Comcast reports earnings; Olympics may break even

Tom Paine

Comcast reported its 2nd quarter results this morning, with CEO Brian Roberts, Comcast Cable CEO Neil Smits, and NBCU CEO Steve Burke joining the conference call from London. Revenue grew 6.1%, while operating cash flow grew 4.2%. Second quarter pro forma results (apples to apples as if 100% of Universal Orlando results were included in the 2nd quarter 2011 instead of 50%) show revenue growth of 3.5% and operating cash flow growth of 0.9%. Not exactly heady growth numbers, but still enough to easily beat expectations and leave many investors satisfied. Earnings per share increased 35.1% from 2011, but only 19% when excluding a special charge from last year. Shares were up about 3.5% at midday.

Pro forma results for NBCU included a slight revenue decline and a 15.4% decline in operating cash flow. Results were affected by a $83 million operating cash flow loss in Filmed Entertainment, primarily due to the poor performance of Battleship. But the bigger story out of NBCU was Roberts reporting that the company will be "right around break-even" on this year's Olympics. Part of that result may be due to a rather arcane accounting issue, as CFO Michael Angelakis explained on the call that since the deal to broadcast the 2012 Olympics was reached before Comcast acquired its stake in NBCU, "some of the loss was eliminated through purchase accounting" (in other words, book costs written down) and the company should show a small profit from the event in the 3rd quarter. Roberts said that because of the time zone factor, NBCU had based its ratings forecasts more on Athens than on Bejing, but ratings were in fact exceeding those of Bejing. NBCU is also hoping for a boost for all of its programming efforts from the Olympics, and also cited specifically the broader exposure its NBC Sports cable channel (formerly Versus) is receiving.

On the Cable Communications side of the business, high-speed internet services revenue grew 8.9%, video 2.8%, and voice 1.2%. The closely watched video subscriber metric showed a net loss of 176,000, down from 238,000 a year ago, in a quarter that often reflects a higher level of disconnects from students. Business Services continued to grow rapidly, at a 34.2% pace for the quarter. Overall, Cable Communications revenue grew 6%.


Some other highlights:

• Efficiency efforts have resulted in fewer truck rolls, and more customers using self-service apps to resolve issues. Capital expenditures are also down, both in absolute terms (slightly) as well as a percentage of revenue


• Telcos (traditional phone companies) have competitive video offerings covering about 40% of Comcast's footprint, Angelakis said.


• The $3 billion sale of Comcast's stake in A&E will net about $2.6 billion in cash, which will stay at NBCU and conceivably can be applied towards buying out GE's stake in the joint venture.


• Comcast's cloud-based X1 video service, initially rolled out in the Boston area, will be expanded to Atlanta this week and to a total of five markets by year end.


• Xfinity Home (smart home & security service) has been rolled out to almost the entire Comcast footprint now, but the company will provide no indication of how many people are signing up. Also no numbers for Skype service.


• No comment on Google Fiber, other than to say that Comcast has 35,000 subscribers in the Kansas City area, they view the Google experiment as being sort of a laboratory and will be watching its progress closely.


• Still expecting approval of Verizon Wireless spectrum sale and joint marketing venture by end of Q3 or Q4, sees the two deals as being interconnected, not separate.


• Angelakis said Comcast passed on some recently acquired small cable systems due to valuations, but didn't say outright that the company wouldn't consider any cable deals.

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