Comcast Corporation — Q1 2021 Form 10-Q Summary
Business context and reporting period
Comcast Corporation reported results for the three months ended March 31, 2021. Its principal businesses are Cable Communications, NBCUniversal and Sky. NBCUniversal’s reportable segments were reorganized into Media, Studios and Theme Parks, with prior periods recast for comparability.
Key financial metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $27.205 billion | $26.609 billion | +2.2% |
| Operating income | $5.039 billion | $4.852 billion | +3.8% |
| Net income attributable to Comcast | $3.329 billion | $2.147 billion | +55.1% |
| Diluted EPS | $0.71 | $0.46 | +54.3% |
| Adjusted EBITDA | $8.413 billion | $8.130 billion | +3.5% |
| Cash flow from operating activities | $7.751 billion | $5.824 billion | +33.1% |
Calculated margins were approximately 18.5% for operating income, 12.2% for net income attributable to Comcast, and 30.9% for Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and is not a substitute for GAAP operating income or cash flow.
- Interest expense declined to $1.018 billion from $1.212 billion, primarily because Q1 2020 included a $140 million charge for early redemption of senior notes and current-period weighted-average interest rates were lower.
- Investment and other income was $390 million versus a $716 million loss in the prior-year period, reflecting improved equity-method investment results and gains on equity securities.
- Cash and cash equivalents were $14.950 billion at March 31, 2021, compared with $11.740 billion at December 31, 2020. Cash, cash equivalents and restricted cash totaled $14.976 billion.
- Total debt had a carrying value of $103.7 billion and an estimated fair value of $117.8 billion. The company had no commercial paper outstanding and no borrowings under its revolving credit facilities.
- Available borrowing capacity under the revolving credit facility, net of commercial paper, letters of credit and bank guarantees, was $11.0 billion. Comcast was in compliance with its debt covenants.
- Capital expenditures were $1.859 billion, cash paid for intangible assets was $612 million, and dividends paid were $1.080 billion.
- The Board increased the annualized dividend by 9% to $1.00 per share; the first-quarter dividend was $0.25 per share, paid in April 2021.
Material changes versus the prior comparable period
- Cable Communications revenue increased 5.9% to $15.805 billion, while Adjusted EBITDA increased 12.4% to $6.830 billion. The segment margin improved to 43.2% from 40.7%.
- Cable broadband revenue rose 12.0%, wireless revenue rose 49.7%, and business services revenue rose 6.1%. Video customers declined by 491,000 and voice customers declined by 106,000 during the quarter, reflecting competitive pressure and changing consumption patterns.
- NBCUniversal revenue declined 9.1% to $7.024 billion and Adjusted EBITDA declined 11.8% to $1.490 billion. Theme Parks revenue fell 33.1% and generated negative Adjusted EBITDA of $61 million.
- Media revenue increased 3.2%, but Adjusted EBITDA declined 3.7% because higher programming and production costs, including Peacock costs, exceeded revenue growth. Peacock revenue was $91 million and related operating costs and expenses were $368 million.
- Studios revenue was broadly flat, with content licensing growth offset by an 87.7% decline in theatrical revenue. Studios Adjusted EBITDA increased 65.7% to $497 million due largely to lower marketing and administrative costs.
- Sky revenue increased 10.6% to $4.997 billion, but Adjusted EBITDA declined 33.9% to $364 million as programming and direct network costs rose faster than revenue. On a constant-currency basis, Sky revenue increased 2.0% and Adjusted EBITDA declined 39.6%.
- Operating cash flow increased by $1.927 billion, primarily reflecting higher earnings and more favorable changes in operating assets and liabilities, including timing related to film and television costs, receivables and deferred revenue.
- Financing cash flow was an outflow of $1.898 billion, compared with an inflow of $374 million in Q1 2020. The prior-year period included substantial debt issuance and repayments; Q1 2021 included the $725 million redemption of NBCUniversal Enterprise preferred stock.
Guidance, outlook, commentary, risks and unusual items
- Management expects COVID-19 to continue to have a material adverse effect on consolidated results over the near to medium term, particularly at NBCUniversal Theme Parks and Studios and within Sky’s sports-related operations.
- In Q1, Orlando and Japan theme parks operated with limited capacity and Hollywood remained closed. Hollywood reopened with limited capacity in April, while Japan temporarily closed. Universal Beijing Resort was expected to open in summer 2021, with significant pre-opening costs anticipated.
- COVID-19-related delays and changes in theatrical releases may defer studio revenue and subsequent licensing windows. The timing of sporting events, including the postponed Tokyo Olympics, may shift revenue and expense recognition between periods.
- Management expects continued declines in residential video and voice customers. Cable programming expenses are expected to face greater rate pressure in 2021 due to contract renewal timing.
- Peacock requires continued investment in content and marketing, and management expects significant related costs. Audience ratings and subscribers at traditional television networks are also expected to continue declining.
- Sky’s future results depend partly on sports programming availability and rights costs. The company stated that it was uncertain whether it would retain certain Italian Serie A broadcast rights after the 2020–2021 season.
- Comcast entered into an $11 billion revolving credit facility due March 30, 2026, replacing $9.2 billion of existing facilities. The facility may be increased to $14 billion and extended, subject to lender approval.
- Universal Beijing Resort had $3.0 billion of debt outstanding as of March 31, 2021. Comcast owns a 30% interest, and the resort’s consolidated assets and liabilities were $8.5 billion and $6.8 billion, respectively.
- Comcast extended its NFL rights agreement by 11 years through the 2033–2034 season, including rights to three additional Super Bowls and additional streaming and Peacock rights.
- Legal proceedings arise in the ordinary course of business. Management does not expect the ultimate liabilities to materially affect results, cash flows or financial position, although litigation could be costly or harm the company’s reputation.
- Management reported effective disclosure controls and procedures and no material changes in internal control over financial reporting. The filing states that there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether theme park attendance, capacity limits and reopening trends improve as COVID-19 restrictions ease, including the timing and cost of Universal Beijing Resort’s opening.
- The sustainability of Cable Communications’ broadband growth and margin expansion amid declining video and voice customers and rising programming costs.
- Peacock subscriber, revenue, content-spending and profitability trends, which are not fully quantified in the filing text provided.
- The timing and profitability impact of theatrical releases, content licensing arrangements and sports programming obligations.
- Sky’s ability to control programming costs and retain important sports rights, particularly in Italy.
- Debt maturities, refinancing requirements, covenant compliance and the effect of interest-rate or foreign-currency movements.
- The volatility of investment income and equity-security valuations, which materially affected the year-over-year increase in pretax income.
- The extent to which COVID-19-related customer payment assistance and collections risks affect Cable Communications’ customer metrics and bad-debt expense.