EARNINGS CALL

NBCU Rebounding As Comcast Cable Soars

Comcast CFO Mike Cavanagh is bullish on 2Q prospects: “We expect healthy growth in distribution revenue to continue. We will have significantly more sporting events compared to last year, which should result in higher advertising revenue, but also a significant increase in sports-related programming and production costs.”

After reporting that revenues down 9.1% in the first quarter for NBCUniversal, Comcast CFO Mike Cavanagh told Wall Street analysts that the current second quarter is looking good.

“We expect healthy growth in distribution revenue to continue. We will have significantly more sporting events compared to last year, which should result in higher advertising revenue, but also a significant increase in sports-related programming and production costs,” Cavanagh said of the current quarter.

Distribution revenue had been the brightest spot in the first quarter, up 9.1% as contractual escalators kicked in for MVPDs, even as subscriber counts declined.

“Advertising revenue declined by 3.4%, as lower entertainment ratings and tough political comps were partially offset by more sports in the quarter, strength in news and the launch of Peacock,” the CFO said. Comcast now reports the “Media” segment of NBCU including NBC, Telemundo, the O&O stations, cable networks and the Peacock streaming service in total. Total Media revenues rose 3.2% to $5.04 billion.

“EBITDA declined 3.7% [to $1.47 billion] when including Peacock, which generated revenue of $91 million and an EBITDA loss of $277 million,” Cavanagh explained. “Excluding Peacock, Media EBITDA increased 10%, primarily driven by lower expenses, which was partly due to lower entertainment costs associated with fewer original hours aired and partly due to our new operating model. This year-over-year reduction more than offset higher sports costs resulting from additional events.”

For all of Comcast, revenues rose 2.2% to $27.21 billion. Comcast Cable drove the company’s strong performance with record financial results for the first quarter and the most customers ever, primarily driven by broadband subscriber growth. But looking forward, analyst Jessica Reif Ehrlich at Bank of America/Merrill Lynch suggested in the Q&A that NBCU has the most upside for Comcast.

BRAND CONNECTIONS

“We really adjusted our cost base across the entire company during the pandemic,” said NBCUniversal CEO Jeff Shell. He noted that wasn’t just because of the pandemic, but that it reflected where the TV business is going. And he noted that the Theme Parks business is coming back as restrictions are eased, although he warned that the recovery will be choppy.

Later, Shell said he was thrilled to have completed a renewal of NFL rights in what he called a “perfect deal.” In particular, he noted that a lot of the content can now be used across multiple platforms, including Peacock.

“We want to build our television business to match what consumers are doing. Consumers are watching content across a variety of different platforms — not just linear, not just streaming, but lots of different ways. Our spending should really be looked at in that context — not just on what we’re spending on Peacock, but what we’re spending across our whole portfolio,” Shell explained.

He had earlier stated that he was pleased that the company had chosen an ad-supported model for Peacock and noted that usage is double what the company had projected. A third of the 42 million households that have signed up for Peacock are now monthly active accounts — or MAAs.

“An average Peacock MAA is using Peacock more than an average TV viewer is watching NBC, so we’re very pleased with that,” Shell told analysts.


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