NBCUniversal Quarterly Earnings Rise, Driven by Olympics, Super Bowl, Theme Parks

Steve Burke CES - H 2016
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Steve Burke CES - H 2016

Top execs at NBCU-parent Comcast defended their now-official $31 billion bid for U.K.-based pay TV giant Sky during an analyst call.

Cable giant Comcast on Wednesday reported its first-quarter financials, including a higher profit at entertainment arm NBCUniversal, as it made a £22 billion (nearly $31 billion) takeover offer for British pay TV giant Sky official.

Helping to kick off earnings season for big Hollywood players, NBCUniversal, led by CEO Steve Burke, posted adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), the profitability metric the company uses, of $2.29 billion, compared with $2.02 billion in the year-ago period.

Top execs at NBCUniversal parent Comcast, led by chairman and CEO Brian Roberts, on Wednesday fielded a host of questions during an analyst call about the U.S. cable giant making its takeover bid for European pay TV giant Sky official and possibly setting off a potential bidding war with 21st Century Fox.

Roberts told analysts Comcast was taking "the next logical step" with a formal cash offer for Sky. He also countered criticism that his company is taking a run at a British pay TV operator in Sky that will land the U.S. cable giant with a European satellite distributor that faces the same challenges that U.S. satellite TV services have been dealing with when competing against Netflix and YouTube.

Roberts insisted the U.S. and European markets are different before adding Sky has a programming business, a content creation business, an over-the-top business and a broadband business in the U.K. "We're impressed with the continuing momentum at the business and the ability to have a content and distribution company that looks very similar to Comcast/NBCUniversal," he argued.

Roberts also told analysts the Sky deal did not indicate Comcast was pursuing scale and international expansion for their own sake. "I don't think we have to do this [deal]. I don't think international is broadly a strategy. It's the unique assets in Sky's case that fits into the mix of businesses we already have," he argued.

And if Comcast is still mulling a new bid for Rupert Murdoch's 21st Century assets, CFO Michael Cavanaugh told analysts on the Wednesday call that the entertainment giant wasn't considering any equity finance deal anytime soon. "I don't see us using stock at these levels, period," he said of using Comcast shares to do any takeover deals.

Comcast in February declined to talk about a renewed bid against the Walt Disney Company for Fox assets, as it rolled out a surprise $31 billion bid for British broadcaster Sky that was made official on Wednesday.

Amid persistent Wall Street chatter over a potential new Comcast takeover offer for parts of Fox, Cavanaugh chose to talk about M&A opportunities overall, while telling analysts it was "unlikely we would use Comcast shares as a median of exchange for a transaction."

On its latest financial results, Comcast recorded EBITDA improvements in all key divisions except for film, with the TV units benefiting from the NBCUniversal networks airing the Winter Olympics and the Super Bowl.

"Comcast NBCUniversal is off to a great start in 2018 with over 10 percent revenue growth in the first quarter," said Roberts. "NBCUniversal delivered double-digit EBITDA growth, fueled by impressive results at our theme parks, as well as our TV businesses' successful broadcasts of the NFL's Super Bowl LII and the 2018 PyeongChang Olympics." He added, "The Olympics were an incredible event that showcased our capabilities and collaboration throughout the company."

Comcast's film unit saw its quarterly profit decline amid a lower number of releases than in the year-ago period. Quarterly film revenue decreased 16.3 percent to $1.6 billion, "primarily reflecting lower theatrical revenue," the company said. "Theatrical revenue decreased 35.0 percent due to the higher number of films in last year's first quarter, including Fifty Shades Darker, Sing, Split and Get Out, partially offset by the performances of Fifty Shades Freed, Pacific Rim Uprising, Darkest Hour and Pitch Perfect 3 in this year's first quarter."

Adjusted EBITDA for the film unit fell 45.2 percent to $203 million in the first quarter, "reflecting the decline in revenue, partially offset by lower programming and production costs."

Broadcast TV unit revenue jumped 58.3 percent to $3.5 billion in the first quarter, "reflecting higher advertising and distribution and other revenue," driven by the Olympics and the Super Bowl. Distribution and other revenue increased 42.9 percent with ad revenue up 84.9 percent. Adjusted EBITDA in the broadcast TV unit rose 57.5 percent to $507 million, reflecting the higher revenue, "partially offset by increased programming and production costs primarily associated with" the Olympics and the Super Bowl.

Cable networks revenue increased 21.0 percent to $3.2 billion amid higher distribution and advertising revenue, driven by the Olympics.

Theme park revenue increased 14.5 percent in the quarter to $1.3 billion "due to higher per capita spending, which benefited from the timing of spring holidays, as well as the continued success of Volcano Bay in Orlando, Minion Park in Japan and The Wizarding World of Harry Potter in Hollywood." Adjusted EBITDA rose 24.6 percent to $495 million.

Comcast's cable systems unit lost 96,000 pay TV subscribers in the first quarter, the company also said Wednesday.

April 25, 7:00 a.m. Updated with comments by top Comcast execs during an analyst call.