margin.

On June 29, 2024, the Company met this covenant

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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.

23 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

5 unchanged sentences

See Note 13 to the Condensed Consolidated Financial Statements and Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

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.

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If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

Revenue Recognition

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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.

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

To determine whether our reporting units should be aggregated, we evaluate the interdependency of our reporting units which includes consideration of the degree to which resources are shared including operating costs such as content, marketing, and technology, the similarity of products and services delivered, customers served or distribution channels used, and long term financial performance (e.g., operating margins).

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

growth projections.

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

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.

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.

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

As discussed in Note 16 to the Condensed Consolidated Financial Statements, the Company recorded a non-cash goodwill impairment charge of $0.7 billion related to our entertainment linear networks reporting unit in the second quarter of fiscal 2024.

The carrying amount of the entertainment linear networks reporting unit goodwill after this impairment is approximately $6 billion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

As a result of the impairment, the fair value of this reporting unit approximates its carrying amount.

A 25 basis point increase in the discount rate or a 1% reduction in projected annual cash flows used to determine fair value of the entertainment linear networks reporting unit 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.

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.

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.

The carrying amount of the entertainment DTC services reporting unit goodwill is approximately $45 billion.

For our entertainment DTC services reporting unit, a 25 basis point increase in the discount rate used to determine its 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.

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.

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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.

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 in the second quarter of fiscal 2024 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.

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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

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.

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

If our estimate of uncollectible accounts is too low, costs and expenses may increase in future periods, and if it is too high, costs and expenses may decrease in future periods.

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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.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

and estimable loss.

It is possible, however, that future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies related to legal proceedings or our assumptions regarding other contingent matters.

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In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar.

In certain Latin American countries, we offer Disney+ as well as Star+, a general entertainment SVOD service, which is available on a standalone basis or together with Disney+ (Combo+).

In certain Latin American countries prior to July 2024, we offered Disney+ as well as Star+, a general entertainment SVOD service, which was available on a standalone basis or together with Disney+ (Combo+).

At the end of June 2024, we merged these services into a single Disney+ product offering.

Depending on the market, our services can be purchased on our websites or through third-party platforms/apps or are available via wholesale arrangements.

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are counted as a paid subscriber for each service included in the multi-product offering and subscribers to Hulu Live TV + SVOD are counted as one paid subscriber for each of the Hulu Live TV + SVOD, Disney+ and ESPN+ services.

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.

In Latin America prior to July 2024, if a subscriber had either the standalone Disney+ or Star+ service or subscribed to Combo+, the subscriber was counted as one Disney+ paid subscriber.

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.

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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

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.

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 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.

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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) March 30,

2024 December 30,

2023 April 1,

(in millions) June 29,

2024 March 30,

Domestic (U.S.

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25.3 24.2 21.9

85.5 77.5 78.4

International standalone (excluding Disney+ Hotstar) (2)

51.8 53.7 49.6

International multi-product (3)

Domestic (U.S.

and Canada) (2)

85.9 85.5 77.5

International (excluding Disney+ Hotstar) (3)(4)

63.5 63.6 59.7

149.4 149.1 137.2

(1) At June 29, 2024, there were 19.5 million and 5.8 million subscribers to three-service and two-service multi-product offerings, respectively.

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.

(3) Consists of subscribers to Combo+.

At July 1, 2023, there were 20.1 million and 1.8 million subscribers to three-service and two-service multi-product offerings, respectively.

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

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

(4) The services within the Combo+ multi-product offering were merged into a single Disney+ product offering.

The Combo+ subscribers at March 30, 2024 and July 1, 2023 were 11.7 million and 9.9 million, respectively.

SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION

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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 March 30, 2024 was as follows:

The par value and carrying value of total outstanding and guaranteed registered debt securities of the Obligor Group at June 29, 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.

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.

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.

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

Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise.

Accordingly, the Obligor Group’s cash flow and ability to service its debt, including the public debt, are dependent upon the earnings of the Company’s subsidiaries

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued)

and the distribution of those earnings to the Obligor Group, whether by dividends, loans or otherwise.

Holders of the guaranteed registered debt securities have a direct claim only against the Obligor Group.

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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) Six Months Ended March 30, 2024

Results of operations (in millions) Nine Months Ended June 29, 2024

Costs and expenses —

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Net income (loss) attributable to TWDC shareholders (1,758)

Balance Sheet (in millions) March 30,

Balance Sheet (in millions) June 29,

2024 September 30,

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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