Comcast Corporation 2019 Form 10-K Summary
Business context and reporting period
Combined annual filing for Comcast Corporation and wholly owned NBCUniversal Media, LLC, covering the fiscal year ended December 31, 2019. Comcast operates through Cable Communications, NBCUniversal and Sky. The filing includes fourth-quarter results but is not a standalone Q4 filing. Sky was acquired on October 9, 2018; therefore, 2019 includes a full year of Sky results, while 2018 includes only post-acquisition results.
Key financial metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | $108.942 billion | $94.507 billion | +15.3% |
| Operating income | $21.125 billion | $19.009 billion | +11.1% |
| Net income attributable to Comcast | $13.057 billion | $11.731 billion | +11.3% |
| Diluted EPS | $2.83 | $2.53 | +11.9% |
| Adjusted EBITDA | $34.258 billion | $30.165 billion | +13.6% |
| Operating margin | 19.4% | 20.1% | Down approximately 70 basis points |
| Net margin | 12.0% | 12.4% | Down approximately 40 basis points |
| Cash flow from operating activities | $25.697 billion | $24.297 billion | +5.8% |
| Capital expenditures | $9.953 billion | $9.774 billion | +1.8% |
| Operating cash flow less capital expenditures | Approximately $15.744 billion | Approximately $14.523 billion | Derived measure |
| Long-term debt, including current portion | $102.217 billion | $111.743 billion | Down $9.526 billion |
| Cash and cash equivalents | $5.500 billion | $3.814 billion | +44.2% |
Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for GAAP operating income, net income or operating cash flow.
Segment performance and material changes
- Cable Communications: Revenue increased 3.7% to $58.082 billion and Adjusted EBITDA increased 7.3% to $23.266 billion. The operating margin improved to 40.1% from 38.7%. High-speed internet revenue rose 9.4%, business services revenue rose 9.3% and wireless revenue rose 31.2%. Video revenue declined 0.8%, voice revenue declined 2.1% and advertising revenue declined 11.8%.
- Customer trends: Total Cable Communications customer relationships increased to 31.545 million. Residential high-speed internet customers increased to 26.414 million, while video customers declined to 20.288 million and voice customers declined to 9.934 million. Wireless lines increased to 2.052 million.
- NBCUniversal: Revenue declined 5.0% to $33.967 billion, while Adjusted EBITDA increased 2.0% to $8.772 billion. Results were affected by the absence of the 2018 PyeongChang Olympics and Super Bowl. Filmed Entertainment revenue declined 9.2%; Theme Parks revenue increased 4.4% to $5.933 billion.
- Sky: Full-year revenue was $19.219 billion and Adjusted EBITDA was $3.099 billion. On a pro forma basis, revenue declined 3.0%, or increased 1.7% excluding foreign currency effects; Adjusted EBITDA increased 7.1%, or 12.2% on a constant-currency basis.
- Capital allocation: Comcast repaid $15.6 billion of debt during 2019, including $14.4 billion of debt repayments and $673 million of net commercial-paper repayments. No common shares were repurchased under the share repurchase authorization. Dividends paid were $3.735 billion.
- Investments and unusual items: Investment and other income was $438 million versus a $225 million loss in 2018, benefiting from equity-security gains, including gains on Snap and Peloton, and Hulu-related items. The company recorded a $56 million charge for early debt redemption.
Liquidity, debt and outlook
Management stated that operating cash flow, cash and investments, available credit facilities and future financing capacity should support expected liquidity and capital requirements. As of December 31, 2019, $9.2 billion was available under revolving credit facilities, net of commercial paper, letters of credit and bank guarantees. Comcast was in compliance with its leverage covenant by a significant margin.
Debt obligations totaled approximately $103.1 billion in the contractual-obligations table, excluding interest, and the Hulu-related collateralized obligation was $5.166 billion. The Hulu obligation is secured by minimum guaranteed proceeds associated with Disney’s put and call provisions; Comcast’s Hulu interest has a minimum guaranteed value of approximately $5.8 billion upon exercise, subject to the disclosed terms.
- Management expected 2020 capital expenditures to focus on Cable Communications network capacity, line extensions, wireless gateways, X1, cloud DVR, Sky Q, international OTT platforms and Universal theme-park attractions.
- Comcast expected Cable Communications programming expenses to increase at rates higher than in 2019 because of the timing of 2020 contract renewals.
- Peacock was expected to launch in 2020, with management anticipating significant development and scaling costs.
- Sky expenses were expected to increase in 2020 due to the launch of high-speed internet service in Italy and continued Sky Q deployment.
Principal risks, contingencies and unusual items
- Rapid growth of OTT streaming and changing consumer behavior may continue to reduce traditional video customers, cable-network subscribers, audience ratings and advertising revenue.
- Programming, retransmission-consent and sports-rights costs are expected to increase and may pressure margins if not offset by pricing, subscriber growth or cost controls.
- Competition from fiber, wireless broadband, 5G, satellite, streaming and other technology platforms could affect Cable Communications and Sky.
- Regulatory uncertainty includes open-internet rules, privacy and data-security requirements, franchise fees, retransmission consent, broadcast licensing, antitrust matters and Brexit-related changes affecting Sky.
- Comcast reported approximately $187.734 billion of contractual obligations, including $66.559 billion of purchase obligations and $14.682 billion of minimum programming and talent commitments due in 2020.
- A theme-park contractual obligation had a carrying value of $1.1 billion and an estimated contractual value of $1.8 billion at year-end, depending on the counterparty’s exercise rights.
- Comcast had a remaining unfunded Atairos commitment of $2.2 billion and a $1.0 billion liability for uncertain tax positions. Legal proceedings were described as arising in the ordinary course and not expected to have a material adverse effect, although outcomes remain uncertain.
- Goodwill and cable franchise rights are material assets subject to impairment testing based on forecasts, discount rates and other judgments. No material impairment charges were recorded in the periods presented.
Important facts for investors to verify
- Reconcile reported growth with the full-year inclusion of Sky and evaluate pro forma, constant-currency Sky trends.
- Track the pace of residential video and voice customer losses against continued high-speed internet and business-services growth.
- Assess whether 2020 programming-cost increases and Peacock investment could reduce Cable Communications and consolidated margins.
- Review debt maturities, the $5.166 billion Hulu-related collateralized obligation and progress in reducing leverage.
- Evaluate capital spending and cash conversion, particularly investment in Cable infrastructure, Sky Q, wireless and Universal theme parks.
- Review programming, sports-rights, regulatory, privacy, cybersecurity, litigation and theme-park commitments disclosed in the notes.
- Consider governance concentration: Class B shares represented approximately 33 1/3% of voting power and were beneficially owned by Chairman and CEO Brian L. Roberts.