COMCAST CORP annual report, FY2020

Comcast Corporation 2020 Form 10-K Summary

Business context and reporting period

Comcast is a global media and technology company operating through Cable Communications, NBCUniversal and Sky. Businesses include broadband, video, voice, wireless, business services, advertising, cable and broadcast networks, filmed entertainment, theme parks, European pay television and Peacock streaming.

This filing is the annual report for the fiscal year ended December 31, 2020, filed February 3, 2021. The requested “2020 Q4” period is covered only as part of the full-year filing; fourth-quarter revenue was $27.7 billion and net income attributable to Comcast was $3.4 billion.

Key financial metrics

Metric	2020	2019	Change
Revenue	$103.6 billion	$108.9 billion	Down 4.9%
Operating income	$17.5 billion	$21.1 billion	Down 17.2%
Net income attributable to Comcast	$10.5 billion	$13.1 billion	Down 19.3%
Diluted EPS	$2.28	$2.83	Down 19.4%
Adjusted EBITDA	$30.8 billion	$34.3 billion	Down 10.0%
Net cash from operating activities	$24.7 billion	$25.7 billion	Down 3.7%
Capital expenditures	$9.2 billion	$10.0 billion	Down 7.8%
Cash and cash equivalents	$11.7 billion	$5.5 billion	Increased
Long-term debt, including current portion	$103.8 billion	$102.2 billion	Increased

Operating margin was approximately 16.9%, compared with 19.4% in 2019. The effective income tax rate was 23.9%, versus 21.6% in 2019. Investment and other income increased to $1.2 billion, including gains on equity investments, partially offsetting lower operating results.

Segment performance and material changes

Cable Communications: Revenue increased 3.4% to $60.1 billion and Adjusted EBITDA increased 8.6% to $25.3 billion. Operating margin improved to 42.1% from 40.1%. High-speed internet revenue increased 9.9%, wireless revenue increased 34.9%, and business services revenue increased 5.1%. Video revenue declined 1.5% and voice revenue declined 8.9%.
Customer trends: Total customer relationships increased by 1.6 million to 33.1 million. Total high-speed internet customers increased by 2.0 million to 30.6 million, while total video customers declined by 1.4 million to 19.8 million. Wireless lines increased to 2.8 million.
NBCUniversal: Revenue declined 17.3% to $28.1 billion and Adjusted EBITDA declined 28.5% to $6.3 billion. Theme Parks revenue fell 68.9% to $1.8 billion, producing a $541 million Adjusted EBITDA loss, due primarily to COVID-19 closures and capacity restrictions. Filmed Entertainment revenue declined 18.7% to $5.3 billion, largely because of theater closures.
Broadcast Television and Cable Networks: Revenue declined 0.2% and 5.8%, respectively. Advertising weakness and lower sports activity were partly offset by content licensing and retransmission revenue. Adjusted EBITDA increased 11.8% for Broadcast Television and 3.9% for Cable Networks due to cost reductions and lower programming-related expenses.
Sky: Revenue declined 3.3% to $18.6 billion and Adjusted EBITDA declined 37.0% to $2.0 billion. Results reflected lower direct-to-consumer, advertising and content revenue, sports disruptions and foreign currency effects. Customer relationships decreased modestly to 23.9 million.
Corporate and Other: Adjusted EBITDA loss increased to $2.4 billion from $880 million, primarily because of Peacock investment, severance and other COVID-19-related costs. Peacock launched nationally in July 2020.

Cash flow, debt and liquidity

Operating cash flow remained substantial at $24.7 billion. Investing cash use was $12.0 billion, including $9.2 billion of capital expenditures, $2.5 billion of intangible asset purchases, $1.5 billion for Universal Beijing Resort and $459 million for spectrum rights.
Comcast issued $18.6 billion of long-term debt and repaid $18.8 billion during 2020. Management stated that the financing activity was intended to strengthen liquidity during the pandemic and reduce the weighted-average cost of debt.
Debt had a carrying value of $103.8 billion, an estimated fair value of $125.6 billion and a weighted-average interest rate of approximately 3.6%. Principal maturities include $3.1 billion in 2021, $4.0 billion in 2022, $3.9 billion in 2023, $6.7 billion in 2024 and $7.0 billion in 2025.
Revolving credit facilities provided $9.2 billion of availability at year-end, with no borrowings outstanding under the facilities or commercial paper programs. Comcast reported compliance with applicable financial covenants by a significant margin.
Contractual obligations totaled $186.0 billion, including $104.4 billion of debt obligations, $64.8 billion of purchase obligations and $5.4 billion of operating lease obligations. This excludes certain obligations whose timing or amount could not be reliably estimated.
The quarterly dividend declared increased from $0.21 per share in 2019 to $0.23 in 2020. In January 2021, the board approved a 9% increase to an annualized rate of $1.00 per share.

Outlook, risks and unusual items

Management expects COVID-19 to continue adversely affecting consolidated results in the near to medium term, particularly theme parks, filmed entertainment, advertising, sports-related programming and Sky. The company could not predict the timing of full theme park reopening, attendance recovery, sporting schedules or the broader economic recovery.

Universal’s Hollywood theme park remained closed at year-end; Orlando and Japan operated with limited capacity. Construction of the Epic Universe theme park in Orlando was delayed, while Universal Beijing Resort was expected to open in 2021.
The Tokyo Olympics were postponed from 2020 to 2021, delaying associated revenue and costs. Sports-rights agreements may require credits or other adjustments when minimum event levels are not achieved.
Management expects continued declines in traditional video customers and rising programming costs, with 2021 programming expense increases expected to be more significant because of contract renewals.
Peacock requires continued content and marketing investment and generated additional Corporate and Other losses. Intercompany licensing with Peacock increased reported eliminations.
Receivables allowance for doubtful accounts increased to $807 million from $419 million, reflecting higher collection risk from pandemic-related economic deterioration.
Key longer-term risks include competition from broadband and wireless providers, fiber networks and streaming services; advertising and audience declines; costly sports and content rights; regulatory and privacy changes; cybersecurity incidents; foreign exchange and Brexit-related risks; litigation; and the substantial debt load.
Sky goodwill was a critical audit matter because its estimated fair value was close to carrying value. No material impairment charge was recorded, but future changes in projected cash flows, discount rates or market conditions could result in impairment.
The filing identifies a $1.7 billion estimated value for a contractual obligation tied to a third-party interest in certain theme park revenue, compared with a $1.1 billion carrying value.

Most important facts for investors to verify

Whether broadband customer growth and higher-margin business services can offset continuing video and voice subscriber losses.
The pace and profitability of recovery at theme parks, filmed entertainment and Sky as COVID-19 restrictions ease.
Peacock subscriber growth, revenue, content commitments and the duration of associated losses.
Debt reduction capacity, upcoming maturities, refinancing costs and compliance with leverage covenants.
The sustainability of operating cash flow after capital expenditures, content purchases, sports rights payments and dividends.
Exposure to rising programming costs, sports-rights obligations and the $64.8 billion of disclosed purchase obligations.
Potential impairment sensitivity for Sky goodwill and other media-related intangible assets.
Regulatory, litigation, cybersecurity, privacy and data-security developments that could increase costs or restrict operations.