Good morning. It's my pleasure to welcome everyone to The Walt Disney Company's First Quarter 2025 Earnings Call. Our press release, Form 10-Q and management's posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com/investors. Today's call is being webcast, and a replay and transcript will be made available on our website after the call. Before we begin, please take note of our cautionary statement regarding forward-looking statements on our Investor Relations website. Certain statements on this call, including those regarding our expectations, beliefs, plans, financial estimates and prospects, trends, outlook and guidance, and other statements that are not historical may be forward-looking statements under the securities laws. We make these statements on the basis of our assumptions regarding the future at the time we make them, and do not undertake any obligation to provide updates. Forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from the results expressed or implied in light of a variety of factors. These factors include, among others, economic or industry conditions, competition, execution risks, the market for advertising, our future financial performance and legal and regulatory developments. Refer to our IR website, the press release issued today and the risks and uncertainties described in our Form 10-K, Form 10-Q and other filings with the SEC for more information about key risk factors. A reconciliation of certain non-GAAP measures referred to on this call to the most comparable GAAP measures can be found on our IR website. Joining me this morning are Bob Iger, Disney's Chief Executive Officer; and Hugh Johnston, Senior Executive Vice President and Chief Financial Officer. Following introductory remarks from Bob, we will be happy to take your questions. So with that, I will now turn the call over to Bob.

Good morning. Before we turn to our results this quarter, I want to take a moment to express our continued sympathies to all those affected by the devastating wildfires across Southern California, including our own employees, creative partners and so many others that we know and love. Our company's roots run deep in Los Angeles, and we feel a strong sense of obligation to support the community that has helped make this company what it is today. I'm proud of the many ways our employees have stepped up to assist their neighbors in need, and Disney remains committed to helping with recovery efforts while our community rebuilds from this tragedy. Moving on to the quarter. Our results in Q1 demonstrate our creative and financial strength, and they reflect the success of our strategic initiatives that we set in motion over the past two years. Clearly, one of the great highlights of the quarter was the performance of our film studios. We had the top three movies of 2024 at the global box office, and I want to thank and congratulate our creative teams on such an incredible year. Looking at the rest of the calendar year, we have a lot more to come with an exciting slate of theatrical releases tied to some of our most popular IP. On top of our studio's outstanding performance, we saw growth in streaming profitability, historic ratings at ESPN, and the strong and enduring appeal of Disney's Experiences business. Overall, we're very encouraged by our results this quarter, and we'll be happy to take your questions.

Thanks, Bob. And with that, operator, we are ready to take the first question.

Our first question today comes from Ben Swinburne with Morgan Stanley.

You guys have a lot going on in terms of platform enhancements this year at Disney+. I'm wondering, as Adam builds out his team, you work on password sharing, bundling ESPN in, what do you think will be the most impactful to driving that business? And what's realistic for investors to expect in terms of timeline to see tangible results in your reported numbers? And then I thought I would at least ask Hugh, if you could comment on the outlook for Experiences and Parks, in particular, around the opening of Epic. There's probably no other question I get more than your ability to deliver on your guidance on the domestic parks front for the year. So any update there would be greatly appreciated.

Thank you for your question, Ben. Regarding the timing of the various technological advancements that Adam and his team are implementing, they have already begun rolling out and will continue to do so over the next 12 months, but we won’t be stopping at the end of the year. I wouldn’t highlight any single technology as more impactful than the others since they work together. You mentioned paid sharing, which is definitely one area. We are increasingly utilizing technology for personalization to enhance our algorithms, shifting from controlled curation to focus more on delivering what consumers want. We still have work to do internationally, especially with the ad tier. We are also focusing on various AI initiatives and developing flagship projects. One important aspect we're aware of is that the home or front screen—the first experience consumers have—needs to be more dynamic. Ours is aesthetically pleasing but tends to be static. A more dynamic interface can engage more users, encouraging them to interact with it rather than exiting the app for other options. This is crucial. There’s a lot happening, and we are still expanding the team. I would say that by the end of the year, we expect to see significant progress, and we have already made some advancements.

Yes, Ben, and I'll handle the Experiences question. Obviously, no change to the guide that we had previously provided. We had said Experiences would be up 6% to 8% on the year. The strong Q1 increases our level of confidence in the guide, for sure. It's obviously quite early, but we certainly feel good about the fact that we were able to power through with stronger performance than our expectations were for Q1. In terms of the balance of the year, recall the easier comps for the Experiences business occur in the back half of the year, particularly in Q4. In addition to that, we obviously have lots going on in terms of our ship coming online as of this quarter, which will support the results from Q2 going forward. And in addition to that, as we built our plans, we did anticipate some small impact. I think we have it effectively hedged in the guides that we've given to you. So overall, level of confidence in the Experiences guide is high.

Our next question today comes from Robert Fishman with MoffettNathanson.

Bob, now that DirecTV and Comcast have launched their skinnier bundles and Hulu + Live, Fubo planning their own, do you expect these skinnier bundles at current pricing to change the trajectory of cord-cutting? And if not, what else on the pricing or product side do you plan with Fubo that you couldn't accomplish with just Hulu + Live? And then if I could just take a step back, after the Fubo deal and shutting down Venu, can you discuss Disney's overall sports or broader streaming strategy with the potential for consumer confusion from all the different options, including the upcoming ESPN Flagship launch?

The aim with ESPN has always been to make it as accessible as possible to consumers in various ways. Some might prefer accessing it only through an app, while others might want it as part of a traditional expanded basic bundle. There are also those who might choose slimmer bundles or just sports bundles. I cannot predict the impact of these slimmer bundles on cord-cutting, but we intend to leverage them as they are an excellent means to distribute ESPN. Following the decision to launch Venu, we noticed that these slimmer bundles were emerging, making Venu seem redundant. This provided us with a chance to offer ESPN through multiple slim bundles and to merge the Hulu + Live and Fubo channel businesses. While we value our presence in that sector, it wasn't central to Hulu's focus. This merger will allow us to improve the Hulu + Live experience by dedicating more time and resources to enhancing the user interface, ultimately benefiting consumers. Our sports strategy includes ensuring ESPN is available in whatever way consumers prefer, whether that’s through a linear channel or our new development called Flagship, which will feature various enhancements, including potential betting and fantasy options, along with greater customization and a more extensive range of programming than what linear channels currently provide. We plan to launch Flagship in the fall and are excited about it since it allows us to bundle with Disney+ and Hulu. We will strategically price it, offering consumers the choice between a sports-only experience or a combined package with their other services. If someone subscribes to both Disney+ and Hulu, they can enjoy ESPN Flagship in one app, making it convenient from both a subscription and user perspective. Furthermore, regarding ESPN's advantage over other streamers entering the sports market, we offer a unique range of sports programming that operates year-round, 24/7. For sports fans, it’s not just about a single event; it’s about engaging with sports every day, which is a strong selling point for consumers.

And our next question today comes from John Hodulik with UBS.

Great. Hugh, could you provide an update on the cost-cutting initiatives and your progress on them? Additionally, I noticed in the Q that you reduced the content budget to $23 billion from $24 billion. What prompted that change? Is it related to the fires in L.A. or simply adjustments to the overall budget? Lastly, you have projected high single-digit earnings growth for the year, starting with over 40% growth in the first quarter. Could you discuss the expected earnings growth trajectory for the remainder of the year?

Sure. Happy to. That's quite a few questions, but I'll take a good whack at them. First, in terms of cost-cutting. As a company, we're focused constantly on identifying opportunities where we're spending money perhaps less efficiently and looking for opportunities to do it more efficiently. That's not a once-a-year thing, that's not a once-a-month thing, that's something that we do every day of the year. It's part of what a good management team does, and we do think we're a good management team in that regard. So we're going to continue to identify opportunities to redeploy money in order to make the company both higher growth and ultimately more profitable. Regarding your question on the guide overall, obviously, the results were certainly in excess of expectations in the first quarter. It certainly gives us confidence, an even higher level of confidence than we probably even had before as we get into the balance of the year. At the same time, given the rapidly evolving macro environment, we think it would be premature at this point to change the guidance. That said, to the degree that the business momentum and the business performance justifies it, we're certainly not a management team that's afraid of over-delivering if, in fact, that is where the business takes us. So generally speaking, feel better about the balance of the year and when we started out the year feeling very, very positive about it.

Our next question comes from Jessica Reif Ehrlich with Bank of America.

I guess, two things. One, on the NBA, can you talk about how you view the path to profitability in the new contract given the weaker season to-date ratings and obviously the step-up next season? And then on DTC, maybe we could drill down a little bit on how you're thinking about subscriber drivers. Bob, you mentioned password-sharing crackdown. How do you think about the TAM with the potential subscriber impact? Obviously, some great films coming onto the platform later this year. And then how important is news to the overall product offer?

In the NBA, we don't focus on profitability for any specific licensed sports package. We have long-term confidence in the NBA as a great and growing sport. We're not overly concerned with the ratings this season, especially since we haven't seen even half of it yet. We're pleased to maintain our partnership for another 11 years, including the last 10 years of that deal. It remains a key component of ESPN's offerings. To grow our subscriber base, we need to continue producing excellent products, films, and television series, which we have proven capable of doing consistently over the past few years. Additionally, strong technology is essential, and while we have made some progress, we still have a lot of work ahead of us. The key to success in global streaming, both in subscriptions and profitability, lies in a combination of high-quality content and technology. We believe we're well-positioned to increase both subscribers and profits in the coming years, especially given our track record of making this business more economically appealing. With our current technology and successful content, we are optimistic about our ability to grow our subscriber base as well.

And Jessica, the only thing I would add to Bob's comments is we gave you guidance in terms of ESPN for next year, we knew all of the aspects of the NBA contract when we made that deal, and there is nothing that is changing in our mind in that regard.

And one last thing, you asked about news. We like the opportunity to make room for our news output, both the ABC News output and the output of our local stations as part of the app experience. With improved technology, we're now offering live streams on the Disney+ Hulu app, and news will occupy one of those streams and it will continue to be a feature of our overall Disney+ and Hulu offering, and it's also something that differentiates us from some of the others in the space.

Our next question today comes from Michael Ng with Goldman Sachs.

I just wanted to follow up on your comments, Bob, about streaming and news. Could you talk a little bit about your decision to add the SportsCenter Daily Show to Disney+ instead of ESPN flagship? And with streams and SC+, the investments in live content, what have you found to be the benefit of live as it relates to gross adds and churn and streaming? And could you expand a little bit about the competitive advantage that Disney has in producing and distributing live relative to some other streaming services?

Well, I think we've all seen the benefit of live. Just look at ESPN's ratings as for instance or talk to anyone in the advertising business, live is extremely attractive. And we have the benefit, as I said earlier, of having live programming every day of the week, every day of the year. And so I think that as we provide our consumers with a one-app experience, live will be a major component of basically our growth in that business. It will contribute to the growth in that business for us. What we did with ESPN and the SportsCenter show that you mentioned is we put it in the ESPN tile, as we call it, or presence on the home screen of Disney+ that was in part designed to increase engagement for Disney+ Hulu subscribers, gives them something to see on a daily basis. And obviously, as we've talked today, growing engagement is critical, particularly to lowering churn. It also gives us the ability to use it as an introductory offer, sort of an introductory ESPN digital offer. Ultimately, when Flagship is launched, people who use the ESPN tile will have an opportunity to subscribe to Flagship right from that tile. And if they do subscribe to it, then it becomes a completely integrated app experience with Disney+ and Hulu. So it's there to improve, but to do two things: to benefit Disney+ Hulu and it's also there to ultimately benefit ESPN Flagship.

Our next question comes from David Karnovsky with JPMorgan.

With Experiences, wanted to see if you could provide any color on the Disney Treasure launch, how the early returns look relative to expectations and the read-throughs for the launches later this calendar year? And then just sticking with Parks, maybe you could discuss the rollout of Lightning Lane Premier, which I think you recently expanded access for. What type of take rates are you observing on the product? And how is that impacting other spending buckets or the overall experience?

Yes. Disney Treasure is off to a spectacular start. Certainly, in terms of selling out the rooms, we've done terrifically well. The feedback and guest experience, a high percentage of people are rating it excellent, very much in line with the rest of our ships. And this is just sort of in the initial cruises. So feel terrific about that. As we've said before, our expectation is for the ship to be profitable in the first quarter, and frankly, that is very much our expectation from here going forward. So feel great about that one. Lighting Lane, we're launching that product. But remember, it is a premium product; it is a product that we are learning how to use. So we are marketing it very gently initially. It's very much in line with our expectations, but we are moving slowly with that product in order to make it a great experience both for the purchasers of Lightning Lane and for the rest of our guests in the park. So feel great about it. It's going to build over time, but it's certainly very much early days.

And our next question today comes from Michael Morris with Guggenheim.

Two questions about your outlook. First, at Experiences, Hugh, on the fourth-quarter call, you mentioned that bookings in the back half of the year were positive at that point in time. I'm wondering if you can give us an update there? Are they still positive? Do you have any more visibility? How has that trended? And then my second question is on direct-to-consumer. You had a really strong first quarter. I think you grew about $400 million year-over-year on operating profit, and your guide only implies about $100 million a quarter for the next three quarters. So can you talk a little bit about what goes into that outlook, what the puts and takes are maybe on investment that would have that growth slower for the balance of the year?

Yes, happy to cover both of those. Hitting on DTC first. As I mentioned, it's obviously an evolving environment. Our expectations are for the business to do terrifically well. We made $300 million in the quarter. For the full year, our expectation is to be a little over $1 billion. So we still have some work to do, but we're out of the blocks very, very quickly. As I mentioned earlier in this call, we're certainly not afraid to over-deliver if the business momentum gives us that, but that's something to be seen. It's premature to be thinking about raising guidance, in my opinion, after just one quarter results. And the second question was in terms of...

The bookings.

The bookings, I'm sorry, I should have written that down. Basically, we are further into the curve, but the messaging is exactly the same as I gave you last quarter. Bookings are up in the summer right now. So certainly feeling positive. And obviously, we have more of them in given that we're 90 days later. So certainly, the outlook is good in that regard. But as always, we're going to take a view at this point that it's premature to be changing guidance in that regard, but off to a great start in Experiences.

Our next question comes from Bryan Kraft with Deutsche Bank.

So I had one on Sports and then just a follow-up. So first, on Sports, you're obviously going to see a step-up in rights costs for the NBA next year, but you've guided to low single-digit OI growth in fiscal '26 on top of 13% growth this year. So I just wanted to ask if we should be thinking about some offset and other sports rights coming out of the business to offset the NBA increase or if the fiscal '26 growth is more a function of the OI growth from Flagship or a big improvement in pay TV sub declines because of smaller priced, lower-priced, small sports and news packages? So just trying to get underneath of the drivers of that strength. And then secondly, just on Disney+, if you could talk about the outlook for Disney+ subscriber growth this year, I think you're guiding to essentially flat subs through the end of 2Q. What are you expecting in the second half of the year directionally? And what are some of the key factors that are shaping the outlook for the rest of the year?

Yes. So in terms of ESPN and the NBA, obviously, there are a lot of variables that go into ESPN's P&L, including the advertising market for live sports, which is obviously very, very strong. It's also in terms of aggregate cost management, not just rights costs for the entire business, and Jimmy and the team do a phenomenal job managing their costs, and that's a tailwind. And then in addition to that, we're going to look at everything else that's out there, and we'll make decisions that are reflective of the discipline that I think this team has shown in terms of what we're looking at in rights going forward. So I'll leave it at that. But as I said earlier in the call, we mentioned low single digits next year. We're still very much committed to that based on the aggregate of all of those inputs. In terms of the outlook for DTC subscribers, our expectation is to grow them for the year. So given we're basically sort of slightly up in the first quarter, we'll be similar in the second quarter. Our expectation is, particularly as paid sharing starts to take hold and as we add more of the movie slate that we produced in the back half of '24 into the streaming service in '25, we think that content will drive sub growth as well.

And I'll add to what Hugh said. We actually are very pleased with where we are sub-wise for Disney+ and Hulu. As you know, we took prices up significantly fairly recently and expected the churn would be significantly greater. It turned out we delivered numbers that were better than we had expected. So the combination of Disney+ and Hulu, actually, we grew subs modestly in the quarter. Now while we did that, we also are implementing, as we talked earlier, these technological advances or enhancements that will enable us to lower churn and continue to grow subs. We also have a great product pipeline coming. So we're bullish about our ability to turn streaming not just into the profitable business that it is today, but into a growth business for the company due to the combination of all these things, and that includes the ability to successfully bundle both for the consumer and for our shareholder Disney+, Hulu and ultimately, ESPN.

And our final question today comes from Kannan Venkateshwar with Barclays.

Maybe on ESPN flagship, Bob. Just in terms of the vision that you have for the product and the objectives with that service. Is this to basically further grow the Sports business relative to where it is today? Or is it more to preserve existing profitability and preserve the ecosystem as it is today? Would be great to get your thoughts on that. And then maybe another one on just the industry-wide consolidation efforts that we are seeing. If there is an effort to roll up cable networks across the industry, would there be any interest from your end potentially to participate in that with some of your smaller networks?

Let me quickly comment on the linear networks. Currently, the linear networks in our company are not a burden but rather an asset. We are programming and funding them at levels that enhance our overall television business, which naturally includes and supports streaming, the future of television. While I'm not ruling out the potential for some smaller networks to be configured differently in how we market them, possibly even in terms of ownership, we feel confident about our current position and how we are managing both linear and streaming businesses at Disney. Regarding Flagship, it's clear that younger viewers are increasingly favoring streaming experiences on both fixed televisions and mobile devices. The more ESPN can connect with a new generation of consumers through a product that meets their needs, the better the business will perform. Flagship is not meant to sustain the current business; it's aimed at growing the business in a rapidly evolving market. We are very excited about what lies ahead and optimistic because we believe it represents not just a sound business opportunity but also a dream for sports fans.

Thanks, Kannan, and thanks, everyone, for your questions this morning. We want to thank you for joining us and wish everyone a good rest of the day.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.