Comcast Corporation 10-Q Summary
Business Context and Reporting Period
Comcast Corporation is a global media and technology company operating through Cable Communications, NBCUniversal and Sky. This unaudited Form 10-Q covers the three and six months ended June 30, 2021, with comparisons to the corresponding 2020 periods. Results remained affected by COVID-19, particularly at theme parks, studios and Sky’s sports-related businesses.
Financial Performance and Position
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $28.546 billion, up 20.4% | $55.751 billion, up 10.8% |
| Operating income | $5.507 billion, up 18.5% | $10.546 billion, up 11.0% |
| Net income attributable to Comcast | $3.738 billion, up 25.1% | $7.067 billion, up 37.6% |
| Diluted EPS | $0.80, up 23.1% | $1.51, up 36.0% |
| Adjusted EBITDA | $8.927 billion, up 12.6% | $17.339 billion, up 8.0% |
| Net cash from operating activities | Not separately provided | $15.357 billion, versus $14.467 billion |
Approximate consolidated margins were 19.3% operating margin, 13.1% net income attributable margin and 31.3% Adjusted EBITDA margin in the second quarter. For the six-month period, the corresponding margins were approximately 18.9%, 12.7% and 31.1%.
- Cable Communications revenue increased 10.9% in the quarter and 8.4% year to date; Adjusted EBITDA increased 14.5% and 13.5%, respectively. Broadband revenue, wireless, business services and advertising were key contributors, while video and voice customer counts declined.
- NBCUniversal revenue increased 39.2% in the quarter and 11.4% year to date. Theme Parks returned to positive Adjusted EBITDA of $221 million in the quarter and $159 million year to date, compared with losses in 2020. Media Adjusted EBITDA declined 15.8% in the quarter and 9.9% year to date, primarily because of higher programming, Peacock and marketing costs.
- Sky revenue increased 28.0% in the quarter and 18.9% year to date, but Adjusted EBITDA declined 25.3% and 29.0%, respectively, as sports programming and other operating costs increased.
- Cash, cash equivalents and restricted cash totaled $12.418 billion at June 30, 2021. Cash and cash equivalents alone were $12.378 billion.
- Total debt had a carrying value of $98.6 billion and estimated fair value of $114.7 billion, compared with carrying value of $103.8 billion at December 31, 2020. The balance sheet also included a $5.169 billion collateralized obligation related to Hulu.
- Available borrowing capacity under the revolving credit facility, net of commercial paper, letters of credit and bank guarantees, was $11.0 billion. The facilities were undrawn, the company had no commercial paper outstanding, and Comcast was in compliance with its debt covenants.
- Capital expenditures were $4.003 billion, cash paid for intangible assets was $1.283 billion, and construction spending for Universal Beijing Resort was $704 million during the first six months.
- Financing cash outflows included $5.785 billion of debt repayments, $957 million of share repurchases and employee-plan activity, and $2.230 billion of dividends.
Material Changes Versus the Prior Comparable Period
- Revenue and profitability improved substantially as advertising markets recovered, sporting events resumed, theme parks reopened and comparisons benefited from COVID-19 disruptions in 2020.
- Investment and other income increased to $1.216 billion in the quarter from $420 million and to $1.607 billion year to date from a $296 million loss. The improvement primarily reflected gains at Atairos and fair-value gains on equity securities, making reported earnings more sensitive to investment-market movements.
- Income tax expense included a $498 million charge from United Kingdom tax-law changes that increased Comcast’s deferred tax liabilities. Total tax expense rose to $2.000 billion in the quarter and $3.119 billion year to date.
- Programming and production expense increased 35.8% in the quarter and 20.2% year to date, reflecting higher sports, licensing and content costs and the timing of events.
- Comcast redeemed $725 million of NBCUniversal Enterprise preferred stock during the first quarter and restarted its share repurchase program in the second quarter. The repurchase authorization was increased to $10 billion; $500 million was used during the first six months.
- The company changed its NBCUniversal segment presentation in the first quarter of 2021, combining television networks and Peacock in Media and reorganizing Studios reporting. Prior periods were recast for comparability.
Outlook, Commentary, Risks and Unusual Items
- Management expects COVID-19 to continue adversely affecting consolidated results in the near to medium term. Theme parks may face closures or capacity restrictions, studios may experience delayed theatrical releases, and Sky may continue to face lower commercial sports subscription revenue.
- Universal Beijing Resort was expected to open later in 2021, with additional pre-opening costs anticipated. The company owns a 30% interest; the resort had $3.3 billion of debt outstanding at June 30, 2021.
- Peacock is expected to require significant additional content and marketing investment. Peacock generated $122 million of revenue and incurred $485 million of operating costs in the second quarter.
- Programming expenses, particularly retransmission consent and sports rights costs, were expected to increase in 2021 because of contract-renewal timing, partly offset by anticipated video-subscriber declines.
- Sky held reduced, nonexclusive Italian Serie A rights beginning with the 2021-2022 season through 2023-2024, which management expected to reduce programming costs but also revenue and Italian customer relationships.
- Broad risks include competition from online video platforms, declining video subscribers and network ratings, advertising-market volatility, rising programming costs, international and foreign-currency exposure, cybersecurity and technology disruption, regulation, litigation, labor disputes and ongoing COVID-19 uncertainty.
- Legal proceedings arise in the ordinary course; management did not expect the ultimate liabilities to materially affect results, cash flows or financial position, although litigation could be costly and harm reputation.
- Disclosure controls were effective, and no material changes to internal control over financial reporting were identified.
Investor Verification Checklist
- Verify the sustainability of Cable Communications broadband and wireless growth against continuing video and voice customer losses.
- Assess whether Theme Parks recovery and the opening of Universal Beijing Resort offset continuing pandemic-related restrictions and pre-opening costs.
- Evaluate Peacock’s subscriber growth, revenue trajectory and continuing content and marketing losses.
- Separate recurring operating performance from the $1.607 billion year-to-date investment and other income, including Atairos and equity-security fair-value gains.
- Monitor debt reduction, the $5.169 billion Hulu-related collateralized obligation, covenant headroom and future refinancing requirements.
- Assess the effect of higher programming costs, Sky’s reduced Italian sports rights and changing consumer video behavior.
- Review the $498 million United Kingdom tax charge and the effect of future tax-rate changes on cash taxes and deferred tax balances.