An interesting day of earnings today, with somewhat of a mixed bag. Some good, some bad. some very ugly!
I’ll be covering The Walt Disney Company, Affirm Holdings and Robinhood.
The Walt Disney Company (DIS) – Q4 (Fiscal Q3 2023) Earnings
Today, Disney reported both revenue and earnings that beat expectations. They also reported a smaller loss in Disney+ subscribers than expected, following a price increase. The beat is largely thanks to the outperformance of Disney’s theme parks, which saw a huge boost in the December quarter.
This is also the first earnings report since Bob Iger returned as the company’s CEO on a 2-year contract.
Key Points:
- Revenue of $23,512m, up from $21,819m (+7.8%) a year ago
- Disney media and entertainment distribution revenue increased to $14,776m, up 1.3% year-over-year. Worth noting that this excludes most of the sales from Avatar: The Way of Water
- Disney parks, experiences and products revenue increased to $8,736m, up 20.8% year-over-year
- Operating profit of $3,043m, down from $3,258m (-6.6%) a year ago
- Profit before tax of $1,773m, compared to $1,688m a year ago
- Profit after tax of $1,279m, compared to $1,104m a year ago
- Basic earnings per share of $0.70
- Disney+ memberships fell to 161.8m, down from 164.2m last quarter. This is a smaller loss in subscribers than expected, and is thought to be due to the rise in prices alongside a cost-conscious consumer
- ESPN membership rose to 24.9m, up from 24.3m last quarter
- Hulu memberships rose to 48.0m, up from 47.2m last quarter
- During the earnings call, Bob Iger announced that Disney will be laying off around 7,000 staff, with a company-wide goal of cutting costs by a huge $5,500m
- Interestingly, this cost-cutting comes as Bob Iger also announced he intends for the company to start issuing dividends once again by the end of 2023. He said “Our cost-cutting initiatives will make this possible, and while initially it will be a modest dividend, we hope to build upon it over time.”. The idea of cutting costs explicitly to aid in funding dividends to shareholders is likely going to receive some backlash. I’m sure we’ll soon find out.
Affirm Holdings (AFRM) – Q4 (Fiscal Q2 2023) Earnings
Safe to say, this was a poor earnings report from Affirm, missing analyst expectations on all accounts, as well as reducing 2023 guidance. The company announced cost-cutting measures, including layoffs, to combat the worsening economic landscape. The silver lining for Affirm is that they have enough cash to afford at least one, possibly two years, of continued net losses.
Key Points:
- Revenue of $400m, up from $361m (+10.7%) a year ago
- Operating loss of ($360), compared to an operating loss of ($196m) a year ago
- Loss before tax of ($324m), compared to ($159m) a year ago
- Loss after tax of ($322m), compared to ($160m) a year ago
- Basic loss per share of ($1.10)
- Guidance for 2023 was somewhat bleak and saw a revision down. However, the company does plan to reach profitability on an adjusted operating income basis by the end of 2023. For the next quarter, the company expects revenue of between $360m and $380m, with an adjusted operating margin (loss) of between (11)% and (7)%
- Affirm announced a restructuring plan, resulting in layoffs for around 500 staff (~19% of their workforce), along with other cost-saving measures such as reducing stock-based compensation
- The company also announced the closing down of its Crypto business with the intention of re-focusing its efforts on the core business
Robinhood (HOOD) – Q4 Earnings
A fairly mixed report by Robinhood. The company missed analyst’s expectations on earnings. However, had the company not reported a “processing error” costing the company $57m, they would have reported better-than-expected results.
While still a money-losing company, largely due to the business’s performance being heavily tied to the overall stock market, Robinhood are in a much healthier position than 12 months ago. The headcount is around a third lighter, new products are showing positive early signs, and they have enough cash and cash equivalents to get through a good number of quarters (years, even) unhindered.
Key Points:
- Revenue of $380m, up from $363m (+4.7%) a year ago
- Transactional revenue decreased to $186m, down 29.5% year-over-year
- Net interest revenue increased to $167m, up 165.1% year-over-year
- Operating loss of ($154m), compared to an operating loss of ($420m) a year ago
- Loss before tax of ($168m), compared to ($420m) a year ago
- Loss after tax of ($166m), compared to ($420m) a year ago
- This net loss includes a $57m from a processing error in December, where the company accidentally shorted a rallying stock. Despite correcting the error quickly, the company incurred a huge loss
- The net loss also includes a $12m impairment from the company’s termination of a deal with Ziglu
- Basic loss per share of ($0.19)
- Robinhood gave no specific revenue guidance for 2023, but they expect net interest revenues to increase by $20m for the first quarter. For 2023, operating expenses (excluding stock-based compensation) are expected to come in at between $1,420m and $1,480m
- Monthly active users continued to decline, down by 0.8m quarter-over-quarter, to 11.4m. However, net funded accounts rose to 23 million. This implies fewer users trading and more users simply holding onto assets/cash within the app
- Assets under custody decreased 4% quarter-over-quarter to $62,000m, largely due to the decline in stock prices over the prior quarter. This was partly offset by net deposits of $4,800m for the quarter. Though, as noted on the earnings call, this has quickly risen by over 20% in the first quarter of 2023 following the recent market rally
- An ambitious goal has been set to provide brokerage services to the UK; something that would really shake up the UK investing-app market
- Cash and cash equivalents at the end of the quarter of $6,300m, slightly higher than the previous quarter’s $6,200m
- The company’s board have approved the buyback of over $500m in shares owned by FTX’s ex-CEO, Sam Bankman-Fried. FTX declared bankruptcy in the prior quarter and SBF is in custody for fraud. While this has been approved by the board, it is no certain and requires discussion with the authorities currently in charge if SBF’s assets
- The company’s co-founders have cancelled nearly $500m worth of stock-compensation due to them in the coming years, lowering quarterly costs by around $50m while also reducing share dilution
Do you invest in any of these companies? Have these earnings changed your view about the company’s prospects in any way? Let me know in the comments!
