Comcast beat earnings expectations on Thursday with its Q1 2024 report, but Wall Street was unimpressed as shares tumbled 6% after the market opened as the company continues to bleed pay TV and broadband subscribers.
Peacock, meanwhile, narrowed its streaming loss to $639 million in the first quarter of 2024, with paid subscribers growing 55% year-over-year to 34 million.
The media conglomerate had a slight 1.2% increase in revenue to $30.1 billion and 13.9% bump in adjusted earnings to $1.04 per share, but higher programming costs at the streamer and operating expenses at its theme parks tempered the overall results.
Here are the top-line results:
Adjusted net income: $4.17 billion, up 7.6% year over year.
Adjusted earnings per share: $1.04 per share, up 13.9% year over year, compared to 98 cents per share expected by analysts surveyed by Zacks Investment Research.
Adjusted EBITDA: $9.35 billion, down 0.6% year over year.
Revenue: $30.06 billion, up 1.2% year over year, compared to $29.8 billion expected by analysts surveyed by Zacks Investment Research.
Peacock: 3 million paid subscribers added during the quarter for a total of 34 million paid subscribers, a 55% increase compared to the prior year’s period. The streamer’s adjusted EBITDA loss narrowed to $639 million from $704 million last year, and its revenue grew 54% year over year to $1.1 billion, compared to $685 million a year ago.
“We have a clear vision for how we’re going to compete now and into the future, combined with a sharp focus on execution,” Comcast president Mike Cavanagh told analysts on Thursday. “Equally important, our disciplined capital allocation strategy, coupled with our strong balance sheet puts us in an enviable position relative to our peers to invest organically and aggressively in our six scaled and diverse growth.”
Cavanagh said that the NBCUniversal parent’s residential broadband, wireless business services, theme parks, studios and streaming units comprise over 55% of total revenue and “will only grow over time.”
Comcast generated free cash flow of $4.5 billion and net cash of $7.8 billion during the quarter, up 19.4% and 8.6% year over year, respectively. It paid dividends totaling $1.2 billion and repurchased 56 million of its shares for $2.4 billion, resulting in a total return of capital to shareholders of $3.6 billion.
Peacock growth
Peacock’s narrowed loss of $639 million in the first quarter followed peak losses of $2.7 billion in 2023. Executives have previously said they expect Peacock to have a “meaningful improvement” in losses in 2024, and the service’s average revenue per user is around $10.
Executives touted the streaming release of the Oscar-winning “Oppenheimer” in February, which was the most watched movie in the streamer’s history, and its exclusive NFL Wildcard game streamed during the quarter. The streamer added three million new subscribers this quarter — the same as last quarter — but Comcast said its Peacock growth was better than expected.
“We added and then retained even more new Peacock subscribers than we expected. Overall, people are staying with us to engage in a broad range of content, spending 90% of their time on the platform viewing non-sports programming,” Cavanagh said. “Looking ahead, our content offering provides such a great value proposition that we should have some real pricing power over time.”
Executives said they would continue to focus on subscriber retention, particularly in the second quarter, but profitability will continue to be a focus from Wall Street — Netflix shocked the industry last week when it announced it will stop reporting subscriber numbers in 2025.
Pay-TV and broadband continue to bleed subscribers
Comcast’s Connectivity & Platforms segment, its cable business, reported adjusted EBITDA of $8.2 billion and revenue of $20.26 billion, up 1.5% and 0.6% year over year, respectively.
Video revenue fell 6.9% year over year to $6.9 billion as the cable giant continued to bleed subscribers from cord-cutting. Domestic broadband revenue grew 3.9% year over year to $6.6 billion, driven by a 4.2% increase in the average rate per customer. Domestic wireless revenue grew 13.3% to $972 million due to a 21% increase in the number of customer lines to 6.9 million.
A growth spot was ad revenue, which grew 4.9% to $951 million due to higher domestic political advertising, higher revenue from its advanced advertising business and the positive impact of foreign currency. It was partially offset by lower domestic advertising overall.
The division lost 487,000 video customers for a total of 13.6 million and 65,000 domestic broadband customers for a total of 32.2 million, but gained 289,000 wireless subscribers during the quarter for a total of 6.87 million. Total customer relationships decreased by 166,000 to 52 million.
“The broadband market remains extremely competitive, particularly within the market for more price conscious consumers,” Cavanagh said. “We continue to be intensely focused on segmentation, providing customers with options that meet both their lifestyle and budget.”
He reiterated the company’s guidance that broadband subscriber growth would return over time.
Higher expenses weigh on growth
The Content & Experiences segment, which includes media, studios and theme parks, saw revenue grow 1.1% year over year to $10.37 billion and adjusted EBITDA fall 7.1% year over year to $1.49 billion.
The media division, which includes Peacock, saw revenue grow 3.6% year over year to $6.37 billion, primarily due to higher domestic distribution revenue, and adjusted EBITDA fell 6.1% year over year to $827 million, driven by higher programming expenses at Peacock. The unit’s overall expenses grew 5.2% to $5.5 billion. Domestic advertising revenue was flat at $2 billion, while domestic distribution revenue grew 7.2% to $2.9 billion and international networks revenue grew 1.3% to $1 billion.
“As we look forward to the second half of the year we will have a substantial amount of acquisition oriented content lined up,” chief financial officer Jason Armstrong said. “This year is expected to be driven by the Olympics this summer, and the NFL and Big 10 returning in the fall, in addition to the steady stream of films landing on our pay one window, as well as upcoming originals.”
The company’s upcoming coverage of the Olympics is on track to generate the most advertising revenue in history with $1.2 billion in ad sales commitments.
The studios division saw revenue fall 7.2% to $2.7 billion due to a 10.4% drop in content licensing revenue to $2.1 billion, primarily reflecting the timing of when content was made available by its film studios. Adjusted EBITDA fell 12.2% to $244 million due to lower revenue, which more than offset lower operating expenses.
As films continue to be a bright spot for Universal, theatrical revenue increased 3.4% to $330 million due to the successful performance of recent releases, including “Kung Fu Panda 4” and “Migration,” compared to theatrical releases in the prior year period like “Puss in Boots: The Last Wish” and “M3GAN.”
“For the third year in a row, we will release more movies than any other major studio,” Cavanagh said. Universal’s “The Fall Guy” will kick off the summer movie season at the beginning of May, and the studio also has “Despicable Me 4” and “Twisters” in July and “Wicked” in November.
The theme park division saw revenue rise 1.5% to $1.97 billion, led by higher revenue at its domestic theme parks, and adjusted EBITDA fall 3.9% to $632 million, reflecting higher operating expenses due to higher marketing and promotion costs and the negative impact of foreign currency, which more than
offset higher revenue. Theme park operating expenses grew 4.3% to $1.34 billion.
“We started to feel some pressure on attendance levels late in the first quarter, which tends to occur in tandem with the ebbs and flows of new attractions in the market,” Cavanagh said. “Right now, we happen to be lapping the multi-year surge in attendance from our opening of new attractions in prior periods.”
Looking ahead, Comcast remains confident about the longer-term growth opportunities in its parks business as it prepares to open its Epic Universe theme park in 2025, which is intended to turn Universal Orlando into a weeklong destination and will feature three new hotels, five immersive worlds and more than 50 attractions, entertainment, dining and shopping experiences.
