Walt Disney Company (The)

Good day, and welcome to the Walt Disney Company's second quarter 2025 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Carlos Gomez, Executive Vice President, Treasurer, and Head of Investor Relations. Please go ahead, sir.

Good morning. It's my pleasure to welcome everyone to the Walt Disney Company's second quarter 2025 earnings call. Our press release, Form 10Q, and management's posted prepared remarks were issued earlier this morning and are available on our website at www.disney.com forward slash 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.

In the 102-year history of the Walt Disney Company, there have been many defining moments and countless achievements. One such moment was the opening of Disneyland in 1955. Now, 70 years later, having entertained 4 billion guests across six Disney theme park destinations around the world, we are celebrating another great moment in our storied history. I am joining you from the United Arab Emirates, where we just announced an agreement to bring a Disney theme park to Abu Dhabi. Disneyland Abu Dhabi will be authentically Disney and distinctly Emirati. It will serve as an oasis of extraordinary Disney entertainment for millions and millions of people in this crossroads of the world. connecting travelers from the Middle East and Africa, India, Asia, Europe, and beyond. This seventh Disney theme park resort will rise from the shores of this land in spectacular fashion, blending wonderful Disney stories and characters with the cultures and tastes of this country and this region. It will combine contemporary architecture and cutting-edge technology with the timeless magic of Disney to offer guests deeply immersive experiences in unique and modern ways. As part of our new strategic partnership with the Morale Group of Abu Dhabi, Disney will oversee design, license our IP, and provide operational expertise, while Morale will provide the capital, construction resources, and operational oversight. Our Imagineering team is already hard at work designing this large and very special destination that will become a source of joy and inspiration for generations to come. This is my third visit to Abu Dhabi in the last nine months, and each time I gain more appreciation and respect for the UAE government, the government of Abu Dhabi, for our partners at Miral, and for the people and the culture of Abu Dhabi. As we prepare to embark on this exciting new addition to our experiences portfolio, we already have more expansion projects underway domestically and around the world than at any time in our history. That includes investing more than $30 billion in our theme parks in Florida and California to enhance our offerings, create jobs, and support the U.S. economy. Our focus must always be on building for tomorrow as much as it is on managing for today. That eye to the future and driving growth is central to the important work we've done advancing our four strategic priorities and looking at our second quarter results were making excellent progress. We had a very strong Q2, with adjusted EPS up 20 percent from the prior year, rounding out a solid first half of fiscal 2025. Our experiences segment delivered strong results this quarter, driven by the outstanding performance from our domestic businesses. Investments in this segment have delivered impressive returns on invested capital, with returns from our Experiences businesses at all-time highs. Experiences is obviously a critical business for Disney, and also an important growth platform. Despite questions around any macroeconomic uncertainty or the impact of competition, I'm encouraged by the strength and resilience of our business, as evidenced in these earnings and in the second-half bookings at Walt Disney World. Our entertainment business, including movies, television series, news, and sports, continues to generate strong growth. Our feature films continue to enjoy success at the global box office. Thunderbolts from Marvel Studios opened this past week and is currently the number one movie in the world and the best-reviewed Marvel film in the last few years. We are also excited about our upcoming theatrical slate for the remainder of the calendar year, including the live-action Lilo & Stitch, Pixar's Elio, Marvel's The Fantastic Four First Steps, Freakier Friday, Zootopia 2 from Walt Disney Animation Studios, and the spectacular Avatar Fire & Ash. We're also quite pleased with the performance of our general entertainment and news programming. Finally, sports viewership trends continue to be healthy. ESPN's Q2 primetime audience, among the key 18 to 49 demographic, was up 32%, making it ESPN's most watched Q2 in primetime ever. Driven by ESPN's fantastic programming, including NFL and college football, the NCAA Women's Basketball Tournament, and other exciting events, all of which is giving us optimism as we head into the upfront next week. Meanwhile, we are only a few months away from the launch of ESPN's exciting new direct-to-consumer product offering, and we look forward to sharing pricing and timing details very soon. Overall, our expansive portfolio of high-quality content and programming is enabling us to continue to grow revenue and profitability in our streaming business. Streaming remains a key priority and a core growth platform for Disney. And as we move forward, our improvements in the product will continue to enhance the user experience, increase engagement, and reduce churn, thereby enabling us to grow the strategic business at an accelerated rate over time. This has been an excellent first half of the fiscal year with strong results powered by our disciplined and focused growth strategy. We remain confident about the direction of the company and optimistic about our outlook for the rest of the fiscal year. And with that, You and I would be happy to take your questions.