NBCUniversal Quarterly Earnings Rise; 'Minions' Helps Full-Year Film Profit to Record

NBCUniversal CEO Steve Burke
NBC

Theme parks unit profit also set a new record, while cable giant and NBCU owner Comcast posted its biggest pay TV subscriber gain in years.

Cable giant Comcast on Wednesday reported improved fourth-quarter and full-year financials for its entertainment arm NBCUniversal.

The entertainment company, led by CEO Steve Burke, reported higher operating cash flow, the profitability metric that the company uses, and revenue than in the year-ago period, driven by growth in its film and theme park units. Both divisions also posted record full-year operating cash flow, as expected.

In moves that Comcast chairman and CEO Brian Roberts said were "underscoring our confidence in our company," Comcast increased its dividend by 10 percent to $1.10 per share on an annualized basis and boosted its stock repurchase authorization to $10 billion, including plans to buy back $5 billion of its stock this year.

NBCUniversal's revenue for the fourth quarter rose 13 percent to $7.5 billion, while its operating cash flow increased 8.7 percent to $1.6 billion. The figures include financials for Universal Studios Japan since the company acquired a 51 percent stake in it during the quarter. Excluding it, revenue grew 10.5 percent and operating cash flow rose 4.7 percent. Full-year revenue increased 11.9 percent to $28.5 billion, with operating cash flow rising 14.8 percent to $6.4 billion. The latter was driven by growth of 73.5 percent in film and 33.5 percent in theme parks, as well as a broadcast TV improvement of 6.3 percent, while cable networks posted a decline of 2.5 percent.

The film unit's theatrical releases in the fourth quarter included Sisters, Steve Jobs and Crimson Peak, leading to lower theatrical results, but Wunderlich Securities analyst Matthew Harrigan said the overall unit results were boosted by the "flow-through of summer releases into higher margin windows." Quarterly film revenue rose 25.8 percent to $1.6 billion driven by a 74.9 percent increase in home entertainment revenue thanks to the strong performances of Minions and Jurassic World, as well as a 22.7 percent increase in content licensing revenue. That was partially offset by a 37.5 percent drop in theatrical revenue.

Quarterly film operating cash flow ended up 84.6 percent at $143 million as the higher revenue was partially offset by a 22.1 percent increase in operating costs, which the company said was "primarily driven by an increase in the amortization of film costs."

For the full year 2015, the company's film division confirmed a record profit, driven by hits Minions, which Universal has said is its most-profitable release ever, Furious 7 and Jurassic World. All three pics topped $1 billion worldwide. Full-year film revenue grew 45.5 percent to $7.3 billion, while operating cash flow jumped to more than $1.2 billion.

While 2016 will be a more challenging year for the film unit due to the previous record year, NBCUniversal has elevated its film studio performance and is in good shape to continue its financial momentum despite a smaller release slate, CFO Michael Cavanagh told the UBS Global Media and Communications Conference in New York in December. He said the studio has a "strategic" slate with big franchises and animation titles in 2016, "but not as big a slate" as 2015. “We have lifted the cruising altitude of the film business and will continue to drive that," he said.

NBCUniversal's cable networks and broadcast units saw mixed trends in the latest quarter. Cable networks revenue for the quarter rose 3.4 percent to $2.4 billion, but operating cash flow declined 1.9 percent to $894 million. The results reflected a 6.8 percent increase in distribution revenue, offset by a 0.3 percent decline in advertising revenue amid lower ratings and higher in sports programming costs, "reflecting the impact of NASCAR and higher programming costs for the English Premier League."

Fourth-quarter broadcast TV revenue rose 7.0 percent thanks to a 7.0 percent increase in advertising revenue, primarily driven by higher rates, a 34.9 percent gain in content licensing revenue and higher retransmission consent fees. Operating cash flow dropped 5.6 percent to $217 million though as the higher revenue was more than offset by higher operating costs and expenses.

The cable networks division continued to be the biggest contributor in terms of operating cash flow for all of 2015 with $3.50 billion, followed by the $1.46 billion for theme parks, $1.23 billion for film and $780 million for broadcast TV.

Meanwhile, cable giant and NBCU owner Comcast posted improved pay TV subscriber momentum for the fourth quarter and the full year. In the latest quarter, it added 89,000 video subs, its best result for any quarter in eight years. For all of 2015, Comcast lost 36,000 video subs, compared with 194,000 losses in 2014. That marked the company's best result in nine years. Comcast ended 2015 with 22.35 million video subscribers.

Management has said it looks to get to video sub growth for the full year in the future. Fellow big cable company Time Warner Cable reached full-year growth for 2015, and Charter has also said it expects to do so. Roberts on Wednesday cited customer service improvements and lower user churn as key boosts to subscriber momentum along with the rollout of the X1 Internet-connected set-top box and guide, design to boost customers’ time spent with Comcast. Cavanagh on Wednesday also cited increased reach in Hispanic households thanks to targeted services and offers as one contributor to growth.

Comcast's fourth-quarter earnings came in slightly shy of Wall Street estimates, while revenue exceeded expectations. Revenue increased 8.5 percent to $19.2 billion, operating cash flow rose 6.7 percent to $6.3 billion and operating income increased 5.7 percent to $4.0 billion. Earnings of $1.97 billion, or 79 cents per share, were up from $1.93 billion, or 74 cents, in the year-ago period.

"I am exceptionally proud of our results this year, which were driven by strong performances in each of our core businesses," said Roberts. "NBCUniversal had a remarkable year, with record-breaking results at both theme parks and film, and continued success at NBC, which was No. 1 in primetime for the second consecutive season. As we enter 2016, the momentum we see across our portfolio is truly exciting."

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