Comcast Corporation Form 10-Q Summary
Business Context and Reporting Period
Comcast Corporation is a global media and technology company with three primary businesses: Cable Communications, NBCUniversal and Sky. The filing covers the three months ended March 31, 2020, with comparison to the three months ended March 31, 2019. The first quarter was affected by the early stages of the COVID-19 pandemic, particularly through theme-park closures, postponed sports, production disruptions and weakening advertising markets.
Key Financial Metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $26.609 billion | $26.859 billion | (0.9%) |
| Operating income | $4.852 billion | $5.182 billion | (6.4%) |
| Net income | $2.224 billion | $3.632 billion | (38.8%) |
| Net income attributable to Comcast | $2.147 billion | $3.553 billion | (39.6%) |
| Diluted EPS | $0.46 | $0.77 | (40.3%) |
| Adjusted EBITDA | $8.130 billion | $8.553 billion | (4.9%) |
| Net cash provided by operating activities | $5.824 billion | $7.231 billion | (19.4%) |
| Capital expenditures | $1.881 billion | $2.092 billion | (10.1%) |
Operating margin was approximately 18.2%, compared with approximately 19.3% in the prior-year period. Net margin was approximately 8.4%, compared with approximately 13.5%. Adjusted EBITDA margin was approximately 30.6%, compared with approximately 31.8%.
- Cash, cash equivalents and restricted cash ended at $8.609 billion, compared with $5.589 billion at December 31, 2019.
- Cash flow from investing activities was a use of $3.101 billion, including capital expenditures, intangible-asset purchases and Universal Beijing Resort construction.
- Cash flow from financing activities was $374 million, reflecting $9.281 billion of borrowings, $7.439 billion of debt repayments and $977 million of dividends paid.
- Total debt had a carrying value of $103.6 billion and estimated fair value of $118.8 billion at March 31, 2020. Long-term debt, including the current portion, totaled approximately $103.6 billion on the balance sheet, excluding the separately presented $5.166 billion collateralized obligation.
- Available capacity under revolving credit facilities, net of commercial paper, letters of credit and bank guarantees, was $9.2 billion. No commercial paper or revolving-credit borrowings were outstanding at quarter-end.
- The quarterly dividend was $0.23 per common share; the annualized dividend was increased 10% to $0.92 per share.
Material Changes Versus the Prior Comparable Period
- Cable Communications revenue increased 4.5% to $14.918 billion and Adjusted EBITDA increased 6.1% to $6.076 billion. High-speed internet revenue rose 9.3%, wireless revenue rose 52.1% and business-services revenue rose 8.0%. Video customers declined by 409,000 and voice customers declined by 89,000.
- NBCUniversal revenue declined 7.0% to $7.734 billion and Adjusted EBITDA declined 25.3% to $1.747 billion. Theme Parks revenue fell 31.9% and Adjusted EBITDA fell 84.7% because parks closed during the quarter. Filmed Entertainment Adjusted EBITDA fell 70.9%.
- Broadcast Television revenue increased 8.8% and Adjusted EBITDA increased 29.6%, primarily from content licensing and distribution revenue.
- Sky revenue declined 5.8% to $4.517 billion and Adjusted EBITDA declined 16.9% to $551 million; constant-currency revenue declined 3.7% and constant-currency Adjusted EBITDA declined 15.3%.
- Investment and other income changed from $676 million of income to a $716 million loss. The change primarily reflected a $581 million Atairos loss, equity investment losses and the absence of a prior-year Hulu dilution gain.
- Interest expense increased 5.4% to $1.212 billion, including a $140 million charge related to the early redemption of senior notes.
- The company issued approximately $9.0 billion of senior notes during February and March 2020 and repaid approximately $7.4 billion of debt, including the early redemption of $6.5 billion of senior notes. Share repurchases under the authorization remained paused.
Guidance, Outlook, Risks and Unusual Items
Management stated that COVID-19 was expected to have a material adverse impact on consolidated results over the near to medium term, with the effects becoming more significant in the second quarter. The filing does not provide quantitative full-year guidance.
- All theme parks were temporarily closed during the first quarter; the timing of reopening and post-reopening attendance remained uncertain. Construction of certain theme-park projects, including Epic Universe, was expected to be delayed.
- Advertising revenue was expected to decline because of deteriorating economic conditions. The company also expected higher allowance-for-doubtful-account losses and additional employee-related costs.
- Postponed sports seasons and the 2020 Tokyo Olympics were expected to affect advertising, programming costs and the timing of revenue and expense recognition.
- Film and television production was disrupted, movie theaters were closed, and certain films were released or planned for release through alternative distribution channels.
- Sky faced lower sports subscription revenue, suspended sales channels, weaker advertising and increased economic uncertainty in the U.K. and Europe.
- Management expected continued significant investment in Peacock, which launched in April 2020, and expected capital projects and debt-reduction efforts to be affected by COVID-19.
- The company concluded that no long-lived-asset or goodwill impairment assessment was required as of March 31, 2020, but stated that future impairment charges remained possible.
- Accounting changes adopted in 2020 included updated film and television cost guidance and the expected-credit-loss standard. The credit-loss adoption reduced retained earnings by $124 million, net of tax.
- Legal proceedings arose in the ordinary course of business; management did not expect them to materially affect results, cash flows or financial position, although litigation could be time-consuming and harm the company’s reputation.
Important Facts for Investors to Verify
- Assess the second-quarter and subsequent effects of COVID-19 on theme parks, filmed entertainment, Sky sports subscriptions, advertising, receivables and customer payment behavior.
- Monitor leverage, debt maturities, interest expense, refinancing needs and the pace of debt reduction following the Sky acquisition.
- Verify the sustainability of Cable Communications’ growth, especially high-speed internet and wireless, against continuing video and voice customer declines.
- Evaluate the effect of postponed sports programming and the delayed Olympics on future revenue, programming costs and reported earnings.
- Review investment volatility, particularly Atairos and other equity investments, because these items materially affected the quarter’s net income.
- Track theme-park reopening dates, attendance, project delays and potential impairment risks.
- Consider that Adjusted EBITDA is a non-GAAP measure and may not be directly comparable with similarly named measures used by other companies.