Industry Insider: A Look into Comcast 2023 Q1 Earnings Call

Comcast

Comcast Corporation (NASDAQ: CMCSA) is the largest media and telecommunications conglomerate in the United States, uniting under its name brands as big as the mass media and entertainment company NBCUniversal, the animation studio DreamWorks Animation, and the British media and telecommunications conglomerate Sky Group. In 2001 it became the largest cable television operator in the US after acquiring AT&T Broadband’s assets, and in 2016 it partnered with Verizon to launch the cellular network Xfinity Mobile, thus allowing Comcast to offer the so-called “Fantastic Four” (more commonly known as “quadplay”): the combined service of television, a telephone line, fixed Internet and mobile Internet services. Comcast just released its quarterly report for 2023 Q1; the accompanying Earnings Call was started by Comcast’s EVP of Investors’ Relations Marci Ryvicker, followed by an overview by Chairman and CEO Brian L. Roberts and President Michael J. Cavenagh, and ending with a thorough analysis of the quarter’s financial metrics by CFO Jason S. Armstrong.

First, they are presenting their segment operations reports in a new division of only two segments: Connectivity and Platforms, and Content and Experiences. The biggest oscillations can be seen in the second segment: the 20.7% decrease in revenues in the media sector compared to 1Q22 is due to the outlier revenue from last year’s broadcast of the Beijing Olympics and the NFL’s Super Bowl. This decrease is partially offset by a series of box office hits (Puss in Boots, M3GAN, Cocaine Bear, and the newly released Super Mario Bros. Movie), and the successful launch of Super Nintendo Worlds in Hollywood together with the reopening of the theme parks in Beijing and in Japan. Nonetheless, 1Q23’s revenues of $10.3 billion in the Content and Experiences segment remain 9.5% lower than last year’s, while the EBITDA is, however, close to the exact same at $1.6 billion.

In his opening, CEO Brian Roberts also briefly addressed the recent firing of Jeff Shell, NBCUniversal’s former CEO, after sexual harassment allegations were brought forward by an employee of the company. Although Roberts did not explicitly mention the scandal, he said that the company is going through “a tough moment”, but thanks to the strong leadership team at NBCUniversal they were able to handle the situation right away by instating Comcast’s President Mike Cavenagh as temporary CEO.

Roberts then proceeded to mention the encouraging results in terms of Free Cash Flow generated during this first quarter: $3.8 billion, of which $3.2 billion were returned to shareholders both via $1.2 billion in dividends and $2 billion in share repurchases. Comcast’s new CFO, Jason S. Armstrong, highlighted how in the past twelve months share repurchases totaled $12 million, and that returning capital to shareholders will remain one of the company’s main priorities looking forward. In order for this to happen, Armstrong’s goal is to preserve the health of the balance sheet by maintaining the current consolidated net leverage of 2.4x.

In addition to stock buybacks, the CFO plans to allocate the remaining capital by investing it into Comcast’s many strategic business opportunities. The main drivers for growth that they have identified are residential connectivity, business services connectivity, theme parks and experiences, and content. Regarding parks, two new openings are set to spike revenues: the 2024 launch of the second Nintendo Land in Japan, and the one of Epic Universe in Orlando in 2025 - as well as other smaller attractions. Regarding content, the strategy is to keep the yearly $20 billion investment in all areas, ranging from movies to sports to news, but with a special attention to Peacock, which, in the words of Cavenagh, is “on the right path [...] to breakeven and grow from there”. The streaming service already offers Comcast’s deep content library, earning a double stream of income from both advertising and subscriptions, and the company has also started to produce original content specifically for the platform. Moreover, the theatrical hits produced and distributed by Comcast’s subsidiaries then roll onto Peacock’s library, thus continuing the profitability of the most successful movies.

Amid the rapidly changing landscape of media and communication, Comcast has a strong position thanks to its capillary reach into most of the industries’ areas. In Mike Cavenagh words:

“I couldn't think of a more advantageous position to be in to monetize the increasing expectations demand as well as the changing habits of the global consumer. We're the best broadband company with the best content that can be accessed over the best distribution and aggregation platforms."