NBCUniversal Earnings Rise Driven by Film Unit, Including 'Fate of the Furious' Box Office

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

The entertainment conglomerate, led by CEO Steve Burke, and parent company Comcast post their second-quarter results.

Cable giant Comcast on Thursday reported its second-quarter financials, including a higher profit at its entertainment arm NBCUniversal, driven by its film and theme parks units.

Among the quarter's strong box-office performers was The Fate of the Furious.

Kicking 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 $2.07 billion, up 22.6 percent from $1.69 billion in the year-ago period.

The company recorded EBITDA improvements in all divisions, with particularly strong gains in its film and theme parks units, which grew 407 percent and 17.3 percent, respectively. NBCUniversal's quarterly revenue rose 17.3 percent to $8.3 billion. Wells Fargo analyst Marci Ryvicker had predicted NBCUniversal cash flow to increase 23.8 percent on a revenue gain of 11.4 percent.

Comcast said it lost 34,000 pay TV subscribers in the second quarter, which is traditionally the weakest of the year for pay TV operators. Ryvicker had forecast a 30,000 decline in the period. In the year-ago quarter, Comcast had lost 4,000.

Comcast reported earnings of 52 cents per share on revenue of $21.2 billion, exceeding Wall Street estimates. 

The film unit's quarterly results benefited from higher theatrical and home entertainment revenue, as well as content licensing and other revenue. Theatrical revenue increased by $540 million to $837 million, "reflecting the strong performance of The Fate of the Furious." Home entertainment revenue jumped 42.6 percent, "driven by strong sales of recent titles, including Fifty Shades Darker and Sing." Content licensing and other revenue rose primarily due to the inclusion of DreamWorks Animation after the studio's acquisition. Adjusted EBITDA increased by $229 million to $285 million in the second quarter of 2017, reflecting higher revenue, partially offset by higher programming and production costs.

"A focus on strong brands has reduced film volatility while driving strength in consumer products," Macquarie Capital analyst Amy Yong said in a recent report. "However, not all films are winners, given reports that The Mummy could stand to lose about $95 million despite a strong release." She forecast second-quarter film operating cash flow of $254 million "driven by The Fate of the Furious."

Broadcast TV unit adjusted EBITDA rose 5.5 percent to $416 million amid higher distribution, other and content licensing revenue, partially offset by a 1.2 percent decline in advertising revenue due to ratings declines and higher programming and production costs and advertising and promotion expenses. Distribution revenue was boosted by higher retransmission consent fees.

Cable networks unit adjusted EBITDA increased 11.7 percent to $1.1 billion thanks to higher distribution revenue, partially offset by a 0.9 percent drop in advertising revenue due to lower ratings and "a modest increase in operating expenses." The company said distribution revenue rose, driven by contractual rate increases and contract renewals, "partially offset by a decline in subscribers at our cable networks."

Said Comcast chairman and CEO Brian Roberts: "NBCUniversal continued to deliver outstanding performance. ... Driving these tremendous results were the box office success of Fate of the Furious, continued increases in affiliate and retransmission revenues at our TV businesses, and impressive growth at our theme parks."

On an earnings call, he highlighted strong business momentum across the company, which he said led to the best first-half EBITDA growth in six years.