Walt Disney Company (the) · NYSE:DIS
Walt Disney Company (the) — The Walt Disney Company — Proxy Contest (March 2024)
67 slides from Walt Disney Company (the)'s proxy contest presentation, March 2024
Slide 1: Disney's Plan For Shareholder Value Creation
THE RIGHT BOARD, THE RIGHT STRATEGY Disney’s Plan For Shareholder Value Creation MARCH 2024
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements Certain statements in this presentation may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s expectations; beliefs; plans; strategies; priorities and
Slide 3: You cannot "restore the magic" if you don't understand magic
You cannot “restore the magic” if you don’t understand magic Disney has an unparalleled creative engine that drives shareholder value creation • Our 100 years of incomparable storytelling excellence has resulted in best-in-class assets and timeless, beloved characters for all ages • Our creativity m
Slide 4: This Board is already delivering on Disney's potential
This Board is already delivering on Disney’s potential Disney is positioned to • In Q1 FY24, we delivered GAAP and Non-GAAP Diluted EPS1 growth of 49% and 23%, respectively, and have guided to Non-GAAP Diluted EPS growth1 of at thrive amid least 20% for FY24 unprecedented • We are successfully execu
Slide 5: Disney is positioned to thrive amid unprecedented industry disruption
DISNEY IS POSITIONED TO THRIVE AMID UNPRECEDENTED INDUSTRY DISRUPTION 5
Slide 6: Our strategic transformation, building on four key priorities, is working
Our strategic transformation, building on four key priorities, is working “Twenty percent EPS growth, where do you get that in old media right now? If this doesn't satisfy Nelson Peltz, I don't know what will. Bob Iger has obviously done everything that he can … We're seeing some tangible results wh
Slide 7: We are delivering on our commitments to create superior, sustainable shareholder value
We are delivering on our commitments to create superior, sustainable shareholder value in a rapidly changing ecosystem STRATEGIC COMMITMENTS WHAT WE HAVE DONE AND WHERE WE ARE GOING ✓ Reorganized Disney to restore decision-making and authority across the content lifecycle to our creative teams 1 Rei
Slide 8: Disney's unparalleled IP and storytelling
Disney’s unparalleled IP and storytelling have 1 a core strategic advantage for over 100 years been Unmatched content creation and storytelling capabilities generate our iconic IP and A franchise tentpoles to maximize our audience and impact C PRODUCTS AND FILM AND TV EXPERIENCES STUDIOS Our content
Slide 9: Enduring franchises highlight our powerful IP and unique monetization capabilities
1 Enduring franchises highlight our powerful IP and unique monetization capabilities Return on Investment1 NOV 2013 JUL 2014 MAY 2016 JUN 2016 NOV 2019 OCT 2020 NOV 2021 NOV 2023 JUN 2024 TBD TBD TBD 9.9x Frozen For the First Frozen – Live at Frozen Ever Frozen 2 Once Upon Olaf World of Frozen World
Slide 10: By restoring authority to creative leaders, Disney is improving efficiency
By restoring authority to creative leaders, 1 Disney is improving efficiency and effectiveness • Creative teams now determine what content is made and how it is marketed, distributed, and monetized – Promotes global accountability and more efficient decision-making processes – Creates a more cost-ef
Slide 11: Disney is focusing on core brands and franchises to deliver higher returns
Disney is focusing on core brands and 1 franchises to deliver higher returns • Disney has the ability to create, distribute, and monetize our IP in unparalleled ways • The longevity of our franchises and our ability to progress consumers across our unique set of assets is unequaled • We have reduced
Slide 12: Our creative engine remains powerful
1 Our creative engine remains powerful UNPARALLELED SUCCESS OF DISNEY’S FILM STUDIOS 20 Academy Award 6 of 10 most-streamed #1 in global box office 8 of 10 and 13 of 20 Nominations in 2024 movies across all 7 of the highest grossing films — the most of any streaming platforms in “Entertainment first
Slide 13: Streaming has disrupted the industry's historic economic models
2 Streaming has disrupted the industry’s historic economic models TV and streaming consumption habits dramatically shifted TV & streaming consumption (avg daily hrs) • Streaming consumption is projected to nearly double from 2019 to 2027, primarily at the expense of linear Traditional TV Streaming 5
Slide 14: The Board is overseeing a carefully planned, long-term strategy
2 The Board is overseeing a carefully planned, long-term strategy that positions Disney for future success and value creation 2015-16: Deterioration of Pay TV ecosystem 2019: Successful launch of Disney+ 2023: Implemented significant transformation to became increasingly evident further adapt our st
Slide 15: Disney's TSR outperformed relevant peers
2 Disney’s TSR outperformed relevant peers facing a similar transition from legacy Pay TV to streaming • The most relevant peers to evaluate Disney’s business challenges, TSR SINCE IGER RETURNED1 3-YEAR TSR progress, and TSR are “pure-play” legacy media companies managing the generational disruption
Slide 16: Disney has built leading, scaled global streaming platforms
Disney has built leading, scaled global streaming platforms in 2 just four years, differentiated by difficult-to-replicate content GLOBAL SUBSCRIPTIONS 1 (MM) BUILDING LEADING PLATFORMS IN A HIGHLY COMPETITIVE ENVIRONMENT • Disney’s “must-have” streaming platforms will be a long-term winner “Disney
Slide 17: Major deals further differentiated Disney's streaming business
Major deals further differentiated Disney’s streaming business, 2 with key content from TFCF (Fox) and technology from BAMTech COMPELLING STRATEGIC RATIONALE FOR BOTH ACQUISITIONS TFCF BAMTECH • Broadened our portfolio of world-class IP and general entertainment content • Provided tech infrastructur
Slide 18: Disney is driving profitability toward double-digit levels
2 Disney is driving profitability toward double-digit levels • Operating losses of our entertainment streaming business have significantly improved “The Netflix comparison may be a little bit • We remain focused on achieving profitability1 in streaming by the end of FY24, which is within five years
Slide 19: Disney's delta in profitability to Netflix results from explainable differences
Disney’s delta in profitability to Netflix results from 2 explainable differences that we are actively addressing • Netflix and Disney DTC launched at different times with unique strategies and investment requirements, resulting in different financial profiles reflecting their respective circumstanc
Slide 20: Disney continues to build ESPN into the preeminent digital sports platform
3 Disney continues to build ESPN into the preeminent digital sports platform World’s leading sports brand, Sports content is a competitive Proven success in Sports can convene reaching millions of fans daily advantage for Disney and a key developing streaming sports millions of fans with live across
Slide 21: ESPN's offerings represent our vision for the future of sports
3 ESPN’s offerings represent our vision for the future of sports Leverage best-in-class advertising team Create a range of and capabilities offerings across price Reinvent the fan points to serve fans experience with (ESPN+, flagship DTC, greater interactivity WBD / Fox JV, MVPDs) Provide new, more
Slide 22: Disney is investing strategically in our most profitable segment, Experiences
Disney is investing strategically in 4 most profitable segment, Experiences our • In September 2023, we announced a ~$60bn investment plan over 10 years, including capital to expand domestic / international parks and cruise line capacity • Investments will build upon our strong track record of gener
Slide 23: Strong ROIC and innovation enable our investment plans
4 Strong ROIC guides and innovation enable our investment plans 10-YEAR INVESTMENT PLAN SELECT OPENINGS AND LAUNCHES • Plan supports investments to create magical Frozen themed lands at Hong Kong Disneyland (opened November 2023) and coming to Tokyo Disneyland and new experiences and refresh existin
Slide 24: Disney is rationalizing costs and driving operating leverage
5 Disney is rationalizing costs and driving operating leverage • We continue to seek additional efficiencies without compromising our commitment to TOTAL ANNUALIZED COST SAVINGS ($BN) quality, growth, and value creation • Within three months of Iger’s return, we announced a $5.5bn cost reduction pro
Slide 25: Disney restored robust FCF, enabling capital return to shareholders
6 Disney restored robust FCF, enabling capital return to shareholders • Disney has long maintained a disciplined and balanced approach to capital allocation • As a result of the global pandemic, which we estimate caused billions in losses to cash from operations, we suspended our dividend in Spring
Slide 26: Disney maintains the strongest balance sheet in the sector
Disney maintains the strongest balance sheet in the sector, 6 supports future growth opportunities and shareholder returns which • We have the highest-rated balance sheet in the sector with senior unsecured credit ratings of A2 / stable (Moody’s) and A- / positive (S&P) • Our Q1 FY24 net debt and ne
Slide 27: Disney is successfully delivering transformational change
Disney is successfully delivering transformational change in a rapidly changing marketplace NOVEMBER 2022 TODAY Organization and culture Misaligned accountability structures Creativity and accountability restored Cost control Elevated spend to support prior media org structure Annualized cost saving
Slide 28: A strong, independent, and qualified Board is focused on delivering sustained shareholder value
A STRONG, INDEPENDENT, AND QUALIFIED BOARD IS FOCUSED ON DELIVERING SUSTAINED SHAREHOLDER VALUE 28
Slide 29: The Board launched a clear, transparent process for a successful CEO transition
The Board launched a clear, transparent process to deliver a top priority: a successful CEO transition • The Board is focused on both selecting a new CEO and positioning the new CEO for long-term success – Independent Chairman Mark Parker, who was integral to Nike’s well-regarded and successful SUCC
Slide 30: Directors Mark Parker and James Gorman have both executed seamless CEO transitions
Directors Mark Parker and James Gorman have both executed high-profile, seamless CEO transitions • Mark Parker was President and CEO of Nike for 14 years • James Gorman was CEO of Morgan Stanley for 14 years • The Nike Board conducted a thorough search, evaluating the skills • The Board deliberately
Slide 31: Disney's independent, highly-qualified Board
Disney’s independent, highly-qualified Board is focused on delivering superior, sustained shareholder value Mary Barra CEO, GENERAL MOTORS Safra Catz CEO & FORMER CFO, ORACLE Amy Chang FORMER EVP, CISCO SYSTEMS * Jeremy Darroch FORMER EXEC. CHAIR AND * GROUP CEO, SKY Expertise in long-term strategic
Slide 32: This Board is built around diverse skillsets critical to Disney's success
This Board is built around diverse skillsets critical to Disney’s success Barra Catz Chang Darroch Everson Froman Gorman Iger Lagomasino McDonald Parker Rice SKILLS CENTRAL TO DISNEY’S STRATEGY Media and entertainment l l l Direct-to-Consumer l l l l l l l l Technology and innovation l l l l l l Str
Slide 33: Trian's campaign targets two Disney directors with important expertise
Trian’s campaign targets two Disney directors with skillsets and expertise that are an important component of the Board’s oversight Extensive foreign relations expertise provides uniquely valuable insights on complex geopolitical issues affecting our strategy and operations • Mr. Froman has signific
Slide 34: Trian's campaign targets two Disney directors with important expertise
Trian’s campaign targets two Disney directors with skillsets and expertise that are an important component of the Board’s oversight Long-term shareholder perspective, capital markets experience, and corporate governance expertise inform the Board’s ongoing accountability and responsiveness to shareh
Slide 35: Trian wants to replace these directors with nominees who lack relevant expertise
Trian wants to replace these valuable directors with nominees who lack relevant and non-duplicative expertise ⨯ No media expertise, despite his stated desire to have a Board-led review of the creative processes at Disney ⨯ His only novel ideas demonstrate his lack of understanding of the media ecosy
Slide 36: Management compensation is heavily tied to Disney performance
Management compensation is heavily tied to Disney performance PERFORMANCE ALIGNMENT % OF IGER FY23 TARGET COMPENSATION AT RISK COMPENSATION OF MEDIA CEOS RELATIVE TO IGER’S 1 • Disney’s Compensation Committee Base salary 4% has a multi-year track record of Target annual incentive 7% 160% 2 making ch
Slide 37: This Board has "skin in the game"
This Board has “skin in the game” and, more importantly, has the expertise to deliver on our growth strategy MEDIAN VALUE OF SHARES HELD BY INDEPENDENTS 1 OWNERSHIP GUIDELINES EXCEED S&P 500 AVG 2 TRIAN CLAIMS TO BE MORE INVESTED THAN IT IS 3 • Trian claims ownership of >$3bn of Disney stock … in re
Slide 38: Nelson Peltz, Ike Perlmutter, and Jay Rasulo are not what Disney needs right now
NELSON PELTZ, IKE PERLMUTTER, AND JAY RASULO ARE NOT WHAT DISNEY NEEDS RIGHT NOW 38
Slide 39: Peltz, Perlmutter, and Rasulo are not what Disney needs now
Peltz, Perlmutter, and Rasulo are not what Disney needs now 1 Peltz does not understand the challenges Disney is facing 2 Peltz’s “theses” are nothing new and underscore his lack of understanding of both Disney and the media industry 3 Peltz’s slate, including his silent partner Ike Perlmutter, woul
Slide 40: Peltz doesn't understand the challenges Disney is facing
1 Peltz doesn’t understand the challenges Disney is facing … • Peltz has ignored the central challenges Disney is facing and the core “I don’t know if he [Peltz] has any idea what to do with a media company. He used to do consumer products companies and Jeff strengths it is leveraging to successfull
Slide 41: … which he readily admits every time he is on CNBC
1 … which he readily admits every time he is on CNBC … THE INTERVIEWER ASKED: NELSON PELTZ SAID: IT IS CLEAR THAT: “… they question the relevant experience you have “By the way, they said I have no media experience. in terms of the entertainment and media business Peltz doesn’t understand media I do
Slide 42: … and his partner, Jay Rasulo, is equally oblivious on CNBC
1 … and his partner, Jay Rasulo, is equally oblivious on CNBC “And, frankly, he [Iger] did the AS DISNEY SAID FROM THE START, Fox acquisition, which is very hard to THE FOX DEAL WAS ABOUT STREAMING understand, which doubled down on the linear business” —CNBC1 “One of the most exciting aspects of our
Slide 43: Peltz's "theses" are nothing new
Peltz’s “theses” are nothing new and underscore his 2 understanding of both Disney and the media industry lack of TRIAN GOAL DISNEY PERSPECTIVE • Clearest example that Trian has no understanding of creative-led businesses STUDIO Initiate Board-led review CREATIVITY • Bureaucracy does not drive globa
Slide 44: Peltz's slate would harm Disney
Peltz’s slate — exacerbated by his silent 3 Ike Perlmutter — would harm Disney … partner, Peltz has never been involved in a business Peltz’s “suggestions” are dangerous, with creativity at its core and doesn’t uninformed, and value-destructive understand the media sector “These activists must be de
Slide 45: … and does not serve shareholders' long-term interests
4 … and does not serve shareholders’ long-term interests WHY ARE THEY INTERESTED IN DISNEY? TRIAN TRIO LOOKING TO SETTLE SCORES • Perlmutter’s fraught history with Bob Iger appears to have driven his collaboration with Peltz to run a proxy “Peltz’s campaign against Disney reeks of a contest (he owns
Slide 46: Disney has consistently sought constructive engagement, which Peltz has ignored
Disney has consistently sought constructive 5 engagement, which Peltz has ignored WHAT HAVE PELTZ, PERLMUTTER, AND RASULO BROUGHT? WHAT HAS DISNEY OFFERED? 2 proxy fights >20 meaningful interactions since Feb. 2023 and 3 meetings with the Board No substantive ideas Disney isn’t already executing Com
Slide 47: Disney has always been open to constructive shareholder engagement, as ValueAct can attest
Disney has always been open to constructive 5 shareholder engagement, as ValueAct can attest HISTORY OF CONSTRUCTIVE ENGAGEMENT WITH VALUEACT STRONG TRACK RECORD WITH INVESTMENTS RELEVANT TO DISNEY Summer 2023 Avg. Duration Held1,2 Board Seats2 ValueAct begins investing in Disney amidst the Hollywoo
Slide 48: Neither Peltz nor Rasulo have the skills to help Disney
As their track records on other media-related boards 6 neither Peltz nor Rasulo have the skills to help Disneydemonstrate, • Nelson Peltz does not understand the media industry and does not bring additive skills to the Disney Board • Neither does Jay Rasulo, who has not managed through the industry’
Slide 49: Peltz and his Trian colleagues chronically underdeliver on boards
7 Peltz and his Trian colleagues chronically underdeliver on boards WHAT NELSON PELTZ SAYS 1 THE ACTUAL FACTS 2 NELSON PELTZ • Served on 14 boards • Only 6 have outperformed the total shareholder return (TSR) of the S&P annually over his Board tenure “I have probably served on more boards than anybo
Slide 50: Peltz's investment returns relative to benchmark do not support his rhetoric
Peltz’s investment returns relative to 7 benchmark do not support his rhetoric …his • Peltz claimed: “I have probably served on more boards than anybody that I know … whatever Board it was, has outperformed the S&P by 900bps annually”1 • But when using a complete dataset, Peltz or Trian involvement
Slide 51: Bob Iger has delivered strong returns for Disney shareholders
… on the other hand, Bob Iger has delivered strong returns for Disney shareholders throughout his tenure as CEO • The Board acted decisively in November 2022 when it determined that a CEO change was necessary – Determined that Bob Iger is the right CEO at the right time to navigate Disney through ge
Slide 52: Conclusion
The OED ‘Company CONCLUSION
Slide 53: You cannot "restore the magic" if you don't understand magic
You cannot “restore the magic” if you don’t understand magic Disney has an unparalleled creative engine that drives shareholder value creation • Our 100 years of incomparable storytelling excellence has resulted in best-in-class assets and timeless, beloved characters for all ages • Our creativity m
Slide 54: This Board is already delivering on Disney's potential
This Board is already delivering on Disney’s potential Disney is positioned to • In Q1 FY24, we delivered GAAP and Non-GAAP Diluted EPS1 growth of 49% and 23%, respectively, and have guided to Non-GAAP Diluted EPS growth1 of at thrive amid least 20% for FY24 unprecedented • We are successfully execu
Slide 55: Appendix A: Blackwells is proposing a solution in search of a problem
APPENDIX A BLACKWELLS IS PROPOSING A SOLUTION IN SEARCH OF A PROBLEM 55
Slide 56: Blackwells "theses" underscore their lack of understanding of Disney
Blackwells “theses” underscore their lack of understanding of Disney BLACKWELLS THESIS THE REALITY • Our businesses — the studios, media platforms, parks, cruise lines, and consumer products — work together as a whole and “…exploring all strategic are fueled by original studio content from our unpar
Slide 57: Breaking Disney up would destroy key competitive advantages
Breaking Disney up, including its real estate assets, would destroy key competitive advantages DIS-SYNERGIES FROM BREAKING DISNEY UP WOULD DWARF ANY POTENTIAL UPSIDE • Our core competitive advantage is our unparalleled IP coupled with the unique ability to leverage and monetize it through film, stre
Slide 58: Disney is already a leader in deploying emerging technologies
Disney is already a leader in deploying emerging technologies BLACKWELLS THESIS 1 THE REALITY • Disney has taken multiple steps – beginning as early as 2018, and especially in the past year – to create unified platforms and organizations, and to streamline technology leadership that aligns with our
Slide 59: Disney is already a leader in deploying emerging technologies (cont.)
Disney is already a leader in deploying emerging technologies (cont.) BLACKWELLS THESIS 1 THE REALITY • Native technology development – a core focus for decades, since Imagineering began – has been accelerating • We have built or rebuilt multiple core technological systems and platforms and several
Slide 60: Blackwells nominees are unqualified for election to Disney's Board
Blackwells nominees are unqualified for election to Disney’s Board THE BLACKWELLS NOMINEES ARE LESS QUALIFIED AND WOULD HINDER DISN EY’S TRANSFORMATION EFFORTS UNDERWAY ⨯ No experience with large, public media and entertainment companies, particularly in Disney’s area of focus, nor any other consume
Slide 61: Appendix B: Financial Reconciliations
APPENDIX B FINANCIAL RECONCILIATIONS 61
Slide 62: Reconciliation of DTC streaming businesses operating losses
Reconciliation of DTC streaming businesses operating losses • The following tables reconcile Entertainment and Sports segment operating income (loss) to the DTC streaming businesses operating loss: Quarter Ended ($MM) December 30, 2023 December 31, 2022 DTC Streaming DTC Streaming Entertainment Spor
Slide 63: Reconciliation of Diluted EPS excluding certain items
Reconciliation of Diluted EPS excluding certain items • The following table reconciles reported Diluted EPS to Diluted EPS excluding certain items: Pre-Tax Tax Benefit / After-Tax Income Change vs. prior- ($MM except EPS) Diluted EPS3 Income / Loss Expense1 / Loss2 year period Quarter Ended December
Slide 64: Reconciliation of free cash flow
Reconciliation of free cash flow • The following table reconciles the Company’s consolidated cash provided by continuing operations to free cash flow: Year ended Sept. 28, Oct. 3, Oct. 2, Oct. 1, Sept. 30, ($MM, unless otherwise noted) FY2024E 2019 2020 2021 2022 2023 Cash provided by operations – c
Slide 65: EBITDA, net debt and leverage reconciliation
EBITDA, net debt and leverage reconciliation ($BN) FY17 FY18 FY19 FY20 FY21 FY22 FY23 Q1 FY23 Q1 FY24 LTM Q1 FY24 Income from continuing operations before income taxes $13.8 $14.7 $13.9 ($1.7) $2.6 $5.3 $4.8 $1.8 $2.9 $5.9 (+) Content license early termination 0.0 0.0 0.0 0.0 0.0 1.0 0.0 0.0 0.0 0.0
Slide 66: Return on invested capital reconciliation
Return on invested capital reconciliation • The following table reconciles the Experiences segment’s consolidated operating income to return on invested capital: ($MM) Year Ended September 30, 2009 Year Ended September 30, 2023 Operating income $1,7322 $8,954 (-) Taxes (641) (1,880) Operating income
Slide 67: ©Disney and related entities
©Disney and related entities