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Comcast Reports 3rd Quarter 2016 Results

ComcastComcast Corporation (NASDAQ: CMCSA) reported results for the quarter ended September 30, 2016.

Brian L. Roberts, Chairman and Chief Executive Officer of Comcast Corporation, said, “I’m pleased to report that our businesses generated double-digit revenue and operating cash flow growth for the third quarter of 2016. Cable delivered solid operating cash flow growth coupled with great customer metrics, and has now added 170,000 video subscribers over the past twelve months. The Rio Olympics were the most profitable and successful games in our history, and demonstrated our ability to deliver an unparalleled entertainment experience through NBCUniversal together with Comcast Cable and the X1 platform. NBCUniversal reported operating cash flow growth of over 30%, benefitting from the Olympics, continued growth at our Theme Parks, and the theatrical success of The Secret Life of Pets this quarter. I’m proud of our consistent execution and excited about the opportunities ahead for Comcast NBCUniversal.”

Consolidated Financial Results

3rd QuarterYear to Date
($ in millions)20152016Growth20152016Growth
Revenue$18,669$21,31914.2%$55,265$59,3787.4%
Excluding Olympics and Super Bowl (see Table 7)$18,669$19,6995.5%$54,889$57,7585.2%
Operating Income$4,001$4,44011.0%$11,996$12,5955.0%
Operating Cash Flow1$6,184$6,83510.5%$18,406$19,6576.8%
Excluding Transaction-Related Costs (see Table 7)$18,584$19,6575.8%
Earnings per Share2$0.80$0.9215.0%$2.45$2.626.9%
Excluding Adjustments (see Table 5)$2.43$2.596.6%
Net Cash Provided by Operating Activities$4,979$4,114(17.4%)$13,813$13,497(2.3%)
Free Cash Flow3$2,663$1,371(48.5%)$7,347$5,596(23.8%)

For additional detail on segment revenue and expenses, customer metrics, capital expenditures, and free cash flow, please refer to the trending schedules on Comcast’s Investor Relations website at www.cmcsa.com.

Consolidated Revenue for the third quarter of 2016 increased 14.2% to $21.3 billion, including $1.6 billion of revenue generated by the broadcast of the 2016 Rio Olympics in the third quarter of 2016, of which $1.2 billion is related to advertising revenue. Excluding the Olympics, consolidated revenue increased 5.5% (see Table 7). Consolidated Operating Income increased 11.0% to $4.4 billion. Consolidated Operating Cash Flow increased 10.5% to $6.8 billion.

For the nine months ended September 30, 2016, consolidated revenue increased 7.4% to $59.4 billion compared to 2015. Excluding $1.6 billion of revenue generated by the broadcast of the 2016 Rio Olympics in the third quarter of 2016, as well as $376 million of revenue generated by the broadcast of the NFL’s Super Bowl in the first quarter of 2015, consolidated revenue increased 5.2% (see Table 7). Consolidated operating income increased 5.0% to $12.6 billion compared to 2015. Consolidated operating cash flow increased 6.8% to $19.7 billion compared to 2015. Excluding $178 million of transaction-related costs in the first nine months of 2015, consolidated operating cash flow increased 5.8% (see Table 7).

Earnings per Share (EPS) for the third quarter of 2016 was $0.92, a 15.0% increase compared to the third quarter of 2015.

EPS for the nine months ended September 30, 2016 was $2.62, a 6.9% increase from the $2.45 reported in the prior year. Excluding adjustments in the first quarter of 2016 and the first nine months of 2015, EPS increased 6.6% to $2.59 (see Table 5).

Capital Expenditures increased 11.1% to $2.4 billion in the third quarter of 2016. Cable Communications’ capital expenditures increased 10.4% to $2.0 billion in the third quarter of 2016, reflecting a higher level of investment in scalable infrastructure to increase network capacity, increased investment in line extensions and continued spending on customer premise equipment related to the deployment of the X1 platform and wireless gateways. Cable capital expenditures represented 16.3% of Cable revenue in the third quarter of 2016 compared to 15.8% in last year’s third quarter. NBCUniversal’s capital expenditures increased 16.3% to $336 million in the third quarter of 2016, primarily reflecting increased spending at our Theme Parks, which now includes Universal Studios Japan.

For the nine months ended September 30, 2016, capital expenditures increased 12.0% to $6.6 billion compared to 2015. Cable Communications’ capital expenditures increased 10.5% to $5.5 billion and represented 14.8% of Cable revenue compared to 14.2% in 2015. NBCUniversal’s capital expenditures increased 19.5% to $991 million for the first nine months of 2016.

Net Cash Provided by Operating Activities decreased 17.4% to $4.1 billion in the third quarter of 2016. Free Cash Flowdecreased 48.5% to $1.4 billion, reflecting growth in consolidated operating cash flow, offset by higher working capital primarily due to the 2016 Rio Olympics, as well as an increase in capital expenditures. Net cash provided by operating activities for the nine months ended September 30, 2016 decreased 2.3% to $13.5 billion. Free cash flow decreased 23.8% to $5.6 billion compared to 2015 (see Table 4).

Dividends and Share Repurchases. During the third quarter of 2016, Comcast paid dividends totaling $663 million and repurchased 20.8 million of its common shares for $1.4 billion. In the first nine months of 2016, Comcast has repurchased 61.2 million of its common shares for $3.8 billion. As of September 30, 2016, Comcast had $6.2 billion available under its share repurchase authorization.

Cable Communications

3rd QuarterYear to Date
($ in millions)201542016Growth201542016Growth
Cable Communications Revenue
Video$5,348$5,5914.5%$16,110$16,7103.7%
High-Speed Internet3,1293,4058.8%9,27410,0498.4%
Voice900878(2.4%)2,7092,667(1.5%)
Business Services1,2111,39915.5%3,4904,07016.6%
Advertising5886347.7%1,6641,7907.6%
Other57565013.0%1,6851,91913.8%
Cable Communications Revenue$11,751$12,5576.9%$34,932$37,2056.5%
Cable Communications Operating Cash Flow$4,726$4,9865.5%$14,161$14,9235.4%
Operating Cash Flow Margin40.2%39.7%40.5%40.1%
Cable Communications Capital Expenditures$1,853$2,04410.4%$4,977$5,50110.5%
Percent of Cable Communications Revenue15.8%16.3%14.2%14.8%

Revenue for Cable Communications increased 6.9% to $12.6 billion in the third quarter of 2016, driven primarily by increases in high-speed Internet, video and business services revenue. High-speed Internet revenue increased 8.8%, reflecting an increase in the number of residential high-speed Internet customers, rate adjustments and an increase in the number of customers receiving higher levels of service. Video revenue increased 4.5%, primarily reflecting rate adjustments, an increase in the number of customers subscribing to additional services and an increase in the number of residential video customers. Business services revenue increased 15.5%, primarily due to an increase in the number of small business customers, as well as continued growth in our medium-sized business services. Other revenue increased 13.0%, primarily reflecting higher franchise and regulatory fees and an increase in Xfinity Home revenue. Advertising revenue increased 7.7%, reflecting an increase in political advertising revenue.

For the nine months ended September 30, 2016, Cable revenue increased 6.5% to $37.2 billion compared to 2015, driven by growth in high-speed Internet, video and business services.

Customer Relationships increased by 216,000 to 28.3 million in the third quarter of 2016, a 60,000 improvement compared to the increase in the third quarter of 2015, primarily reflecting increases in double product relationships. At the end of the third quarter, penetration of our double and triple product customers increased to 70.0% compared to 69.5% in the third quarter of 2015. Video customer net adds of 32,000 were the best result for a third quarter in 10 years, high-speed Internet customer net additions of 330,000 were the best result for a third quarter in 7 years and Voice customers grew by 2,000.

CustomersNet Additions
(in thousands)3Q153Q163Q153Q16
Video Customers22,25822,428(48)32
High-Speed Internet Customers22,86824,316320330
Voice Customers11,33611,643172
Single Product Customers8,3678,4882472
Double Product Customers9,0669,540130141
Triple Product Customers9,98810,27314
Customer Relationships27,42128,301156216
Customer metrics include residential and business customers.

Operating Cash Flow for Cable Communications increased 5.5% to $5.0 billion in the third quarter of 2016, reflecting higher revenue, partially offset by a 7.8% increase in operating expenses. The higher expenses were primarily due to an 11.4% increase in video programming costs, reflecting the timing of contract renewals, as well as higher retransmission consent fees and sports programming costs. Technical and product support expenses increased 6.2% primarily related to the development, delivery and support of our X1 platform, Cloud DVR technology and wireless gateways, and the continued growth in business services and home security and automation services. Advertising, marketing and promotion costs increased 7.2%, primarily due to increases in spending associated with attracting new residential and business services customers. Customer service expenses increased 3.5%, primarily due to increased support for improving the customer experience and increases in total labor costs. This quarter’s operating cash flow margin was 39.7% compared to 40.2% in the third quarter of 2015.

For the nine months ended September 30, 2016, Cable operating cash flow increased 5.4% to $14.9 billion compared to 2015, driven by higher revenue, partially offset by a 7.3% increase in operating expenses primarily related to a 9.4% increase in video programming costs, as well as higher technical and product support expenses, higher advertising, marketing and promotion costs, and higher customer service expenses. Year-to-date operating cash flow margin was 40.1% compared to 40.5% in 2015.

NBCUniversal

3rd Quarter

Year to Date

($ in millions)20152016

Reported
Growth

Pro Forma
Growth5

20152016

Reported
Growth

Pro Forma
Growth5

NBCUniversal Revenue
Cable Networks$2,412$2,94222.0%$7,221$7,96110.2%

Excluding Olympics

$2,412

$2,510

4.1%

$7,221

$7,529

4.3%

Broadcast Television1,9713,08756.6%6,0327,29921.0%

Excluding Olympics and Super Bowl

1,971

1,899

(3.6%)

5,656

6,111

8.0%

Filmed Entertainment1,9461,792(7.9%)5,6584,526(20.0%)
Theme Parks8961,44060.6%16.1%2,3203,60255.2%12.5%
Headquarters, Other and Eliminations(74)(83)NM(246)(246)NM
NBCUniversal Revenue$7,151$9,17828.3%22.5%$20,985$23,14210.3%5.8%

Excluding Olympics and Super Bowl

$7,151

$7,558

5.7%

0.8%

$20,609

$21,522

4.4%

0.1%

NBCUniversal Operating Cash Flow
Cable Networks$835$8937.0%$2,605$2,7937.2%
Broadcast Television150378NM5631,05687.6%
Filmed Entertainment376353(6.1%)1,091576(47.2%)
Theme Parks43470662.4%17.1%1,0121,55053.1%9.8%
Headquarters, Other and Eliminations(162)(184)NM(471)(518)NM
NBCUniversal Operating Cash Flow$1,633$2,14631.5%19.2%$4,800$5,45713.7%5.0%
NM=comparison not meaningful.

Revenue for NBCUniversal increased 28.3% to $9.2 billion in the third quarter of 2016 and Operating Cash Flow increased 31.5% to $2.1 billion. Pro Forma5 Revenue for NBCUniversal increased 22.5%, primarily driven by 2016 Rio Olympics revenue of $1.6 billion included in the Broadcast Television and Cable Networks segments. Pro Forma5 Operating Cash Flow increased 19.2%, reflecting increases at Broadcast Television, Theme Parks and Cable Networks, partially offset by a decline at Filmed Entertainment.

For the nine months ended September 30, 2016, NBCUniversal revenue increased 10.3% to $23.1 billion compared to 2015 and operating cash flow increased 13.7% to $5.5 billion. Pro forma5 revenue for NBCUniversal increased 5.8%. Pro forma5operating cash flow increased 5.0%, reflecting increases at Broadcast Television, Cable Networks and Theme Parks, partially offset by a decline at Filmed Entertainment.

Cable Networks

Cable Networks revenue increased 22.0% to $2.9 billion in the third quarter of 2016, reflecting higher distribution, advertising and content licensing and other revenue. Distribution revenue increased 27.3%, driven by the broadcast of the 2016 Rio Olympics, as well as contractual rate increases and contract renewals, partially offset by a decline in subscribers at our cable networks. Advertising revenue increased 15.9%, due to the broadcast of the 2016 Rio Olympics. Content licensing and other revenue increased 9.8%, due to the timing of content provided under licensing agreements. Excluding $432 million of revenue generated by the broadcast of the 2016 Rio Olympics, Cable Networks revenue increased 4.1% (see Table 7). Operating cash flow increased 7.0% to $893 million in the third quarter of 2016, reflecting higher revenue, partially offset by an increase in programming and production costs associated with the 2016 Rio Olympics, as well as increases in sports programming rights costs.

For the nine months ended September 30, 2016, revenue from the Cable Networks segment increased 10.2% to $8.0 billion compared to 2015, reflecting higher distribution, advertising and content licensing and other revenue. Excluding $432 million of revenue generated by the broadcast of the 2016 Rio Olympics in the third quarter of 2016, revenue increased 4.3% (see Table 7). Operating cash flow increased 7.2% to $2.8 billion compared to 2015, reflecting higher revenue, partially offset by an increase in programming and production costs.

Broadcast Television

Broadcast Television revenue increased 56.6% to $3.1 billion in the third quarter of 2016, reflecting higher advertising and distribution and other revenue, partially offset by a decline in content licensing revenue. Advertising revenue increased 92.4%, primarily driven by the broadcast of the 2016 Rio Olympics. Distribution and other revenue increased 77.5%, due to the broadcast of the 2016 Rio Olympics, as well as higher retransmission consent fees. Content licensing revenue decreased 32.0%, primarily due to the timing of content provided under licensing agreements. Excluding $1.2 billion of revenue associated with the broadcast of the 2016 Rio Olympics, Broadcast Television revenue decreased 3.6% (see Table 7). Operating cash flow increased by $228 million to $378 million in the third quarter of 2016, reflecting higher revenue, partially offset by increased programming and production costs associated with the broadcast of the 2016 Rio Olympics.

For the nine months ended September 30, 2016, revenue from the Broadcast Television segment increased 21.0% to $7.3 billion compared to 2015. Excluding $1.2 billion of revenue generated by the broadcast of the 2016 Rio Olympics in the third quarter of 2016, as well as $376 million of revenue generated by the broadcast of the NFL’s Super Bowl in the first quarter of 2015, revenue increased 8.0% (see Table 7). Operating cash flow increased 87.6% to $1.1 billion compared to 2015, reflecting higher revenue, partially offset by an increase in programming and production costs.

Filmed Entertainment

Filmed Entertainment revenue declined 7.9% to $1.8 billion in the third quarter of 2016, and included revenue attributable to DreamWorks from its acquisition date of August 22nd. The revenue decline reflects lower theatrical and home entertainment revenue, partially offset by higher content licensing and other revenue. Theatrical revenue declined 21.1%, primarily due to the strong performances of Jurassic World and Minions in last year’s third quarter, partially offset by the strong performance of The Secret Life of Pets in this year’s third quarter. Home entertainment revenue declined 29.6%, reflecting the success of several releases in the prior year period, including Furious 7 and Pitch Perfect 2. Content licensing revenue increased 19.8%, due to the timing of when content related to our 2015 film slate was made available under licensing agreements. Other revenue increased 25.8% driven by higher Fandango revenue. Operating cash flow decreased 6.1% to $353 million in the third quarter of 2016, reflecting lower revenue and severance costs of $50 million associated with the DreamWorks acquisition, partially offset by lower programming and production and advertising, marketing and promotion costs. The decrease in programming and production costs was primarily due to lower amortization of film production costs in the current year period due to our larger film slate in 2015.

For the nine months ended September 30, 2016, revenue from the Filmed Entertainment segment decreased 20.0% to $4.5 billion compared to 2015, reflecting lower theatrical and home entertainment revenue, partially offset by higher content licensing and other revenue. Operating cash flow decreased 47.2% to $576 million compared to 2015, reflecting lower revenue, partially offset by lower programming and production costs.

Theme Parks

Theme Parks revenue increased 60.6% to $1.4 billion in the third quarter of 2016. Pro forma5 revenue increased 16.1%, reflecting higher attendance and higher per capita spending at the parks, driven by the successful opening of Hollywood’s The Wizarding World of Harry Potter™ attraction, as well as the positive impact of a stronger Japanese yen. Operating cash flow increased 62.4% to $706 million in the third quarter of 2016. Pro forma5 operating cash flow increased 17.1%, reflecting higher revenue, partially offset by an increase in operating expenses, including costs to support new attractions.

For the nine months ended September 30, 2016, revenue from the Theme Parks segment increased 55.2% to $3.6 billion compared to 2015. Pro forma5 revenue increased 12.5%, reflecting higher attendance and per capita spending at the parks. Operating cash flow increased 53.1% to $1.6 billion compared to 2015. Pro forma5 operating cash flow increased 9.8%, reflecting higher revenue, partially offset by an increase in operating expenses, including costs to support new attractions.

Headquarters, Other and Eliminations

NBCUniversal Headquarters, Other and Eliminations include overhead and eliminations among the NBCUniversal businesses. For the quarter ended September 30, 2016, NBCUniversal Headquarters, Other and Eliminations operating cash flow loss was $184 million compared to a loss of $162 million in the third quarter of 2015.

For the nine months ended September 30, 2016, NBCUniversal Headquarters, Other and Eliminations operating cash flow loss was $518 million compared to a loss of $471 million in 2015.

Corporate, Other and Eliminations

Corporate, Other and Eliminations primarily include corporate operations, Comcast Spectacor and eliminations among Comcast’s businesses. For the quarter ended September 30, 2016, Corporate, Other and Eliminations revenue was ($416) million compared to ($233) million in 2015. The operating cash flow loss was $297 million compared to a loss of $175 million in the third quarter of 2015, reflecting an increase in eliminations associated with the 2016 Rio Olympics.

For the nine months ended September 30, 2016, Corporate, Other and Eliminations revenue was ($969) million compared to ($652) million in 2015. The operating cash flow loss was $723 million compared to a loss of $555 million in the first nine months of 2015, reflecting an increase in eliminations associated with the 2016 Rio Olympics and $178 million of transaction-related costs in 2015.

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