Comcast/NBCU Q3 revenue up 15%

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Comcast and NBCURevenue increased 15.4% in Q3 to $16.5 billion, while Operating Cash Flow increased 9.5% to $5.0 billion and Operating Income increased 15.4% to $3.0 billion. For the nine months ended 9/30/12, revenue increased 14.3% to $46.6 billion, while operating cash flow increased 9.4% to $14.7 billion and operating income increased 13.9% to $8.9 billion.


Earnings per Share in the quarter was $0.78, a healthy 136.4% increase from $0.33 reported in Q3 2011. Excluding a $0.20 per share gain related to their share of SpectrumCo’s sale of wireless spectrum licenses and a $0.12 per share gain on the sale of NBCUniversal’s interest in A&E Television Networks, EPS increased 39.4% to $0.46 in Q3.

Speaking of NBCU, revenue was up in the division 31.2% to $6.8 billion. That’s compared to $5.2 billion in Q3 2011, primarily driven by 2012 London Olympics revenue of $1.2 billion in the Broadcast Television segment. The Summer Games helped drive the revenue growth by adding $1.8 billion in the quarter. Excluding this impact, revenue was up 8.3%. Operating Cash Flow was up 19.9% to $1.1 billion compared to $951 million in Q3 2011 and included $120 million of operating cash flow generated by the Olympics. Excluding the Olympics, operating cash flow increased 7.3%.

Comcast CFO Michael Angelakis noted that overall, the London Olympics broke even “when you take into account other Olympics-related revenues that are booked over multiple quarters.”

CEO Brian Roberts mentioned on the call he was proud of the Olympics coverage and results, praising staff for ensuring that “the whole company worked together.”

He added that  the Olympics helped launch NBC’s fall primetime schedule, which has started off successfully. He’s hopeful that this was the start of a turnaround for NBC, which has lagged in ratings in past few years.

For the nine months ended 9/30, NBCU’s revenue was up 15.7% to $17.8 billion. Excluding $259 million of revenue related to the Super Bowl in the Q1 and the impact of the Olympics in Q3, revenue increased 6.3%. Operating cash flow was up 8.0% to $2.9 billion compared to the first nine months of 2011. Excluding the Olympics, operating cash flow increased 3.6%.

For Q3, revenue from the Cable Networks increased 3.2% to $2.2 billion compared to $2.1 billion in Q3 2011, reflecting a 5.7% increase in distribution revenue and flat ad revenue.

For the nine months ended 9/30, revenue from the Cable Networks increased 4.2% to $6.6 billion compared to $6.3 billion in 2011. Operating cash flow decreased 0.5% to $2.4 billion compared to the first nine months of 2011.

Revenue from Broadcast Television in the quarter increased 83.8% to $2.8 billion compared to $1.5 billion in the third quarter of 2011 and included $1.2 billion of revenue generated by the 2012 London Olympics. Excluding the Olympics, revenue increased 5.2%. Operating cash flow was $88 million, which included $120 million of operating cash flow generated by the Olympics, compared to a loss of $7 million in the third quarter of 2011. Excluding the Olympics, operating cash flow declined by $25 million reflecting higher programming costs related to an early start of their fall TV season and news coverage of the Presidential election.

For the nine months ended 9/30, revenue from the Broadcast Television segment increased 35.3% to $6.2 billion compared to $4.6 billion in 2011. Excluding the Super Bowl in Q1 and the Olympics in Q3, revenue increased 3.6%. Operating cash flow increased 35.2% to $274 million compared to $203 million in the first nine months of 2011. Excluding the Olympics, operating cash flow declined by $49 million to $154 million compared to the first nine months of 2011.

Marci Ryvicker, Wells Fargo Senior Analyst, had these takeaways:

Could Q4 video subs be positive?
Management did not give a definitive answer other than to state that the company continues to ”block and tackle” and remains encouraged. Assuming that y/y growth stays in the +20% range, subs would still be negative (about -12k) but getting really close to flat.

Has any of Comcast’s momentum come from an improving macro or competitive environment?
CMCSA is not seeing anything different in terms of housing – it is still a slow recovery in a lot of markets. And there has been no real change in the competitive environment.

Given that leverage is closing in on 1.5x, is there any change in terms of your target leverage or NBCU equity redemption?
Comcast has recently tapped the debt markets and post-Q3 has about $41B of debt and $11B of cash on hand-so by year end, the company is likely to still be in its target leverage range of 2-2.5x. We do think there is the potential for accelerated capital returns-mgmt is likely to make any such announcement on its Q4 call in February (no change there).

What does programming expense look like for 2013?
Mgmt mentioned that programming expense will remain under pressure in Q4 (specific guidance remains at HSD growth on the P&L) and into 2013. We did not get definitive guidance for next year but Mr. Angelakis did say that the company is getting more rights with each contract and is managing through the expense growth.

Any update on the X-1?
This IP-based product has been rolled out in 4 major markets and will be rolled out to 2 more shortly. It sounds like response has been positive.

Any update on home security?
Home security is now rolled out across all markets and it sounds like this is starting to contribute (probably still small) to ARPU growth.