Walt Disney Co 10-Q

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations ORGANIZATION OF INFORMATION Management’s Discussion and Analysis provides a narrative of the Company’s financial performance and condition that should be read in conjunction with the accompanying financial statements. It includes the following sections: • Consolidated Results • Current Quarter Results Compared to Prior-Year Quarter • Current Nine-Month Period Results Compared to Prior-Year Nine-Month Period • Seasonality • Business Segment Results • Corporate and Unallocated Shared Expenses • Financial Condition • Market Risk • Commitments and Contingencies • Other Matters • DTC Product Descriptions, Key Definitions and Supplemental Information • Supplemental Guarantor Financial Information CONSOLIDATED RESULTS Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions, except per share data) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Revenues: Services $ 20,836 $ 20,008 4 % $ 61,568 $ 60,591 2 % Products 2,319 2,322 — % 7,219 7,066 2 % Total revenues 23,155 22,330 4 % 68,787 67,657 2 % Costs and expenses: Cost of services (exclusive of depreciation and amortization) ( 13,236 ) ( 12,974 ) (2) % ( 39,821 ) ( 40,915 ) 3 % Cost of products (exclusive of depreciation and amortization) ( 1,473 ) ( 1,497 ) 2 % ( 4,647 ) ( 4,558 ) (2) % Selling, general, administrative and other ( 3,872 ) ( 3,874 ) — % ( 11,445 ) ( 11,315 ) (1) % Depreciation and amortization ( 1,220 ) ( 1,344 ) 9 % ( 3,705 ) ( 3,960 ) 6 % Total costs and expenses (19,801) (19,689) (1) % (59,618) (60,748) 2 % Restructuring and impairment charges — ( 2,650 ) 100 % ( 2,052 ) ( 2,871 ) 29 % 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 (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 (loss) 2,842 (153) nm 5,209 2,696 93 % Net income attributable to noncontrolling interests ( 221 ) ( 307 ) 28 % ( 697 ) ( 606 ) (15) % Net income (loss) attributable to Disney $ 2,621 $ (460) nm $ 4,512 $ 2,090 >100 % Diluted earnings (loss) per share attributable to Disney $ 1.43 $ (0.25) nm $ 2.46 $ 1.14 >100 % CURRENT QUARTER RESULTS COMPARED TO PRIOR-YEAR QUARTER Revenues for the quarter increased 4%, or $0.8 billion, to $23.2 billion; 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. The EPS 35 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) 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. Revenues 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 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 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 Interest expense, net is as follows: Quarter Ended (in millions) June 29, 2024 July 1, 2023 % Change Better (Worse) Interest expense $ (509) $ (503) (1) % Interest income, investment income and other 167 198 (16) % 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 Income from equity investees decreased $45 million, to $146 million from $191 million, due to lower income from A+E Television Networks. Income Taxes Quarter Ended June 29, 2024 July 1, 2023 Income (loss) before income taxes $ 3,093 $ (134) Income tax expense 251 19 Effective income tax rate 8.1 % (14.2)% 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). 36 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Noncontrolling Interests Quarter Ended (in millions) June 29, 2024 July 1, 2023 % Change Better (Worse) Net income attributable to noncontrolling interests $ (221) $ (307) 28 % 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 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 • 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: (in millions, except per share data) Pre-Tax Income (Loss) Tax Benefit (Expense) (1) After-Tax Income (Loss) EPS Favorable (Adverse) (2) Quarter Ended June 29, 2024: Income Tax Reserve Adjustments $ — $ 418 $ 418 $ 0.23 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) TFCF and Hulu Acquisition Amortization (432) 101 (331) (0.18) Other expense, net (11) 5 (6) — Total $ (3,093) $ 723 $ (2,370) $ (1.28) (1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item. (2) EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding. 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 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. Revenues 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. 37 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Costs and expenses 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 $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: Nine Months Ended (in millions) June 29, 2024 July 1, 2023 % Change Better (Worse) Interest expense $ (1,538) $ (1,472) (4) % Interest income, investment income and other 639 545 17 % Interest expense, net $ (899) $ (927) 3 % The increase in interest expense was due to higher average rates, partially offset by lower average debt balances. The increase in interest income, investment income and other was driven by 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. Income Taxes Nine Months Ended June 29, 2024 July 1, 2023 Income before income taxes $ 6,621 $ 3,762 Income tax expense 1,412 1,066 Effective income tax rate 21.3% 28.3 % 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. 38 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Noncontrolling Interests Nine Months Ended (in millions) June 29, 2024 July 1, 2023 % Change Better (Worse) 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 • 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 • 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: (in millions, except per share data) Pre-Tax Income (Loss) Tax Benefit (Expense) (1) After-Tax Income (Loss) EPS Favorable (Adverse) (2) 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) Nine Months Ended July 1, 2023: Restructuring and impairment charges $ (2,871) $ 660 $ (2,211) $ (1.20) 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) (1) Tax benefit (expense) amounts are determined using the tax rate applicable to the individual item. (2) EPS is net of noncontrolling interest share, where applicable. Total may not equal the sum of the column due to rounding. SEASONALITY The Company’s businesses are subject to the effects of seasonality. 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. In general, domestic advertising revenues are typically somewhat higher during the fall and somewhat lower during the summer months. Affiliate revenues vary with the subscriber trends of multi-channel video programming distributors (i.e. cable, satellite telecommunications and digital over-the-top service providers). Theatrical release dates are determined by several factors, including competition and the timing of vacation and holiday periods. 39 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. In addition, advertising revenues generated from sports programming are impacted by the timing of sports seasons and events, which varies throughout the year or may take place periodically (e.g. biannually, quadrennially). 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. Peak attendance and resort occupancy generally occur during the summer months when school vacations occur and during early winter and spring holiday periods. In addition, theme park and resort revenues may be higher during significant celebrations such as theme park or character anniversaries and lower in the periods following such celebrations. Consumer products revenue fluctuates with consumer purchasing behavior, which generally results in higher revenues during the Company’s first fiscal quarter due to the winter holiday season. In addition, licensing revenues fluctuate with the timing and performance of our film and television content. BUSINESS SEGMENT RESULTS The Company evaluates the performance of its operating businesses based on segment revenue and segment operating income. The following table presents revenues from our operating segments: Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Entertainment $ 10,580 $ 10,127 4 % $ 30,357 $ 31,111 (2) % Sports 4,558 4,335 5 % 13,705 13,201 4 % Experiences 8,386 8,198 2 % 25,911 24,389 6 % Eliminations (1) (369) (330) (12) % (1,186) (1,044) (14) % 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 Disney+. The following table presents income from our operating segments and other components of income (loss) before income taxes: Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Entertainment operating income $ 1,201 $ 408 >100 % $ 2,856 $ 1,208 >100 % Sports operating income 802 854 (6) % 1,477 1,484 — % Experiences operating income 2,222 2,297 (3) % 7,613 7,195 6 % Corporate and unallocated shared expenses (328) (295) (11) % (1,027) (854) (20) % Restructuring and impairment charges — (2,650) 100 % (2,052) (2,871) 29 % Other income (expense), net (65) (11) >(100) % (65) 96 nm Interest expense, net (342) (305) (12) % (899) (927) 3 % TFCF and Hulu Acquisition Amortization (397) (432) 8 % (1,282) (1,569) 18 % Income (loss) before income taxes $ 3,093 $ (134) nm $ 6,621 $ 3,762 76 % 40 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Depreciation expense is as follows: Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Entertainment $ 171 $ 174 2 % $ 503 $ 478 (5) % Sports 7 25 72 % 29 54 46 % Experiences Domestic 437 524 17 % 1,287 1,431 10 % International 185 170 (9) % 538 503 (7) % Total Experiences 622 694 10 % 1,825 1,934 6 % Corporate 54 53 (2) % 159 153 (4) % Total depreciation expense $ 854 $ 946 10 % $ 2,516 $ 2,619 4 % Amortization of intangible assets is as follows: Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Entertainment $ 13 $ 9 (44) % $ 40 $ 73 45 % Experiences 27 28 4 % 81 82 1 % TFCF and Hulu intangible assets 326 361 10 % 1,068 1,186 10 % Total amortization of intangible assets $ 366 $ 398 8 % $ 1,189 $ 1,341 11 % BUSINESS SEGMENT RESULTS - Current Quarter Results Compared to Prior-Year Quarter Entertainment Revenue and operating results for the Entertainment segment are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues: Linear Networks $ 2,663 $ 2,872 (7) % Direct-to-Consumer 5,805 5,045 15 % Content Sales/Licensing and Other 2,112 2,210 (4) % $ 10,580 $ 10,127 4 % Segment operating income (loss): Linear Networks $ 966 $ 1,025 (6) % Direct-to-Consumer (19) (505) 96 % Content Sales/Licensing and Other 254 (112) nm $ 1,201 $ 408 >100 % Revenues The increase in Entertainment revenues was due to subscription revenue growth. Operating income 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. 41 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Linear Networks Operating results for Linear Networks are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Affiliate fees $ 1,726 $ 1,833 (6) % Advertising 907 1,005 (10) % Other 30 34 (12) % Total revenues 2,663 2,872 (7) % Operating expenses (1,209) (1,331) 9 % Selling, general, administrative and other (604) (677) 11 % Depreciation and amortization (11) (15) 27 % Equity in the income of investees 127 176 (28) % Operating Income $ 966 $ 1,025 (6) % Revenues - Affiliate fees Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Domestic $ 1,451 $ 1,523 (5) % International 275 310 (11) % $ 1,726 $ 1,833 (6) % 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 Better (Worse) (in millions) June 29, 2024 July 1, 2023 Domestic $ 672 $ 762 (12) % International 235 243 (3) % $ 907 $ 1,005 (10) % 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. 42 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Operating expenses Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs Domestic $ (811) $ (926) 12 % International (173) (179) 3 % Total programming and production costs (984) (1,105) 11 % Other operating expenses (225) (226) — % $ (1,209) $ (1,331) 9 % 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 $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 $59 million, to $966 million from $1,025 million, due to lower income from equity investees. Supplemental revenue and operating income The following table provides supplemental revenue and operating income detail for Linear Networks: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail Domestic $ 2,145 $ 2,302 (7) % International 518 570 (9) % $ 2,663 $ 2,872 (7) % Supplemental operating income detail Domestic $ 682 $ 692 (1) % International 157 157 — % Equity in the income of investees 127 176 (28) % $ 966 $ 1,025 (6) % 43 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Direct-to-Consumer Operating results for Direct-to-Consumer are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Subscription fees $ 4,729 $ 4,157 14 % Advertising 1,004 839 20 % Other 72 49 47 % Total revenues 5,805 5,045 15 % Operating expenses (4,542) (4,490) (1) % Selling, general, administrative and other (1,197) (991) (21) % Depreciation and amortization (85) (69) (23) % Operating Loss $ (19) $ (505) 96 % Revenues - Subscription fees 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 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. Key metrics 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: Paid subscribers at: % Change Better (Worse) (in millions) June 29, 2024 March 30, 2024 July 1, 2023 June 29, 2024 vs. Mar. 30, 2024 June 29, 2024 vs. July 1, 2023 Disney+ Domestic (U.S. and Canada) 54.8 54.0 46.0 1 % 19 % International (excluding Disney+ Hotstar) 63.5 63.6 59.7 — % 6 % Disney+ Core (2) 118.3 117.6 105.7 1 % 12 % Disney+ Hotstar 35.5 36.0 40.4 (1) % (12) % Hulu SVOD Only 46.7 45.8 44.0 2 % 6 % Live TV + SVOD 4.4 4.5 4.3 (2) % 2 % Total Hulu (2) 51.1 50.2 48.3 2 % 6 % 44 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Average Monthly Revenue Per Paid Subscriber: Quarter Ended % Change Better (Worse) June 29, 2024 March 30, 2024 July 1, 2023 June 29, 2024 vs. Mar. 30, 2024 June 29, 2024 vs. July 1, 2023 Disney+ Domestic (U.S. and Canada) $ 7.74 $ 8.00 $ 7.31 (3) % 6 % International (excluding Disney+ Hotstar) 6.78 6.66 6.01 2 % 13 % Disney+ Core 7.22 7.28 6.58 (1) % 10 % Disney+ Hotstar 1.05 0.70 0.59 50 % 78 % Hulu SVOD Only 12.73 11.84 12.39 8 % 3 % Live TV + SVOD 96.11 95.01 91.80 1 % 5 % (1) See discussion on pages 72-73 — DTC Product Descriptions, Key Definitions and Supplemental Information. (2) Total may not equal the sum of the column due to rounding. Average Monthly Revenue Per Paid Subscriber - 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. 45 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Operating expenses Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs Hulu $ (2,142) $ (2,066) (4) % Disney+ and other (1,508) (1,468) (3) % Total programming and production costs (3,650) (3,534) (3) % Other operating expense (892) (956) 7 % $ (4,542) $ (4,490) (1) % 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 $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 Operating results for Content Sales/Licensing and Other are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues TV/VOD distribution $ 664 $ 560 19 % Theatrical distribution 724 838 (14) % Home entertainment distribution 142 252 (44) % Other 582 560 4 % Total revenues 2,112 2,210 (4) % Operating expenses (1,204) (1,469) 18 % Selling, general, administrative and other (562) (752) 25 % Depreciation and amortization (88) (99) 11 % Equity in the loss of investees (4) (2) (100) % Operating Income (Loss) $ 254 $ (112) nm Revenues - TV/VOD distribution The increase in TV/VOD distribution revenue was due to higher sales of episodic content. Revenues - Theatrical distribution 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. 46 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 Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs $ (1,017) $ (1,252) 19 % Distribution costs and cost of goods sold (187) (217) 14 % $ (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 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 $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 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 The following table presents supplemental information for items related to the Entertainment segment that are excluded from segment operating income: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Restructuring and impairment charges (1) $ — $ (2,569) 100 % TFCF and Hulu Acquisition Amortization (2) (322) (333) 3 % (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. In the prior-year quarter, amortization of intangible assets was $262 million and amortization of step-up on film and television costs was $68 million. 47 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Sports Operating results for Sports are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Affiliate fees $ 2,571 $ 2,633 (2) % Advertising 1,339 1,153 16 % Subscription fees 414 380 9 % Other 234 169 38 % Total revenues 4,558 4,335 5 % Operating expenses (3,482) (3,164) (10) % Selling, general, administrative and other (293) (312) 6 % Depreciation and amortization (7) (25) 72 % Equity in the income of investees 26 20 30 % Operating Income $ 802 $ 854 (6) % Revenues - Affiliate fees Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 ESPN Domestic $ 2,239 $ 2,294 (2) % International 272 252 8 % 2,511 2,546 (1) % Star India 60 87 (31) % $ 2,571 $ 2,633 (2) % 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 Better (Worse) (in millions) June 29, 2024 July 1, 2023 ESPN Domestic $ 1,071 $ 918 17 % International 51 53 (4) % 1,122 971 16 % Star India 217 182 19 % $ 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. 48 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Revenues - Subscription fees Subscription fees increased $34 million, to $414 million from $380 million, due to higher rates. Revenues - Other 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. Key Metrics 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) June 29, 2024 March 30, 2024 July 1, 2023 June 29, 2024 vs. Mar. 30, 2024 June 29, 2024 vs. July 1, 2023 Paid subscribers at (in millions) 24.9 24.8 25.2 — % (1) % Average Monthly Revenue per Paid Subscriber for the quarter end $ 6.23 $ 6.30 $ 5.45 (1) % 14 % (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. Operating expenses Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs ESPN Domestic $ (2,381) $ (2,209) (8) % International (308) (292) (5) % (2,689) (2,501) (8) % Star India (555) (456) (22) % (3,244) (2,957) (10) % Other operating expenses (238) (207) (15) % $ (3,482) $ (3,164) (10) % 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. 49 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Supplemental revenue and operating income The following table provides supplemental revenue and operating income (loss) detail for the Sports segment: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail ESPN Domestic $ 3,908 $ 3,708 5 % International 371 350 6 % 4,279 4,058 5 % Star India 279 277 1 % $ 4,558 $ 4,335 5 % Supplemental operating income (loss) detail ESPN Domestic $ 1,085 $ 1,077 1 % International 5 (27) nm 1,090 1,050 4 % Star India (314) (216) (45) % Equity in the income of investees 26 20 30 % $ 802 $ 854 (6) % Items Excluded from Segment Operating Income Related to Sports The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 TFCF Acquisition Amortization (1) $ (74) $ (97) 24 % Restructuring and impairment charges (2) — (50) 100 % (1) Amortization of intangible assets (2) Charges for the prior-year quarter were due to severance 50 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Experiences Operating results for the Experiences segment are as follows: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Theme park admissions $ 2,780 $ 2,731 2 % Resorts and vacations 2,115 1,990 6 % Parks & Experiences merchandise, food and beverage 1,994 1,963 2 % Merchandise licensing and retail 954 1,010 (6) % Parks licensing and other 543 504 8 % Total revenues 8,386 8,198 2 % Operating expenses (4,573) (4,279) (7) % Selling, general, administrative and other (942) (900) (5) % Depreciation and amortization (649) (722) 10 % Operating Income $ 2,222 $ 2,297 (3) % Revenues - Theme park admissions Theme park admissions revenue growth was due to increases of 1% from higher average per capita ticket revenue and 1% from attendance growth. Revenues - Resorts and vacations Higher resorts and vacations revenue was primarily due to increases of 3% from higher average ticket prices for cruise line sailings, 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 1% from guest spending growth and 1% from higher volumes. Revenues - Merchandise licensing and retail 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 due to a favorable foreign exchange impact and higher real estate sales. 51 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Key metrics In addition to revenue, costs and operating income, management uses the following key metrics to analyze trends and evaluate the overall performance of our theme parks and resorts, and we believe these metrics are useful to investors in analyzing the business: Domestic International (1) Total (1) Quarter Ended Quarter Ended Quarter Ended Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Parks Increase (decrease) Attendance (2) — % 1 % 4 % 88 % 1 % 20 % Per Capita Guest Spending (3) 1 % — % (1) % 16 % — % (2) % Hotels Occupancy (4) 83 % 84 % 82 % 74 % 83 % 82 % Available Hotel Room Nights (in thousands) (5) 2,543 2,527 791 793 3,334 3,320 Change in Per Room Guest Spending (6) 4 % (1) % 7 % 19 % 4 % 1 % (1) Per capita guest spending growth rate and per room guest spending growth rate exclude the impact of changes in foreign exchange rates. (2) Attendance is used to analyze volume trends at our theme parks and is based on the number of unique daily entries, i.e. a person visiting multiple theme parks in a single day is counted only once. Our attendance count includes complimentary entries but excludes entries by children under the age of three. (3) Per capita guest spending is used to analyze guest spending trends and is defined as total revenue from ticket sales and sales of food, beverage and merchandise in our theme parks, divided by total theme park attendance. (4) Occupancy is used to analyze the usage of available capacity at hotels and is defined as the number of room nights occupied by guests as a percentage of available hotel room nights. (5) Available hotel room nights is defined as the total number of room nights that are available at our hotels and at Disney Vacation Club (DVC) properties located at our theme parks and resorts that are not utilized by DVC members. Available hotel room nights include rooms temporarily taken out of service. (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. Operating expenses Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Operating labor $ (2,154) $ (1,938) (11) % Infrastructure costs (823) (754) (9) % Cost of goods sold and distribution costs (780) (811) 4 % Other operating expense (816) (776) (5) % $ (4,573) $ (4,279) (7) % 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. 52 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Depreciation and amortization 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 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 The following table presents supplemental revenue and operating income detail for the Experiences segment: Quarter Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail Parks & Experiences Domestic $ 5,820 $ 5,649 3 % International 1,602 1,532 5 % Consumer Products 964 1,017 (5) % $ 8,386 $ 8,198 2 % Supplemental operating income detail Parks & Experiences Domestic $ 1,347 $ 1,436 (6) % International 435 428 2 % Consumer Products 440 433 2 % $ 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 Better (Worse) (in millions) June 29, 2024 July 1, 2023 Charge related to a legal ruling $ (65) $ (101) 36 % Restructuring and impairment charges (1) — (16) 100 % TFCF Acquisition Amortization (1) (2) 50 % (1) Charges for the prior-year quarter were due to severance. 53 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) 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: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues: Linear Networks $ 8,231 $ 9,073 (9) % Direct-to-Consumer 16,993 14,850 14 % Content Sales/Licensing and Other 5,133 7,188 (29) % $ 30,357 $ 31,111 (2) % Segment operating income (loss): Linear Networks $ 2,954 $ 3,314 (11) % Direct-to-Consumer (110) (2,076) 95 % Content Sales/Licensing and Other 12 (30) nm $ 2,856 $ 1,208 >100 % Revenues 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 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: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Affiliate fees $ 5,251 $ 5,631 (7) % Advertising 2,875 3,303 (13) % Other 105 139 (24) % Total revenues 8,231 9,073 (9) % Operating expenses (3,838) (4,308) 11 % Selling, general, administrative and other (1,845) (1,940) 5 % Depreciation and amortization (34) (39) 13 % Equity in the income of investees 440 528 (17) % Operating Income $ 2,954 $ 3,314 (11) % Revenues - Affiliate fees Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Domestic $ 4,437 $ 4,689 (5) % International 814 942 (14) % $ 5,251 $ 5,631 (7) % 54 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) The decrease in domestic affiliate revenue was due to a decline of 11% from fewer subscribers, including the impact of the non-renewal of carriage of certain networks by an affiliate, partially offset by an increase of 6% from higher effective 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Domestic $ 2,121 $ 2,555 (17) % International 754 748 1 % $ 2,875 $ 3,303 (13) % The decline in domestic advertising revenue was due to decreases of 14% from fewer impressions and 3% from lower rates. The decrease in impressions was due to lower average viewership and, to a lesser extent, fewer units delivered. 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs Domestic $ (2,619) $ (3,021) 13 % International (534) (520) (3) % Total programming and production costs (3,153) (3,541) 11 % Other operating expenses (685) (767) 11 % $ (3,838) $ (4,308) 11 % 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 $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 $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. 55 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Supplemental revenue and operating income The following table provides supplemental revenue and operating income detail for Linear Networks: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail Domestic $ 6,624 $ 7,307 (9) % International 1,607 1,766 (9) % $ 8,231 $ 9,073 (9) % Supplemental operating income detail Domestic $ 2,040 $ 2,206 (8) % International 474 580 (18) % Equity in the income of investees 440 528 (17) % $ 2,954 $ 3,314 (11) % Direct-to-Consumer Operating results for Direct-to-Consumer are as follows: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Subscription fees $ 14,041 $ 12,243 15 % Advertising 2,740 2,411 14 % Other 212 196 8 % Total revenues 16,993 14,850 14 % Operating expenses (13,449) (13,643) 1 % Selling, general, administrative and other (3,424) (3,033) (13) % Depreciation and amortization (230) (250) 8 % Operating Loss $ (110) $ (2,076) 95 % Revenues - Subscription fees Growth in subscription fees reflected an increase of 10% from higher rates attributable to increases in retail pricing at Disney+ Core and, to a lesser extent, Hulu, and 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 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. 56 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Key metrics Average Monthly Revenue Per Paid Subscriber: Nine Months Ended % Change Better (Worse) June 29, 2024 July 1, 2023 Disney+ Domestic (U.S. and Canada) $ 7.96 $ 6.80 17 % International (excluding Disney+ Hotstar) 6.46 5.82 11 % Disney+ Core 7.13 6.26 14 % Disney+ Hotstar 1.02 0.65 57 % Hulu SVOD Only 12.29 12.19 1 % Live TV + SVOD 94.89 90.66 5 % 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs Hulu $ (6,437) $ (6,300) (2) % Disney+ and other (4,275) (4,333) 1 % Total programming and production costs (10,712) (10,633) (1) % Other operating expense (2,737) (3,010) 9 % $ (13,449) $ (13,643) 1 % 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 $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+. 57 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Content Sales/Licensing and Other Operating results for Content Sales/Licensing and Other are as follows: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues TV/VOD distribution $ 1,656 $ 2,063 (20) % Theatrical distribution 1,098 2,745 (60) % Home entertainment distribution 540 639 (15) % Other 1,839 1,741 6 % Total revenues 5,133 7,188 (29) % Operating expenses (3,305) (4,931) 33 % Selling, general, administrative and other (1,529) (2,024) 24 % Depreciation and amortization (279) (262) (6) % Equity in the loss of investees (8) (1) >(100) % Operating Income (Loss) $ 12 $ (30) nm Revenues - TV/VOD distribution 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 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 , 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 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs $ (2,769) $ (4,249) 35 % Distribution costs and cost of goods sold (536) (682) 21 % $ (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. 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. 58 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: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Restructuring and impairment charges (1) $ (717) $ (2,750) 74 % TFCF and Hulu Acquisition Amortization (2) (1,018) (1,272) 20 % Gain on sale of a business — 28 (100) % (1) Charges for the current period were due to a goodwill impairment related to linear networks. Charges for the prior-year period were due to 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. In the prior-year period, amortization of intangible assets was $889 million and amortization of step-up on film and television costs was $374 million. Sports Operating results for Sports are as follows: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Affiliate fees $ 7,918 $ 8,052 (2) % Advertising 3,640 3,196 14 % Subscription fees 1,246 1,139 9 % Other 901 814 11 % Total revenues 13,705 13,201 4 % Operating expenses (11,295) (10,737) (5) % Selling, general, administrative and other (949) (965) 2 % Depreciation and amortization (29) (54) 46 % Equity in the income of investees 45 39 15 % Operating Income $ 1,477 $ 1,484 — % Revenues - Affiliate fees Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 ESPN Domestic $ 6,947 $ 7,057 (2) % International 783 776 1 % 7,730 7,833 (1) % Star India 188 219 (14) % $ 7,918 $ 8,052 (2) % 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. 59 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 ESPN Domestic $ 3,059 $ 2,757 11 % International 143 151 (5) % 3,202 2,908 10 % Star India 438 288 52 % $ 3,640 $ 3,196 14 % 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 $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. Key Metrics Nine Months Ended % Change Better (Worse) June 29 2024 July 1, 2023 Average Monthly Revenue per Paid Subscriber for the period $ 6.21 $ 5.54 12 % ESPN+ average monthly revenue per paid subscriber increased from $5.54 to $6.21 due to increases in retail pricing and higher advertising revenue. Operating expenses Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Programming and production costs ESPN Domestic $ (8,386) $ (8,250) (2) % International (874) (825) (6) % (9,260) (9,075) (2) % Star India (1,341) (977) (37) % (10,601) (10,052) (5) % Other operating expenses (694) (685) (1) % $ (11,295) $ (10,737) (5) % 60 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 the Sports segment: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail ESPN Domestic $ 11,847 $ 11,490 3 % International 1,075 1,074 — % 12,922 12,564 3 % Star India 783 637 23 % $ 13,705 $ 13,201 4 % Supplemental operating income (loss) detail ESPN Domestic $ 2,120 $ 1,894 12 % International (32) (5) >(100) % 2,088 1,889 11 % Star India (656) (444) (48) % Equity in the income of investees 45 39 15 % $ 1,477 $ 1,484 — % Items Excluded from Segment Operating Income Related to Sports The following table presents supplemental information for items related to the Sports segment that are excluded from segment operating income: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 TFCF Acquisition Amortization (1) $ (259) $ (291) 11 % Restructuring and impairment charges (2) — (60) 100 % (1) Amortization of intangible assets (2) Charges for the prior-year period were due to severance 61 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Experiences Operating results for the Experiences segment are as follows: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Revenues Theme park admissions $ 8,568 $ 7,800 10 % Resorts and vacations 6,334 5,919 7 % Parks & Experiences merchandise, food and beverage 6,126 5,846 5 % Merchandise licensing and retail 3,184 3,246 (2) % Parks licensing and other 1,699 1,578 8 % Total revenues 25,911 24,389 6 % Operating expenses (13,562) (12,524) (8) % Selling, general, administrative and other (2,830) (2,652) (7) % Depreciation and amortization (1,906) (2,016) 5 % Equity in the loss of investees — (2) 100 % Operating Income $ 7,613 $ 7,195 6 % Revenues - Theme park admissions 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. 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 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 3% from higher volumes and 2% from an increase in average guest spending. Revenues - Merchandise licensing and retail 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, a favorable foreign exchange impact and higher royalties from Tokyo Disney Resort. 62 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Key metrics Domestic International Total Nine Months Ended Nine Months Ended Nine Months Ended Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Jun. 29, 2024 Jul. 1, 2023 Parks Increase (decrease) Attendance 1 % 6 % 15 % 64 % 5 % 19 % Per Capita Guest Spending 3 % 4 % 7 % 20 % 3 % 2 % Hotels Occupancy 86 % 87 % 83 % 71 % 85 % 83 % Available Hotel Room Nights (in thousands) 7,640 7,565 2,381 2,380 10,021 9,945 Change in Per Room Guest Spending (1) 3 % 1 % 8 % 14 % 3 % 1 % (1) In the third quarter of the prior fiscal year, the Company revised its method of allocating revenue on the sales of Disneyland Paris vacation packages between hotel room revenue and admissions revenue. The new method resulted in a decrease in the percentage of revenue allocated to hotel rooms. If we had applied the new method in the 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 Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Operating labor $ (6,222) $ (5,553) (12) % Infrastructure costs (2,432) (2,226) (9) % Cost of goods sold and distribution costs (2,482) (2,490) — % Other operating expense (2,426) (2,255) (8) % $ (13,562) $ (12,524) (8) % 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 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 $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 $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 $7.2 billion to $7.6 billion due to growth at our international parks and experiences. 63 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Supplemental revenue and operating income The following table presents supplemental revenue and operating income detail for the Experiences segment: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Supplemental revenue detail Parks & Experiences Domestic $ 18,075 $ 17,293 5 % International 4,600 3,810 21 % Consumer Products 3,236 3,286 (2) % $ 25,911 $ 24,389 6 % Supplemental operating income detail Parks & Experiences Domestic $ 5,031 $ 5,068 (1) % International 1,055 663 59 % Consumer Products 1,527 1,464 4 % $ 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 Better (Worse) (in millions) June 29, 2024 July 1, 2023 Charge related to a legal ruling $ (65) $ (101) 36 % Restructuring and impairment charges (1) — (27) 100 % TFCF Acquisition Amortization (5) (6) 17 % (1) Charges for the prior-year period were due to severance. CORPORATE AND UNALLOCATED SHARED EXPENSES Quarter Ended % Change Better (Worse) Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023 Corporate and unallocated shared expenses $ (328) $ (295) (11) % $ (1,027) $ (854) (20) % 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. 64 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: Nine Months Ended % Change Better (Worse) (in millions) June 29, 2024 July 1, 2023 Cash provided by operations $ 8,453 $ 5,064 67 % Cash used in investing activities (4,903) (3,259) (50) % Cash used in financing activities (11,722) (2,127) >(100) % 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) % Operating Activities 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 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. Produced and licensed programming costs The Entertainment and Sports segments incur costs to produce and license film, episodic, sports and other content. Production costs include spend on content internally produced at our studios such as live-action and animated films, episodic series, specials, shorts and theatrical stage plays. Production costs also include original content commissioned from third-party studios. Programming costs include content rights licensed from third parties for use on the Company’s sports and general entertainment networks and DTC streaming services. Programming assets are generally recorded when the programming becomes available to us with a corresponding increase in programming liabilities. 65 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, 2024 July 1, 2023 Beginning balances: Produced and licensed programming assets $ 36,593 $ 37,667 Programming liabilities (3,792) (3,940) 32,801 33,727 Spending: Programming licenses and rights 10,773 11,518 Produced film and television content 7,184 10,441 17,957 21,959 Amortization: Programming licenses and rights (11,565) (10,871) Produced film and television content (7,513) (9,227) (19,078) (20,098) Change in produced and licensed content costs (1,121) 1,861 Content Impairment — (2,266) Produced and licensed content costs reclassified to assets held for sale (978) — Other non-cash activity 382 (191) Ending balances: Produced and licensed programming assets 34,791 36,976 Programming liabilities (3,707) (3,845) $ 31,084 $ 33,131 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. 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 nine months ended June 29, 2024 and July 1, 2023 are as follows: Nine Months Ended (in millions) June 29, 2024 July 1, 2023 Investments in parks, resorts and other property: Entertainment $ 750 $ 747 Sports 2 8 Experiences Domestic 1,953 1,544 International 706 609 Total Experiences 2,659 2,153 Corporate 512 687 Total investments in parks, resorts and other property 3,923 3,595 Cash used in (provided by) other investing activities, net 980 (336) Cash used in investing activities $ 4,903 $ 3,259 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. 66 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 cruise ship fleet expansion and new attractions. Capital expenditures at Corporate primarily reflect investments in corporate facilities, technology and equipment. 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 nine months ended June 29, 2024 and July 1, 2023 are as follows: Nine Months Ended (in millions) June 29, 2024 July 1, 2023 Change in borrowings $ 780 $ (1,209) Dividends (549) — Repurchases of common stock (2,523) — Activities related to noncontrolling and redeemable noncontrolling interests (1) (8,610) (181) Cash used in other financing activities, net (2) (820) (737) Cash used in financing activities $ (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. 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. See Note 11 to the Condensed Consolidated Financial Statements for a summary of dividends and share repurchases in fiscal 2024. There were no dividends paid or share repurchases in fiscal 2023. The Company is targeting 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. We believe that the Company’s financial condition is strong and that its cash balances, other liquid assets, operating cash flows, access to debt and equity capital markets and borrowing capacity under current bank facilities, taken together, provide adequate resources to fund ongoing operating requirements, contractual obligations, upcoming debt maturities as well as future capital expenditures related to the expansion of existing businesses and development of new projects. In addition, the Company could undertake other measures to ensure sufficient liquidity, such as raising additional financing, reducing or not declaring future dividends; reducing or stopping share repurchases; reducing capital spending; reducing film and episodic content investments; or implementing furloughs or reductions in force. 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 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 June 29, 2024, the Company met this covenant 67 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. MARKET RISK The Company is exposed to the impact of interest rate changes, foreign currency fluctuations, commodity fluctuations and changes in the market values of its investments. Policies and Procedures In the normal course of business, we employ established policies and procedures to manage the Company’s exposure to changes in interest rates, foreign currencies and commodities using a variety of financial instruments. Our objectives in managing exposure to interest rate changes are to limit the impact of interest rate volatility on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we primarily use interest rate swaps to manage net exposure to interest rate changes related to the Company’s portfolio of borrowings. By policy, the Company targets fixed-rate debt as a percentage of its net debt between minimum and maximum percentages. Our objective in managing exposure to foreign currency fluctuations is to reduce volatility of earnings and cash flows in order to allow management to focus on core business issues and challenges. Accordingly, the Company enters into various contracts that change in value as foreign exchange rates change to protect the U.S. dollar equivalent value of its existing foreign currency assets, liabilities, commitments and forecasted foreign currency revenues and expenses. The Company utilizes option strategies and forward contracts that provide for the purchase or sale of foreign currencies to hedge probable, but not firmly committed, transactions. The Company also uses forward and option contracts to hedge foreign currency assets and liabilities. The principal foreign currencies hedged are the euro, Japanese yen, British pound, Chinese yuan and Canadian dollar. Cross-currency swaps are used to effectively convert foreign currency denominated borrowings to U.S. dollar denominated borrowings. By policy, the Company maintains hedge coverage between minimum and maximum percentages of its forecasted foreign exchange exposures generally for periods not to exceed four years. The gains and losses on these contracts are intended to offset changes in the U.S. dollar equivalent value of the related exposures. The economic or political conditions in a country have reduced and in the future could reduce our ability to hedge exposure to currency fluctuations in the country or our ability to repatriate revenue from the country. Our objectives in managing exposure to commodity fluctuations are to use commodity derivatives to reduce volatility of earnings and cash flows arising from commodity price changes. The amounts hedged using commodity swap contracts are based on forecasted levels of consumption of certain commodities, such as fuel oil and gasoline. Our objectives in managing exposures to market-based fluctuations in certain retirement liabilities are to use total return swap contracts to reduce the volatility of earnings arising from changes in these retirement liabilities. The amounts hedged using total return swap contracts are based on estimated liability balances. It is the Company’s policy to enter into foreign currency and interest rate derivative transactions and other financial instruments only to the extent considered necessary to meet its objectives as stated above. The Company does not enter into these transactions or any other hedging transactions for speculative purposes. COMMITMENTS AND CONTINGENCIES Legal Matters As disclosed in Note 13 to the Condensed Consolidated Financial Statements, the Company has exposure for certain legal matters. Guarantees See Note 14 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K. Tax Matters As disclosed in Note 9 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K, the Company has exposure for certain tax matters. Contractual Commitments 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. 68 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) OTHER MATTERS Accounting Policies and Estimates We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require significant judgments and estimates on the part of management. For a summary of our significant accounting policies, including the accounting policies discussed below, see Note 2 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K. Produced and Acquired/Licensed Content Costs We amortize and test for impairment of capitalized film and television production costs based on whether the content is predominantly monetized individually or as a group. See Note 7 to the Condensed Consolidated Financial Statements for further discussion. Production costs that are classified as individual are amortized based upon the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues). With respect to produced films intended for theatrical release, the most sensitive factor affecting our estimate of Ultimate Revenues is theatrical performance. Revenues derived from other markets subsequent to the theatrical release are generally highly correlated with theatrical performance. Theatrical performance varies primarily based upon the public interest and demand for a particular film, the popularity of competing films at the time of release and the level of marketing effort. Upon a film’s release and determination of the theatrical performance, the Company’s estimates of revenues from succeeding windows and markets, which may include imputed license fees for content that is used on our DTC streaming services, are revised based on historical relationships and an analysis of current market trends. With respect to capitalized television production costs that are classified as individual, the most sensitive factor affecting estimates of Ultimate Revenues is program ratings of the content on our licensees’ platforms. Program ratings, which are an indication of market acceptance, directly affect the program’s ability to generate advertising and subscriber revenues and are correlated with the license fees we can charge for the content in subsequent windows and for subsequent seasons. Ultimate Revenues are reassessed each reporting period and the impact of any changes on amortization of production cost is accounted for as if the change occurred at the beginning of the current fiscal year. If our estimate of Ultimate Revenues decreases, amortization of costs may be accelerated or result in an impairment. Conversely, if our estimate of Ultimate Revenues increases, cost amortization may be slowed. Production costs classified as individual are tested for impairment at the individual title level by comparing that title’s unamortized costs to the present value of discounted cash flows directly attributable to the title. To the extent the title’s unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess. Produced content costs that are part of a group and acquired/licensed content costs are amortized based on projected usage, typically resulting in an accelerated or straight-line amortization pattern. The determination of projected usage requires judgment and is reviewed on a regular basis for changes. Adjustments to projected usage are applied prospectively in the period of the change. Historical viewing patterns are the most significant input into determining the projected usage, and significant judgment is required in using historical viewing patterns to derive projected usage. If projected usage changes we may need to accelerate or slow the recognition of amortization expense. 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. The group is established by identifying the lowest level for which cash flows are independent of the cash flows of other produced and licensed content. If the unamortized costs exceed the present value of discounted cash flows, an impairment charge is recorded for the excess and allocated to individual titles based on the relative carrying value of each title in the group. If there are no plans to continue to use an individual film or television program that is part of a group, the unamortized cost of the individual title is written down to its estimated fair value. Licensed content is included as part of the group within which it is monetized for purposes of impairment testing. The amortization of multi-year sports rights is based on projections of revenues for each season relative to projections of total revenues over the contract period (estimated relative value). Projected revenues include advertising revenue and an allocation of affiliate revenue. If the annual contractual payments related to each season approximate each season’s estimated relative value, we expense the related contractual payments during the applicable season. If estimated relative values by year were to change significantly, amortization of our sports rights costs may be accelerated or slowed. 69 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Revenue Recognition The Company has revenue recognition policies for its various operating segments that are appropriate to the circumstances of each business. Refer to Note 2 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K for our revenue recognition policies. Pension and Postretirement Medical Plan Actuarial Assumptions The Company’s pension and postretirement medical benefit obligations and related costs are calculated using a number of actuarial assumptions. Two critical assumptions, the discount rate and the expected return on plan assets, are important elements of expense and/or liability measurement, which we evaluate annually. See Note 10 to the Consolidated Financial Statements in the 2023 Annual Report on Form 10-K for estimated impacts of changes in these assumptions. Other assumptions include the healthcare cost trend rate and employee demographic factors such as retirement patterns, mortality, turnover and rate of compensation increase. The discount rate enables us to state expected future cash payments for benefits as a present value on the measurement date. A lower discount rate increases the present value of benefit obligations and increases pension and postretirement medical expense. The guideline for setting this rate is a high-quality long-term corporate bond rate. The Company’s discount rate was determined by considering yield curves constructed of a large population of high-quality corporate bonds and reflects the matching of the plans’ liability cash flows to the yield curves. To determine the expected long-term rate of return on the plan assets, we consider the current and expected asset allocation, as well as historical and expected returns on each plan asset class. A lower expected rate of return on plan assets will increase pension and postretirement medical expense. Goodwill, Other Intangible Assets, Long-Lived Assets and Investments The Company is required to test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and if current events or circumstances require, on an interim basis. The Company performs its annual test of goodwill and indefinite-lived intangible assets for impairment in its fiscal fourth quarter. Goodwill is allocated to various reporting units, which are an operating segment or one level below the operating segment. To test goodwill for impairment, the Company first performs a qualitative assessment to determine if it is more likely than not that the carrying amount of a reporting unit exceeds its fair value. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test. The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows of the reporting unit. The quantitative assessment compares the fair value of each 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, 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 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. 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. 70 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%. 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. If it is, a quantitative assessment is required. Alternatively, the Company may bypass the qualitative assessment and perform a quantitative impairment test. The qualitative assessment requires the consideration of factors such as recent market transactions, macroeconomic conditions and changes in projected future cash flows. The quantitative assessment compares the fair value of an indefinite-lived intangible asset to its carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized for the excess. Fair values of indefinite-lived intangible assets are determined based on discounted cash flows or appraised values, as appropriate. The Company tests long-lived assets, including amortizable intangible assets, for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount may not be recoverable. Once a triggering event has occurred, the impairment test employed is based on whether the Company’s intent is to hold the asset for continued use or to hold the asset for sale. The impairment test for assets held for use requires a comparison of the estimated undiscounted future cash flows expected to be generated over the useful life of the significant assets of an asset group to the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets and could include assets used across multiple businesses. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. For assets held for sale, to the extent the carrying amount is greater than the asset’s fair value less costs to sell, an impairment loss is recognized for the difference. 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 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. The Company has investments in equity securities. For equity securities that do not have a readily determinable fair value, we consider forecasted financial performance of the investee companies, as well as volatility inherent in the external markets for these investments. If these forecasts are not met, impairment charges may be recorded. Allowance for Credit Losses We evaluate our allowance for credit losses and estimate collectability of accounts receivable based on historical bad debt experience, our assessment of the financial condition of individual companies with which we do business, current market conditions and reasonable and supportable forecasts of future economic conditions. 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. See Note 3 to the Condensed Consolidated Financial Statements for additional discussion. Contingencies and Litigation We are currently involved in certain legal proceedings and, as required, have accrued estimates of the probable and estimable losses for the resolution of these proceedings. These estimates are based upon an analysis of potential results, 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 71 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. See Note 13 to the Condensed Consolidated Financial Statements for more detailed information on litigation exposure. Income Tax As a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. From time to time, these audits result in proposed assessments. Our determinations regarding the recognition of income tax benefits are made in consultation with outside tax and legal counsel, where appropriate, and are based upon the technical merits of our tax positions in consideration of applicable tax statutes and related interpretations and precedents and upon the expected outcome of proceedings (or negotiations) with taxing and legal authorities. The tax benefits ultimately realized by the Company may differ from those recognized in our future financial statements based on a number of factors, including the Company’s decision to settle rather than litigate a matter, relevant legal precedent related to similar matters and the Company’s success in supporting its filing positions with taxing authorities. New Accounting Pronouncements See Note 17 to the Condensed Consolidated Financial Statements for information regarding new accounting pronouncements. DTC PRODUCT DESCRIPTIONS, KEY DEFINITIONS AND SUPPLEMENTAL INFORMATION Product Offerings In the U.S., Disney+, ESPN+ and Hulu SVOD Only are each offered as a standalone service or together as part of various multi-product offerings. Hulu Live TV + SVOD includes Disney+ and ESPN+. Disney+ is available in more than 150 countries and territories outside the U.S. and Canada. In India and certain other Southeast Asian countries, the service is branded Disney+ Hotstar. 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. Paid Subscribers Paid subscribers reflect subscribers for which we recognized subscription revenue. Subscribers cease to be a paid subscriber as of their effective cancellation date or as a result of a failed payment method. Subscribers to multi-product offerings in the U.S. 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 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. When we aggregate the total number of paid subscribers across our DTC streaming services, we refer to them as paid subscriptions. International Disney+ (excluding Disney+ Hotstar) International Disney+ (excluding Disney+ Hotstar) includes the Disney+ service outside the U.S. and Canada and the Star+ service in Latin America. Average Monthly Revenue Per Paid Subscriber Hulu and ESPN+ average monthly revenue per paid subscriber is calculated based on the average of the monthly average paid subscribers for each month in the period. The monthly average paid subscribers is calculated as the sum of the beginning of the month and end of the month paid subscriber count, divided by two. Disney+ average monthly revenue per paid subscriber is calculated using a daily average of paid subscribers for the period. Revenue includes subscription fees, advertising (excluding revenue earned from selling advertising spots to other Company businesses) and premium and feature add-on revenue but excludes Pay-Per-View revenue. Advertising revenue generated by content on one DTC streaming service that is accessed through another DTC streaming service by subscribers to both streaming services is allocated between both streaming services. The average revenue per paid subscriber is net of discounts on offerings that carry more than one service. Revenue is allocated to each service based on the relative retail or wholesale price of each service on a standalone basis. Hulu Live TV + SVOD revenue is allocated to the SVOD services based on the wholesale price of the Hulu SVOD Only, Disney+ and ESPN+ multi-product offering. In general, wholesale arrangements have a lower average monthly revenue per paid subscriber than subscribers that we acquire directly or through third-party platforms. 72 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (continued) Supplemental information about paid subscribers: (in millions) June 29, 2024 March 30, 2024 July 1, 2023 Domestic (U.S. and Canada) standalone 60.6 61.4 55.6 Domestic (U.S. and Canada) multi-product (1) 25.3 24.2 21.9 Domestic (U.S. and Canada) (2) 85.9 85.5 77.5 International (excluding Disney+ Hotstar) (3)(4) 63.5 63.6 59.7 Total (2) 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 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 On March 20, 2019 as part of the acquisition of TFCF, The Walt Disney Company (“TWDC”) became the ultimate parent of TWDC Enterprises 18 Corp. (formerly known as The Walt Disney Company) (“Legacy Disney”). Legacy Disney and TWDC are collectively referred to as “Obligor Group”, and individually, as a “Guarantor”. Concurrent with the close of the TFCF acquisition, $16.8 billion of TFCF’s assumed public debt (which then constituted 96% of such debt) was exchanged for senior notes of TWDC (the “exchange notes”) issued pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to an Indenture, dated as of March 20, 2019, between TWDC, Legacy Disney, as guarantor, and Citibank, N.A., as trustee (the “TWDC Indenture”) and guaranteed by Legacy Disney. On November 26, 2019, $14.0 billion of the outstanding exchange notes were exchanged for new senior notes of TWDC registered under the Securities Act, issued pursuant to the TWDC Indenture and guaranteed by Legacy Disney. In addition, contemporaneously with the closing of the March 20, 2019 exchange offer, TWDC entered into a guarantee of the registered debt securities issued by Legacy Disney under the Indenture dated as of September 24, 2001 between Legacy Disney and Wells Fargo Bank, National Association, as trustee (the “2001 Trustee”) (as amended by the first supplemental indenture among Legacy Disney, as issuer, TWDC, as guarantor, and the 2001 Trustee, as trustee). 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 June 29, 2024 was as follows: TWDC Legacy Disney (in millions) Par Value Carrying Value Par Value Carrying Value Registered debt with unconditional guarantee $ 34,617 $ 35,102 $ 8,113 $ 7,948 The guarantees by TWDC and Legacy Disney are full and unconditional and cover all payment obligations arising under the guaranteed registered debt securities. The guarantees may be released and discharged upon (i) as a general matter, the indebtedness for borrowed money of the consolidated subsidiaries of TWDC in aggregate constituting no more than 10% of all consolidated indebtedness for borrowed money of TWDC and its subsidiaries (subject to certain exclusions), (ii) upon the sale, transfer or disposition of all or substantially all of the equity interests or all or substantially all, or substantially as an entirety, the assets of Legacy Disney to a third party, and (iii) other customary events constituting a discharge of a guarantor’s obligations. In addition, in the case of Legacy Disney’s guarantee of registered debt securities issued by TWDC, Legacy Disney may be released and discharged from its guarantee at any time Legacy Disney is not a borrower, issuer or guarantor under certain material bank facilities or any debt securities. 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 73 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. Set forth below is summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between TWDC and Legacy Disney and (ii) equity in the earnings from and investments in any subsidiary that is a non-Guarantor. 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) Nine Months Ended June 29, 2024 Revenues $ — Costs and expenses — Net income (loss) (1,758) Net income (loss) attributable to TWDC shareholders (1,758) Balance Sheet (in millions) June 29, 2024 September 30, 2023 Current assets $ 2,195 $ 8,544 Noncurrent assets 3,146 2,927 Current liabilities 9,759 5,746 Noncurrent liabilities (excluding intercompany to non-Guarantors) 40,709 43,307 Intercompany payables to non-Guarantors 153,758 154,018 74 Item 3. Quantitative and Qualitative Disclosures about Market Risk. See Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 15 to the Condensed Consolidated Financial Statements.