NBCU Earnings Rise, But Peacock Loss Hits $467M and Paid Subs Stall at 13M

Peacock, the streaming service of Comcast’s entertainment unit NBCUniversal, grew its revenue during the second quarter, but its paid subscriber base stalled, and its loss widened, while NBCU overall increased its earnings.

After ending the first quarter with more than 13 million paid subs and 28 million monthly active accounts in the U.S., the company said on Thursday that paid subs “stayed relatively flat at 13 million” as of the end of June “following a very strong first quarter that was driven by a variety of extraordinary programming,” including the Super Bowl and the Beijing Winter Olympics, leading to a gain of 4 million paid subs.

Comcast chairman and CEO Brian Roberts said on an earnings conference call he was “pleased” with Peacock’s stable user base and touted a “very strong fall” that would see renewed growth momentum.

Comcast in its second-quarter financial report on Thursday posted NBCU earnings before interest, taxes, depreciation and amortization (EBITDA) that rose 19.5 percent to $1.86 billion on revenue of $9.45 billion, up 18.7 percent. NBCU’s media unit results included $444 million of revenue and an adjusted EBITDA loss of $467 million related to Peacock. That compared to $122 million of revenue and an adjusted EBITDA loss of $363 million related to the streamer in the prior-year period.

Comcast on Thursday also disclosed latest results at its core cable systems. Broadband user gains came to a halt amid growth challenges across the cable industry, even though most analysts had expected slight gains from Comcast. “Total broadband customers of 32.2 million were flat compared to the first quarter of 2022, total video customer net losses were 521,000, and total voice customer net losses were 286,000,” Comcast detailed on Thursday. For the year-ago period, it had reported total broadband customer net additions of 354,000, video customer net losses of 399,000 and total voice customer net losses of 108,000. 

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Wells Fargo analyst Steven Cahall had recently lowered his forecast from 70,000 to 60,000. Broadband customer net additions in the second quarter of 2021 had come in at 354,000. “We continue to expect cable net adds to slow through 2022 (and beyond), driven primarily by an acceleration in fiber and fixed wireless growth,” he wrote about the broader sector trend. “Moving forward, we see much less headroom for Cable subscriber growth as the entire broadband market inches closer to full penetration.”

Roberts lauded the financial performance in the latest period. “Our financial results in the second quarter were very strong across the board, with Cable, NBCUniversal and Sky each delivering solid growth in adjusted EBITDA, resulting in a double-digit increase in adjusted earnings per share and healthy free cash flow generation,” he said. “Significantly we accomplished this while also continuing to invest in our businesses’ future growth, increasing our return of capital to our shareholders, and keeping our balance sheet in a great place.”

In the cable systems unit, he touted “our highest adjusted EBITDA margin on record even amid a unique and evolving macro-economic environment that is temporarily putting pressure on the volume of our new customer connects.” At NBCUniversal, Roberts lauded “terrific results at theme parks (that) fueled our growth in the quarter, and we expect our recent premieres and planned slate of content and live events from our media and studios businesses, including Jurassic World: Dominion, Minions: The Rise of Gru, NopeSunday Night Football and the (soccer) World Cup, to make significant contributions later this year, including to our subscriber growth at Peacock.”

Concluded Roberts: “Looking ahead, our company is in an enviable strategic and financial position, with substantial cash flow generation and a strong foundation for innovation.”

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But amid the stalling broadband figures Comcast’s stock dropped more than 7 percent in pre-market trading.

At NBCU’s Studios unit, second-quarter revenue increased 33.3 percent to $3.0 billion, “primarily reflecting higher theatrical revenue and content licensing revenue.” Theatrical revenue jumped by $352 million to $550 million due to an increase in the number of theatrical releases, “including the successful release of Jurassic World: Dominion.” Content licensing revenue rose 19.0 percent, driven by television content licensing.

Adjusted EBITDA in the Studios division fell by $155 million to $1 million though in the latest quarter, “reflecting higher operating expenses, which more than offset higher revenue.” The higher expenses were driven by higher programming and production expenses, which the firm said reflected higher amortization of television and film production costs, as well as an increase in advertising, marketing and promotion expenses ahead of recent releases Jurassic World: Dominion and Minions: The Rise of Gru.

“Production has returned to pre-pandemic levels, Comcast CFO Mike Cavanagh noted during the earnings conference call.

At NBCU’s theme parks unit, quarterly revenue jumped 64.8 percent to $1.8 billion due to higher attendance and increases in guest spending at parks in the U.S. and Japan. “Universal Beijing Resort was closed for most of the second quarter of 2022 due to local COVID-19-related prevention and control requirements, then resumed operations with restricted capacity in late June,” the company highlighted. Theme parks’ adjusted EBITDA increased by $411 million to $632 million, “reflecting higher revenue, partially offset by higher operating expenses.”

During the earnings conference call, management highlighted that domestic theme parks attendance is now above pre-pandemic levels, with NBCU CEO Jeff Shell touting strong per-capita spending there coming out of the COVID-19 pandemic.

NBCU’s media unit grew its second-quarter revenue by 3.6 percent to $5.3 billion thanks to an 8.4 percent gain in distribution revenue, “driven by increases at Peacock and contractual rate increases, partially offset by a decline in subscribers at our networks.” Within media revenue, advertising revenue fell 1.3 percent though, “reflecting a decline in ratings in the current year period and a higher number of sporting events in the prior-year period, partially offset by higher pricing and additional Peacock sales,” the company said. For example, NBC lost the rights to NHL games.

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Adjusted EBITDA at the media division decreased 2.9 percent to $1.3 billion in the second quarter. The company cited higher operating expenses, “primarily due to higher costs at Peacock.”

Cavanagh reiterated previous guidance that Peacock’s EBITDA loss would come in around $2.5 billion for 2022, with losses being higher in the back half, especially in the fourth quarter.

Roberts on the earnings call dug deeper into the broadband user trends. While the firm has added broadband users over the past 12 months, connect activity has decelerated due to three causes, while user churn has remained low. He said that the main cause for lower connects was a “dramatic slowdown” in people moving. The COVID-19 pandemic, meanwhile, also allowed Comcast to take share, a factor that has more recently been waning. Finally, competition has increased, the Comcast boss noted, but argued that this would have a “temporary” impact and was mostly focused on the “value” customer space.

Cavanagh said later in the call that early in the third quarter weaker broadband user trends have continued, with losses quarter-to-date having reached around 30,000, but adding that July is typically a weak month before back-to-school activity kicks in.

Roberts said though that overall he was bullish that the company would return to broadband user growth.