Comcast Corporation — 2023 Q2 Form 10-Q Summary
Business context and reporting period
Comcast is a global media and technology company operating through Connectivity & Platforms and Content & Experiences. The filing covers the three and six months ended June 30, 2023, with comparisons to the corresponding 2022 periods. Beginning in the first quarter of 2023, Comcast changed its segment presentation to two Connectivity & Platforms segments and three Content & Experiences segments; prior-period information was recast accordingly.
Key financial metrics
| Metric | Three months ended June 30, 2023 | Year-over-year change | Six months ended June 30, 2023 | Year-over-year change |
|---|---|---|---|---|
| Revenue | $30.5 billion | 1.7% | $60.2 billion | (1.3%) |
| Operating income | $6.7 billion | 5.4% | $12.4 billion | 3.5% |
| Net income attributable to Comcast | $4.2 billion | 25.1% | $8.1 billion | 16.4% |
| Diluted EPS | $1.02 | 34.2% | $1.92 | 24.7% |
| Adjusted EBITDA | $10.2 billion | 4.2% | $19.7 billion | 3.6% |
| Net cash provided by operating activities | Not separately provided | — | $14.4 billion | 6.2% |
Operating margin was approximately 22.0% for the quarter and 20.5% for the six-month period, compared with approximately 21.2% and 19.6%, respectively, in the prior-year periods. Adjusted EBITDA margin was approximately 33.6% for the quarter and 32.7% for the six months.
- Connectivity & Platforms: Revenue was $20.4 billion in the quarter, essentially flat, and $40.5 billion for six months, down 0.8%. Adjusted EBITDA increased 4.4% in the quarter and 3.8% for six months; margin expanded to 41.0% and 40.6%, respectively.
- Residential Connectivity & Platforms: Broadband revenue increased 4.4% in the quarter and 4.6% year to date, while wireless revenue increased 20.4% and 23.5%. Video revenue declined 5.6% and 6.7%, and advertising revenue declined 10.7% and 13.0%.
- Customer trends: Domestic broadband customers declined by 19,000 in the quarter and 14,000 year to date. Domestic wireless lines increased by 316,000 in the quarter and 671,000 year to date. Domestic video customers declined by 543,000 in the quarter and 1.16 million year to date.
- Business Services Connectivity: Revenue increased 4.0% in the quarter and 4.6% year to date; Adjusted EBITDA increased 4.7% and 6.3%.
- Media: Revenue was essentially flat in the quarter but declined 11.5% for six months, primarily because the 2022 period included the Beijing Olympics and Super Bowl. Adjusted EBITDA declined 18.2% in the quarter and 21.4% year to date. Peacock revenue was $820 million in the quarter and approximately $1.5 billion year to date, with 24 million paid subscribers at June 30, 2023.
- Studios: Revenue declined 0.9% in the quarter and increased 0.3% year to date. Adjusted EBITDA improved to $255 million from a $3 million loss in the quarter and increased 120.1% year to date, supported by theatrical releases including The Super Mario Bros. Movie and Fast X.
- Theme Parks: Revenue increased 22.4% in the quarter and 23.6% year to date. Adjusted EBITDA increased 31.8% and 37.7%, reflecting stronger international operations and the opening of Super Nintendo World in Hollywood.
Cash flow, debt and liquidity
- Operating cash flow was $14.4 billion for the six months, compared with $13.6 billion in 2022.
- Investing cash outflow was $7.5 billion, including $5.6 billion of capital expenditures and $1.6 billion paid for intangible assets. Capital expenditures increased from $4.3 billion in the prior-year period, primarily due to network infrastructure and Epic Universe development.
- Financing cash outflow was $4.5 billion, including $4.2 billion of share repurchases and $2.4 billion of dividends paid.
- Cash, cash equivalents and restricted cash increased to $7.2 billion at June 30, 2023, from $4.8 billion at December 31, 2022; cash and cash equivalents alone were $7.1 billion.
- Total debt had a carrying value of $97.5 billion and estimated fair value of $90.5 billion at June 30, 2023, compared with carrying value of $94.8 billion at year-end 2022.
- Comcast issued $5.0 billion of fixed-rate senior notes in May 2023, using $2.9 billion to purchase senior notes maturing in 2024 and 2025. It also issued $1.0 billion of senior notes in February 2023 intended to finance or refinance qualifying green projects.
- Available borrowing capacity under the revolving credit facility, net of commercial paper, letters of credit and bank guarantees, was $11.0 billion.
- Comcast repurchased 103.1 million Class A shares for $4.0 billion during the first six months and had $12.0 billion remaining under its repurchase authorization at June 30, 2023. The quarterly dividend was $0.29 per share, following a 7.4% annualized increase approved in January 2023.
Material changes versus the prior comparable period
- Profitability improved despite modest revenue growth in the second quarter, driven by cost management, lower programming and production expense, and higher operating performance in Connectivity & Platforms and Theme Parks.
- Six-month revenue declined because the prior year benefited from the Beijing Olympics and Super Bowl; excluding those events, Media revenue declined 0.9%.
- Investment and other income improved from a $897 million loss to $15 million of income in the quarter and from a $709 million loss to $622 million of income for six months. The change was primarily associated with Atairos investment results, equity securities and other income.
- Interest expense increased 3.0% in the quarter and 2.3% year to date because of higher weighted-average interest rates and higher average debt.
- Comcast continued to experience video and domestic broadband customer pressure, while wireless, business services, Peacock and theme parks provided growth.
- The company incurred higher Peacock costs, totaling $1.5 billion in the quarter and $2.9 billion year to date, compared with $912 million and $1.8 billion in the prior-year periods.
Guidance, outlook, commentary and risks
- Management expects continued growth in higher-margin connectivity businesses, supported by pricing, wireless growth and international connectivity, while video and wireline voice revenue are expected to continue declining.
- Management expects continued pressure on linear television subscribers and audience ratings, with growth in Peacock paid subscribers and advertising intended to mitigate the decline. Peacock content and marketing costs are expected to increase in 2023.
- Comcast continues to invest in network expansion, theme parks, hotels and attractions, including Epic Universe in Orlando.
- Management expects increased 2023 costs related to Xumo and continues to face foreign-currency exposure in the British pound, euro, Japanese yen and Chinese yuan.
- Principal disclosed risks include competition, changing consumer behavior, advertising weakness, rising programming costs, content acceptance, cybersecurity and technology disruption, economic conditions, regulation, litigation, labor disputes, severe weather and the loss of key personnel or talent.
- Comcast has a $5.2 billion collateralized obligation related to its Hulu investment, due March 2024. Universal Beijing Resort had $3.4 billion of debt outstanding at June 30, 2023.
- Legal proceedings arise in the ordinary course; management does not expect them to materially affect results, cash flows or financial position, although litigation could be costly or reputationally harmful.
- No goodwill impairment was required following the 2023 change in segment presentation. Management stated that disclosure controls were effective and that there were no material changes to internal control over financial reporting.
Important facts for investors to verify
- Whether domestic broadband customer losses persist and whether pricing and wireless growth can offset video, advertising and voice declines.
- Peacock subscriber growth, revenue, cash costs and the timing of potential improvement in Media profitability.
- Theme park attendance, guest spending and execution of Epic Universe and other capital projects.
- Debt maturities, refinancing needs and interest-rate effects, particularly the March 2024 Hulu-related collateralized obligation.
- Capital allocation between network and theme park investment, debt repayment, dividends and the remaining $12.0 billion share-repurchase authorization.
- The sustainability of investment and other income, including gains or losses related to Atairos and equity securities, which materially affected year-over-year earnings comparisons.
- Effects of foreign currency, advertising-market conditions, programming renewals, regulatory developments and potential litigation or cybersecurity events.