Comcast Corporation 2022 Q3 Form 10-Q Summary
Business Context and Reporting Period
Comcast is a global media and technology company operating through Cable Communications, NBCUniversal and Sky. This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, compared primarily with the corresponding 2021 periods.
Key Financial Metrics
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Revenue | $29.849 billion | $30.298 billion | $90.874 billion | $86.049 billion |
| Adjusted EBITDA | $9.482 billion | $8.957 billion | $28.459 billion | $26.297 billion |
| Operating income (loss) | $(2.425) billion | $5.450 billion | $9.511 billion | $15.996 billion |
| Net income (loss) attributable to Comcast | $(4.598) billion | $4.035 billion | $2.347 billion | $11.102 billion |
| Diluted EPS | $(1.05) | $0.86 | $0.52 | $2.38 |
| Cash flow from operations | Not separately provided for quarter | Not separately provided for quarter | $20.530 billion | $21.457 billion |
Q3 consolidated Adjusted EBITDA margin was approximately 31.8%, compared with approximately 29.6% in Q3 2021. Nine-month Adjusted EBITDA margin was approximately 31.3%, compared with approximately 30.6% in the prior-year period. Cable Communications Adjusted EBITDA margins were 45.1% in Q3 and 44.6% for the nine-month period.
- Q3 revenue declined 1.5%, while nine-month revenue increased 5.6%.
- Adjusted EBITDA increased 5.9% in Q3 and 8.2% for the nine-month period.
- Q3 results included $8.583 billion of goodwill and long-lived asset impairment charges, consisting primarily of an $8.098 billion Sky goodwill impairment and $485 million of Sky intangible-asset impairments.
- Cash and cash equivalents were $5.695 billion at September 30, 2022, compared with $8.711 billion at December 31, 2021.
- Debt had a carrying value of $92.5 billion at September 30, 2022, compared with $94.8 billion at year-end 2021; estimated fair value was $82.1 billion.
- Available revolving-credit capacity, net of commercial paper, letters of credit and bank guarantees, was approximately $11.0 billion.
Cash Flow, Capital Allocation and Liquidity
- For the first nine months, operating cash flow was $20.530 billion, capital expenditures were $7.062 billion, and cash paid for intangible assets was $2.152 billion.
- Net cash used in investing activities was $10.158 billion, including purchases of investments and higher capital expenditures.
- Net cash used in financing activities was $13.299 billion, including $9.813 billion of common-stock repurchases and $3.571 billion of dividends paid.
- Comcast repurchased 225.7 million Class A shares for approximately $9.5 billion during the nine months. In September 2022, the Board authorized an additional $20 billion repurchase program with no expiration date.
- The annualized dividend was increased 8% to $1.08 per share, and the third-quarter dividend was $0.27 per share.
Material Changes Versus the Prior Comparable Period
- Cable Communications: Q3 revenue increased 2.6% and Adjusted EBITDA increased 5.4%. Broadband revenue rose 5.7%, wireless revenue rose 30.8% and business-services revenue rose 9.4%. Video customers declined by 561,000 and voice customers declined by 316,000 in the quarter, while broadband customers increased by 14,000.
- NBCUniversal: Q3 revenue declined 4.3%, primarily because the prior-year period included the Tokyo Olympics. Adjusted EBITDA increased 24.6%. Studios revenue increased 31.4%, and Theme Parks revenue increased 42.4%, supported by higher attendance and guest spending and the operation of Universal Beijing Resort.
- Media: Q3 revenue declined 22.7% and Adjusted EBITDA declined 41.5%, primarily due to the absence of the Tokyo Olympics broadcast. Peacock revenue was $506 million, with significant continuing content and marketing investment.
- Sky: Q3 revenue declined 14.7% as reported, or 0.2% on a constant-currency basis. Adjusted EBITDA declined 27.9% as reported and 15.5% on a constant-currency basis. Sky customer relationships increased by 320,000 in the quarter but declined by 41,000 for the nine-month period.
- Investments: Investment and other income changed to a $266 million loss in Q3 from $766 million of income in the prior-year quarter, and to a $975 million loss for nine months from $2.374 billion of income. The change was driven largely by lower equity-method investment results, including Atairos, and market-related investment losses.
Guidance, Outlook, Risks and Unusual Items
- Management stated that it expects continued declines in residential video and voice customers and ongoing broadband net-addition pressure due to competition, low household-move levels and changing consumer behavior.
- Management expects continued network subscriber and audience-rating declines and significant additional Peacock content and marketing costs.
- Sky performance is exposed to worsening macroeconomic conditions in the United Kingdom and continental Europe, foreign-currency movements, reduced sports rights in Italy and higher network costs.
- Management expects additional 2022 costs from Sky Glass and the streaming-platform joint venture with Charter Communications. Comcast and Paramount Global also formed the SkyShowtime joint venture, which began operations in selected European markets in September 2022 and carries a multiyear funding commitment.
- The Sky impairment reflected a higher discount rate, reduced forecast cash flows and macroeconomic deterioration. Management identified goodwill and cable-franchise-rights valuation as critical accounting judgments; further changes in cash-flow forecasts, competitive conditions or discount rates could result in additional impairments.
- COVID-19 effects, economic weakness, advertising-market changes, competition, programming costs, content acceptance, regulatory actions, litigation, labor disputes, cybersecurity incidents, technology disruptions and foreign-exchange volatility remain material risks.
- Ordinary-course legal proceedings and claims are not expected by management to materially affect results, cash flows or financial position, although adverse outcomes could be costly and reputationally damaging.
- Disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Whether Sky’s lower forecast cash flows and elevated discount rates lead to additional impairments or sustained operating weakness.
- The pace of broadband net additions and the continued loss of video and voice customers at Cable Communications.
- Peacock subscriber, revenue and profitability trends relative to ongoing content and marketing investment.
- Sky’s customer trends, sports-rights economics, European macroeconomic exposure and constant-currency performance.
- The effect of share repurchases and dividends on leverage, liquidity and per-share results.
- Future capital spending, software and intangible-asset investment, Universal theme-park development costs and joint-venture funding obligations.
- Debt maturities, refinancing conditions, foreign-currency exposure and the $5.2 billion collateralized obligation related to the Hulu investment.