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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and our 2021 Annual Report on Form 10-K.
Overview
We are a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal and Sky. We present our operations in five reportable business segments (1) Comcast Cable in one reportable business segment, referred to as Cable Communications; (2) NBCUniversal in three reportable business segments: Media, Studios and Theme Parks (collectively, the “NBCUniversal segments”); and (3) Sky in one reportable business segment.
COVID-19 has impacted our businesses in a number of ways, affecting the comparability of periods included in this report. The most significant continuing impacts have resulted from temporary restrictions and closures at our international theme parks. The continuing effects of COVID-19, in addition to worsening U.S., European and global economic conditions and consumer sentiment, may adversely impact demand for our products and services, including advertising, and our results of operations over the near to medium term. In addition, changes in foreign currency exchange rates have impacted our results of operations in our Sky and Theme Parks segments as a result of the strengthening of the U.S. dollar.
Consolidated Operating Results
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||
| (in millions, except per share data) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||
| Revenue | $ | 29,849 | $ | 30,298 | (1.5)% | $ | 90,874 | $ | 86,049 | 5.6 | % | ||||||||||||||||||||||||
| Costs and Expenses: | |||||||||||||||||||||||||||||||||||
| Programming and production | 8,949 | 10,395 | (13.9) | 28,406 | 28,570 | (0.6) | |||||||||||||||||||||||||||||
| Other operating and administrative | 9,344 | 8,981 | 4.0 | 27,701 | 25,799 | 7.4 | |||||||||||||||||||||||||||||
| Advertising, marketing and promotion | 2,066 | 1,995 | 3.5 | 6,324 | 5,462 | 15.8 | |||||||||||||||||||||||||||||
| Depreciation | 2,150 | 2,177 | (1.2) | 6,525 | 6,407 | 1.8 | |||||||||||||||||||||||||||||
| Amortization | 1,183 | 1,301 | (9.1) | 3,824 | 3,815 | 0.2 | |||||||||||||||||||||||||||||
| Goodwill and long-lived asset impairments | 8,583 | — | NM | 8,583 | — | NM | |||||||||||||||||||||||||||||
| Total costs and expenses | 32,274 | 24,848 | 29.9 | 81,363 | 70,053 | 16.1 | |||||||||||||||||||||||||||||
| Operating income (loss) | (2,425) | 5,450 | NM | 9,511 | 15,996 | (40.5) | |||||||||||||||||||||||||||||
| Interest expense | (960) | (1,050) | (8.5) | (2,922) | (3,161) | (7.6) | |||||||||||||||||||||||||||||
| Investment and other income (loss), net | (266) | 766 | NM | (975) | 2,374 | NM | |||||||||||||||||||||||||||||
| Income (loss) before income taxes | (3,652) | 5,166 | NM | 5,614 | 15,208 | (63.1) | |||||||||||||||||||||||||||||
| Income tax expense | (1,014) | (1,235) | (17.9) | (3,562) | (4,354) | (18.2) | |||||||||||||||||||||||||||||
| Net income (loss) | (4,665) | 3,931 | NM | 2,052 | 10,854 | (81.1) | |||||||||||||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests | (68) | (104) | (34.7) | (295) | (249) | 18.8 | |||||||||||||||||||||||||||||
| Net income (loss) attributable to Comcast Corporation | $ | (4,598) | $ | 4,035 | NM | $ | 2,347 | $ | 11,102 | (78.9) | % | ||||||||||||||||||||||||
| Basic earnings (loss) per common share attributable to Comcast Corporation shareholders | $ | (1.05) | $ | 0.88 | NM | $ | 0.53 | $ | 2.42 | (78.1) | % | ||||||||||||||||||||||||
| Diluted earnings (loss) per common share attributable to Comcast Corporation shareholders | $ | (1.05) | $ | 0.86 | NM | $ | 0.52 | $ | 2.38 | (78.2) | % | ||||||||||||||||||||||||
| Adjusted EBITDA(a) | $ | 9,482 | $ | 8,957 | 5.9 | % | $ | 28,459 | $ | 26,297 | 8.2 | % |
Percentage changes that are considered not meaningful are denoted with NM.
(a)Adjusted EBITDA is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section on page 27 for additional information, including our definition and our use of Adjusted EBITDA, and for a reconciliation from net income attributable to Comcast Corporation to Adjusted EBITDA.
Consolidated Revenue
Consolidated revenue decreased for the three months ended September 30, 2022, driven by Media and Sky, partially offset by increases in revenue in Studios, Theme Parks and Cable Communications. Consolidated revenue increased for the nine months ended September 30, 2022, driven by Theme Parks, Studios, Cable Communications and Media, partially offset by decreases in revenue in Sky.
Revenue for our segments and other businesses is discussed separately below under the heading “Segment Operating Results.”
Consolidated Costs and Expenses
Consolidated operating costs and expenses, which is comprised of total costs and expenses excluding depreciation expense, amortization expense and goodwill and long-lived assets impairments, decreased for the three months ended September 30, 2022, driven by Media and Sky, partially offset by increases in operating costs and expenses in Studios, Theme Parks and Cable Communications. Consolidated operating costs and expenses increased for the nine months ended September 30, 2022, driven by Studios, Media, Theme Parks and Cable Communications, partially offset by decreases in operating costs and expenses in Sky.
Operating costs and expenses for our segments and our corporate operations, business development initiatives and other businesses are discussed separately below under the heading “Segment Operating Results.”
Consolidated Depreciation and Amortization Expense
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||
| Cable Communications | $ | 1,945 | $ | 1,965 | (1.0) | % | $ | 5,850 | $ | 5,845 | 0.1 | % | |||||||||||||||||||||||
| NBCUniversal | 596 | 591 | 0.8 | 1,909 | 1,759 | 8.5 | |||||||||||||||||||||||||||||
| Sky | 722 | 884 | (18.3) | 2,402 | 2,524 | (4.8) | |||||||||||||||||||||||||||||
| Corporate and Other | 70 | 38 | 85.4 | 188 | 95 | 97.8 | |||||||||||||||||||||||||||||
| Comcast Consolidated | $ | 3,333 | $ | 3,477 | (4.2) | % | $ | 10,349 | $ | 10,222 | 1.2 | % |
Depreciation and amortization expense decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to the impact of foreign currency at Sky. Depreciation and amortization expense increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to increased depreciation at NBCUniversal driven by the opening of Universal Beijing Resort, increased amortization of software at Sky and increased depreciation and amortization related to other business initiatives, partially offset by the impact of foreign currency at Sky.
Amortization expense from acquisition-related intangible assets totaled $517 million and $1.7 billion for the three and nine months ended September 30, 2022, respectively. Amortization expense from acquisition-related intangible assets totaled $603 million and $1.8 billion for the three and nine months ended September 30, 2021, respectively. Amounts primarily relate to customer relationship intangible assets recorded in connection with the Sky transaction in the fourth quarter of 2018 and the NBCUniversal transaction in 2011.
Consolidated Goodwill and Long-lived Asset Impairments
Goodwill and long-lived asset impairments included charges related to our Sky segment totaling $8.6 billion for the three and nine months ended September 30, 2022 recognized in connection with our annual impairment assessment. The impairments primarily reflected an increased discount rate and reduced estimated future cash flows as a result of macroeconomic conditions in Sky’s territories. See “Critical Accounting Judgments and Estimates” and Note 8 for further discussion.
Consolidated Interest Expense
Interest expense decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to a decrease in average debt outstanding in the current year period. Interest expense decreased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to a decrease in average debt outstanding in the current year period and a $78 million charge recorded in the prior year period related to the early redemption of senior notes due 2024.
Consolidated Investment and Other Income (Loss), Net
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||
| Equity in net income (losses) of investees, net | $ | (242) | $ | 602 | $ | (523) | $ | 1,696 | |||||||||||||||||||||||||||
| Realized and unrealized gains (losses) on equity securities, net | (2) | 106 | (207) | 532 | |||||||||||||||||||||||||||||||
| Other income (loss), net | (21) | 59 | (245) | 146 | |||||||||||||||||||||||||||||||
| Total investment and other income (loss), net | $ | (266) | $ | 766 | $ | (975) | $ | 2,374 |
The change in investment and other income (loss), net for the three and nine months ended September 30, 2022 compared to the same periods in 2021 was due to equity in net income (losses) of investees, net primarily related to our investment in Atairos Group, Inc., realized and unrealized gains (losses) on equity securities, net and other income (loss), net. The income (losses) at Atairos were driven by fair value adjustments on its underlying investments with income (loss) of $(97) million and $(473) million for the three and nine months ended September 30, 2022, respectively, and $555 million and $1.5 billion for the three and nine months ended September 30, 2021, respectively. The changes in realized and unrealized gains (losses) on equity securities, net for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily resulted from fair value adjustments on marketable and nonmarketable equity securities. The change in other income (loss), net for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily resulted from net losses on foreign exchange remeasurement in the current year period, losses on insurance contracts and an impairment of an equity method investment.
Consolidated Income Tax Expense
Income tax expense for the three and nine months ended September 30, 2022 and 2021 reflects an effective income tax rate that differs from the federal statutory rate due to state and foreign income taxes and adjustments associated with uncertain tax positions. In addition, income tax expense was affected by changes in our net deferred tax liabilities as a result of the enactment of tax law changes, including $286 million of benefit for the three and nine months ended September 30, 2022 related to state taxes and $498 million of expense for the nine months ended September 30, 2021 in the United Kingdom (see Note 10). Our effective income tax rate for the three and nine months ended September 30, 2022 was also impacted by the goodwill impairment, which was primarily not deductible for tax purposes (see Note 10).
Consolidated Net Income (Loss) Attributable to Noncontrolling Interests
The change in net income (loss) attributable to noncontrolling interests for the three months ended September 30, 2022 compared to the same period in 2021 was primarily due to decreased losses at Universal Beijing Resort due to operations in the current year period, partially offset by operations of the streaming platform joint venture with Charter Communications in the current year period. The change in net income (loss) attributable to noncontrolling interests for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to increased losses at Universal Beijing Resort due to operations in the current year period compared to pre-opening costs in the prior year period in advance of the park’s opening in September 2021 and operations of the streaming platform joint venture with Charter Communications in the current year period.
Segment Operating Results
Our segment operating results are presented based on how we assess operating performance and internally report financial information. We use Adjusted EBITDA as the measure of profit or loss for our operating segments.
See Note 2 for our definition of Adjusted EBITDA and a reconciliation from the aggregate amount of Adjusted EBITDA for our reportable business segments to consolidated income before income taxes.
Cable Communications Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Residential: | ||||||||||||||||||||||||||||||||||||||
| Broadband | $ | 6,135 | $ | 5,801 | 5.7 | % | $ | 18,292 | $ | 17,118 | 6.9 | % | ||||||||||||||||||||||||||
| Video | 5,255 | 5,499 | (4.4) | 16,214 | 16,676 | (2.8) | ||||||||||||||||||||||||||||||||
| Voice | 745 | 851 | (12.5) | 2,293 | 2,592 | (11.5) | ||||||||||||||||||||||||||||||||
| Wireless | 789 | 603 | 30.8 | 2,188 | 1,672 | 30.9 | ||||||||||||||||||||||||||||||||
| Business services | 2,436 | 2,227 | 9.4 | 7,256 | 6,597 | 10.0 | ||||||||||||||||||||||||||||||||
| Advertising | 756 | 705 | 7.2 | 2,174 | 2,002 | 8.6 | ||||||||||||||||||||||||||||||||
| Other | 423 | 427 | (0.9) | 1,263 | 1,265 | (0.2) | ||||||||||||||||||||||||||||||||
| Total revenue | 16,539 | 16,115 | 2.6 | 49,680 | 47,922 | 3.7 | ||||||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||
| Programming | 3,446 | 3,546 | (2.8) | 10,611 | 10,809 | (1.8) | ||||||||||||||||||||||||||||||||
| Technical and product support | 2,284 | 2,169 | 5.3 | 6,749 | 6,265 | 7.7 | ||||||||||||||||||||||||||||||||
| Customer service | 574 | 581 | (1.1) | 1,727 | 1,765 | (2.2) | ||||||||||||||||||||||||||||||||
| Advertising, marketing and promotion | 943 | 1,012 | (6.8) | 2,926 | 2,887 | 1.3 | ||||||||||||||||||||||||||||||||
| Franchise and other regulatory fees | 408 | 432 | (5.7) | 1,237 | 1,382 | (10.5) | ||||||||||||||||||||||||||||||||
| Other | 1,430 | 1,305 | 9.6 | 4,258 | 3,841 | 10.9 | ||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 9,086 | 9,045 | 0.5 | 27,508 | 26,949 | 2.1 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 7,452 | $ | 7,069 | 5.4 | % | $ | 22,172 | $ | 20,972 | 5.7 | % |
Customer Metrics
Our customer relationships net additions were lower in the three and nine months ended September 30, 2022 as compared to prior periods primarily due to decreased growth in our broadband net additions and also reflected accelerated net losses in our video and voice customers. In a reversal from pandemic trends, our broadband net addition growth has slowed primarily reflecting continued low household move levels and an increasingly competitive environment, which is continuing in the fourth quarter of 2022.
| Net Additions / (Losses) | ||||||||||||||||||||||||||
| September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Customer relationships | ||||||||||||||||||||||||||
| Residential customer relationships | 31,849 | 31,576 | (26) | 237 | 121 | 884 | ||||||||||||||||||||
| Business services customer relationships | 2,514 | 2,473 | 5 | 18 | 25 | 46 | ||||||||||||||||||||
| Total customer relationships | 34,363 | 34,048 | (21) | 255 | 145 | 930 | ||||||||||||||||||||
| Residential customer relationships mix | ||||||||||||||||||||||||||
| One product customers | 15,463 | 13,959 | 340 | 481 | 1,133 | 1,551 | ||||||||||||||||||||
| Two product customers | 8,204 | 8,473 | (77) | (89) | (202) | (261) | ||||||||||||||||||||
| Three or more product customers | 8,182 | 9,144 | (289) | (156) | (810) | (406) | ||||||||||||||||||||
| Broadband | ||||||||||||||||||||||||||
| Residential customers | 29,835 | 29,389 | 10 | 281 | 253 | 1,063 | ||||||||||||||||||||
| Business services customers | 2,342 | 2,300 | 5 | 19 | 24 | 52 | ||||||||||||||||||||
| Total broadband customers | 32,177 | 31,688 | 14 | 300 | 277 | 1,115 | ||||||||||||||||||||
| Video | ||||||||||||||||||||||||||
| Residential customers | 15,973 | 17,844 | (540) | (382) | (1,522) | (1,149) | ||||||||||||||||||||
| Business services customers | 609 | 705 | (21) | (26) | (72) | (147) | ||||||||||||||||||||
| Total video customers | 16,582 | 18,549 | (561) | (408) | (1,594) | (1,297) | ||||||||||||||||||||
| Voice | ||||||||||||||||||||||||||
| Residential customers | 8,190 | 9,245 | (307) | (167) | (872) | (400) | ||||||||||||||||||||
| Business services customers | 1,380 | 1,384 | (9) | 9 | (11) | 28 | ||||||||||||||||||||
| Total voice customers | 9,570 | 10,630 | (316) | (158) | (884) | (372) | ||||||||||||||||||||
| Wireless | ||||||||||||||||||||||||||
| Wireless lines | 4,948 | 3,668 | 333 | 285 | 968 | 842 |
Customer metrics are presented based on actual amounts. Customer relationships represent the number of residential and business customers that subscribe to at least one of our services. One product, two product, and three or more product customers represent residential customers that subscribe to one, two, or three or more of our services, respectively. For multiple dwelling units (“MDUs”), including buildings located on college campuses, whose residents have the ability to receive additional services, such as additional programming choices or our high-definition video (“HD”) or digital video recorder (“DVR”) services, we count and report customers based on the number of potential billable relationships within each MDU. For MDUs whose residents are not able to receive additional services, the MDU is counted as a single customer. Residential broadband and video customer metrics include certain customers that have prepaid for services. Business customers are generally counted based on the number of locations receiving services within our distribution system, with certain offerings such as Ethernet network services counted as individual customer relationships. Wireless lines represent the number of activated, eligible wireless devices on customers’ accounts. Individual customer relationships may have multiple wireless lines. Customer metrics in 2021 did not include customers in certain pandemic-related programs through which portions of our customers temporarily received our services for free. These programs ended in December 2021, resulting in a one-time benefit to net additions in the three months ended March 31, 2022.
| Three Months Ended September 30, | Increase/(Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||||||||||||||||||||
| 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||
| Average monthly total revenue per customer relationship | $ | 160.38 | $ | 158.36 | 1.3 | % | $ | 160.98 | $ | 158.55 | 1.5 | % | ||||||||||||||||||||
| Average monthly Adjusted EBITDA per customer relationship | $ | 72.27 | $ | 69.47 | 4.0 | % | $ | 71.84 | $ | 69.39 | 3.5 | % |
Average monthly total revenue per customer relationship is impacted by rate adjustments and changes in the types and levels of services received by our residential and business services customers, as well as changes in advertising revenue. While revenue from our residential broadband, video, voice and wireless services is also impacted by changes in the allocation of revenue among services sold in a bundle, the allocation does not impact average monthly total revenue per customer relationship. Each of our services has a different contribution to operating margin. We use average monthly Adjusted EBITDA per customer relationship to evaluate the profitability of our customer base across our service offerings. We believe both metrics are useful to understand the trends in our business, and average monthly Adjusted EBITDA per customer relationship is useful particularly as we continue to focus on growing our higher-margin businesses.
Cable Communications Segment – Revenue
Broadband
Revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to increases in average rates and increases in the number of residential broadband customers.
Video
Revenue decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to declines in the number of residential video customers, partially offset by increases in average rates. We expect that the number of residential video customers will continue to decline, negatively impacting video revenue as a result of the competitive environment and shifting video consumption patterns.
Voice
Revenue decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to declines in the number of residential voice customers. We expect that the number of residential voice customers and voice revenue will continue to decline.
Wireless
Revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to increases in the number of customer lines and device sales.
Business Services
Revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to increases in average rates and customer relationships compared to the prior year periods and due to the acquisition of Masergy in October 2021.
Advertising
Revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to increases in political advertising and revenue from our advanced advertising businesses, partially offset by advertising revenue at our Xumo streaming service, which is a part of our streaming platform joint venture with Charter Communications, having been reported in Corporate and Other since June 2022, and by lower local and national advertising revenue.
Cable Communications Segment – Operating Costs and Expenses
Programming expenses decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to declines in the number of video subscribers, partially offset by contractual rate increases.
Technical and product support expenses increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to increases in costs associated with our wireless phone service resulting from increases in device sales and the number of customers receiving the service, and the acquisition of Masergy.
Customer service expenses decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to lower labor costs.
Advertising, marketing and promotion expenses decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to higher advertising expenses associated with the Tokyo Olympics in the prior year period. Advertising, marketing and promotion expenses increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to increased spending associated with attracting new customers and promoting our service offerings.
Franchise and other regulatory fees decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to a decrease in the revenue to which the fees apply. The nine months ended September 30, 2022 was also impacted by decreases in the related rates of these fees.
Other operating costs and expenses increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to lower levels of bad debt expense in the prior year periods.
Cable Communications Segment – Operating Margin
Our operating margin is Adjusted EBITDA as a percentage of revenue. We believe this metric is useful particularly as we continue to focus on growing our higher-margin businesses and improving overall operating cost management.
Our operating margin for the three and nine months ended September 30, 2022 was 45.1% and 44.6%, respectively. Our operating margin for the three and nine months ended September 30, 2021 was 43.9% and 43.8%, respectively.
NBCUniversal Segments Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Media | $ | 5,230 | $ | 6,770 | (22.7) | % | $ | 17,427 | $ | 16,955 | 2.8 | % | ||||||||||||||||||||||||||
| Studios | 3,163 | 2,407 | 31.4 | 8,885 | 7,027 | 26.4 | ||||||||||||||||||||||||||||||||
| Theme Parks | 2,064 | 1,449 | 42.4 | 5,428 | 3,163 | 71.6 | ||||||||||||||||||||||||||||||||
| Headquarters and Other | 22 | 28 | (22.1) | 46 | 65 | (30.1) | ||||||||||||||||||||||||||||||||
| Eliminations | (909) | (654) | (38.9) | (2,474) | (2,230) | (10.9) | ||||||||||||||||||||||||||||||||
| Total revenue | $ | 9,570 | $ | 10,001 | (4.3) | % | $ | 29,311 | $ | 24,981 | 17.3 | % | ||||||||||||||||||||||||||
| Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||
| Media | $ | 583 | $ | 997 | (41.5) | % | $ | 3,080 | $ | 3,847 | (20.0) | % | ||||||||||||||||||||||||||
| Studios | 537 | 179 | 199.6 | 783 | 833 | (6.0) | ||||||||||||||||||||||||||||||||
| Theme Parks | 819 | 434 | 88.6 | 1,902 | 593 | NM | ||||||||||||||||||||||||||||||||
| Headquarters and Other | (199) | (248) | 19.8 | (528) | (643) | 18.0 | ||||||||||||||||||||||||||||||||
| Eliminations | (59) | (12) | NM | (98) | (238) | 58.6 | ||||||||||||||||||||||||||||||||
| Total Adjusted EBITDA | $ | 1,681 | $ | 1,349 | 24.6 | % | $ | 5,138 | $ | 4,392 | 17.0 | % |
Percentage changes that are considered not meaningful are denoted with NM.
Media Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Advertising | $ | 2,111 | $ | 3,255 | (35.1) | % | $ | 7,603 | $ | 7,537 | 0.9 | % | ||||||||||||||||||||||||||
| Distribution | 2,578 | 2,987 | (13.7) | 8,270 | 7,934 | 4.2 | ||||||||||||||||||||||||||||||||
| Other | 541 | 528 | 2.4 | 1,554 | 1,483 | 4.8 | ||||||||||||||||||||||||||||||||
| Total revenue | 5,230 | 6,770 | (22.7) | 17,427 | 16,955 | 2.8 | ||||||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||
| Programming and production | 3,240 | 4,475 | (27.6) | 10,322 | 9,676 | 6.7 | ||||||||||||||||||||||||||||||||
| Other operating and administrative | 1,042 | 917 | 13.7 | 2,943 | 2,590 | 13.7 | ||||||||||||||||||||||||||||||||
| Advertising, marketing and promotion | 365 | 382 | (4.5) | 1,082 | 842 | 28.5 | ||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 4,647 | 5,774 | (19.5) | 14,347 | 13,107 | 9.5 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 583 | $ | 997 | (41.5) | % | $ | 3,080 | $ | 3,847 | (20.0) | % |
Media Segment – Revenue
Revenue decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to our broadcast of the Tokyo Olympics in the third quarter of 2021. Revenue increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to our broadcasts of the Beijing Olympics and Super Bowl in the first quarter of 2022 and increased revenue at Peacock, partially offset by our broadcast of the Tokyo Olympics in 2021. Excluding $1.5 billion and $1.8 billion of incremental revenue associated with the broadcasts of the Beijing Olympics and Super Bowl in the first quarter of 2022 and the Tokyo Olympics in the third quarter of 2021, respectively, Media revenue increased 4.4% and 4.9% for the three and nine months ended September 30, 2022 compared to the same periods in 2021.
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||
| Advertising | $ | 2,111 | $ | 3,255 | (35.1) | % | $ | 7,603 | $ | 7,537 | 0.9 | % | |||||||||||||||||||||||
| Advertising, excluding Olympics and Super Bowl | 2,111 | 2,017 | 4.7 | 6,449 | 6,300 | 2.4 |
Advertising revenue decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to our broadcast of the Tokyo Olympics in the prior year period. Advertising revenue increased for the nine months ended September 30, 2022 compared to the same period in 2021 and included our broadcasts of the Beijing Olympics and Super Bowl in the current year period, offset by our broadcast of the Tokyo Olympics in the prior year period. Excluding $1.2 billion of incremental revenue associated with our broadcasts of these events in the first quarter of 2022 and third quarter of 2021, advertising revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021, primarily due to increased revenue at Peacock, partially offset by decreases in revenue at our networks. The decreases at our networks were primarily due to continued audience ratings declines and the impact of additional sporting events in the prior year period, partially offset by higher pricing in the current year period.
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/(Decrease) | ||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||
| Distribution | $ | 2,578 | $ | 2,987 | (13.7) | % | $ | 8,270 | $ | 7,934 | 4.2 | % | |||||||||||||||||||||||
| Distribution, excluding Olympics | 2,578 | 2,465 | 4.6 | 7,943 | 7,413 | 7.1 |
Distribution revenue decreased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to our broadcast of the Tokyo Olympics in the prior year period. Distribution revenue increased for the nine months ended September 30, 2022 compared to the same period in 2021 and included our broadcast of the Beijing Olympics in the current year period, offset by our broadcast of the Tokyo Olympics in the prior year period. Excluding $327 million and $522 million of incremental revenue associated with our broadcasts of the Beijing and Tokyo Olympics in the first quarter of 2022 and third quarter of 2021, respectively, distribution revenue increased for the three and nine months ended September 30, 2022 primarily due to increased revenue at Peacock. Revenue at our networks decreased for the three months ended September 30, 2022 compared to the same period in 2021 due to a decline in the number of subscribers, partially offset by contractual rate increases. Revenue at our networks increased for the nine months ended September 30, 2022 compared to the same period in 2021 due to contractual rate increases, partially offset by a decline in the number of subscribers.
We expect the number of subscribers and audience ratings at our networks will continue to decline as a result of the competitive environment and shifting video consumption patterns. Revenue included $506 million and $1.4 billion related to Peacock for the three and nine months ended September 30, 2022, respectively, with the nine months including amounts related to the Beijing Olympics and Super Bowl in the first quarter of 2022. Revenue included $230 million and $443 million related to Peacock for the three and nine months ended September 30, 2021, respectively.
Media Segment – Operating Costs and Expenses
Operating costs and expenses decreased for the three months ended September 30, 2022 compared to the same period in 2021 due to decreases in programming and production costs and in advertising, marketing and promotion costs, partially offset by increases in other operating and administrative costs. The decreases in programming and production costs and in advertising, marketing and promotion costs were primarily due to costs associated with our broadcast of the Tokyo Olympics in the prior year period, with the decrease in programming and production costs partially offset by higher costs related to Peacock. Other operating and administrative costs increased primarily due to higher costs related to Peacock.
Operating costs and expenses increased for the nine months ended September 30, 2022 compared to the same period in 2021 due to increases in programming and production costs; in other operating and administrative costs; and in advertising, marketing and promotion costs. Programming and production costs increased primarily due to costs associated with our broadcasts of the Beijing Olympics and Super Bowl and higher programming costs at Peacock, partially offset by costs associated with our broadcast of the Tokyo Olympics in the prior year period and lower costs for other sports programming in the current year. Advertising, marketing and promotion costs and other operating and administrative costs increased primarily due to higher costs related to Peacock.
Operating costs and expenses included $1.1 billion and $3.0 billion related to Peacock for the three and nine months ended September 30, 2022, respectively. Operating costs and expenses included $750 million and $1.6 billion related to Peacock for the three and nine months ended September 30, 2021, respectively. We expect to continue to incur significant costs related to additional content and marketing as we invest in the platform and attract new customers.
Studios Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Content licensing | $ | 2,134 | $ | 1,827 | 16.8 | % | $ | 6,531 | $ | 5,683 | 14.9 | % | ||||||||||||||||||||||||||
| Theatrical | 673 | 307 | 119.1 | 1,391 | 544 | 155.5 | ||||||||||||||||||||||||||||||||
| Home entertainment and other | 356 | 273 | 30.2 | 963 | 801 | 20.3 | ||||||||||||||||||||||||||||||||
| Total revenue | 3,163 | 2,407 | 31.4 | 8,885 | 7,027 | 26.4 | ||||||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||
| Programming and production | 2,036 | 1,744 | 16.8 | 6,252 | 4,961 | 26.0 | ||||||||||||||||||||||||||||||||
| Other operating and administrative | 201 | 146 | 38.3 | 604 | 475 | 27.2 | ||||||||||||||||||||||||||||||||
| Advertising, marketing and promotion | 388 | 339 | 14.6 | 1,247 | 759 | 64.3 | ||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 2,626 | 2,228 | 17.9 | 8,102 | 6,195 | 30.8 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 537 | $ | 179 | 199.6 | % | $ | 783 | $ | 833 | (6.0) | % |
Studios Seg****ment – Revenue
Revenue increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 due to increases in theatrical and content licensing revenue. Theatrical revenue increased primarily due to the strong performances of releases in our 2022 slate, including Jurassic World: Dominion and Minions: The Rise of Gru. Content licensing revenue increased primarily due to the timing of when content was made available by our television and film studios under licensing agreements, including additional sales of content as production levels returned to normal. For the nine months ended September 30, 2022, this increase was partially offset by the impact of a new licensing agreement for content that became exclusively available for streaming on Peacock in the prior year period.
Studios Segment – Operating Costs and Expenses
Operating costs and expenses increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to increases in programming and production costs and in advertising, marketing and promotion costs. Programming and production costs increased primarily due to higher costs associated with content licensing sales and theatrical releases in the current year periods. Advertising, marketing and promotion costs increased due to higher spending on current period and upcoming theatrical releases.
Theme Parks Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | $ | 2,064 | $ | 1,449 | 42.4 | % | $ | 5,428 | $ | 3,163 | 71.6 | % | ||||||||||||||||||||||||||
| Operating costs and expenses | 1,244 | 1,015 | 22.6 | 3,526 | 2,570 | 37.2 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 819 | $ | 434 | 88.6 | % | $ | 1,902 | $ | 593 | NM |
Percentage changes that are considered not meaningful are denoted with NM.
Them****e Parks Segment – Revenue
Revenue increased for the three months ended September 30, 2022 due to increases at our theme parks in Orlando and Hollywood driven by increased attendance and guest spending, an increase at our theme park in Japan, which was operating with capacity restrictions in the prior year period, and an increase from the operations of Universal Beijing Resort, which opened in September 2021. Results at our international theme parks have been negatively impacted by fluctuations in foreign currency exchange rates.
Revenue increased for the nine months ended September 30, 2022 primarily due to improved operating conditions compared to the same period in 2021, when our theme parks in Orlando, Hollywood and Japan were impacted by COVID-19 restrictions, as well as the operations of Universal Beijing Resort, which opened in September 2021.
Theme Parks Segment – Operating Costs and Expenses
Expenses increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to operating costs associated with Universal Beijing Resort in the current year periods, which were higher than pre-opening costs in the prior year periods, and as a result of decreased operating costs in the prior year periods due to COVID-19 restrictions at our theme parks.
NBCUniversal Headquarters, Other and Eliminations
Headquarters and Other Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | $ | 22 | $ | 28 | (22.1) | % | $ | 46 | $ | 65 | (30.1) | % | ||||||||||||||||||||||||||
| Operating costs and expenses | 221 | 276 | (20.0) | 574 | 709 | (19.1) | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (199) | $ | (248) | 19.8 | % | $ | (528) | $ | (643) | 18.0 | % |
Expenses include overhead, personnel costs and costs associated with corporate initiatives.
Eliminations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | $ | (909) | $ | (654) | 38.9 | % | $ | (2,474) | $ | (2,230) | 10.9 | % | ||||||||||||||||||||||||||
| Operating costs and expenses | (849) | (642) | 32.4 | (2,376) | (1,992) | 19.2 | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (59) | $ | (12) | NM | $ | (98) | $ | (238) | (58.6) | % |
Percentage changes that are considered not meaningful are denoted with NM.
Amounts represent eliminations of transactions between our NBCUniversal segments, which are affected by the timing of recognition of content licenses between our Studios and Media segments. Prior year amounts include the impact of a new licensing agreement for content that became exclusively available for streaming on Peacock during the first quarter of 2021. Results of operations for NBCUniversal may be impacted as we continue to use content on our platforms, including Peacock, rather than licensing it to third parties.
For the three and nine months ended September 30, 2022, approximately 44% and 40%, respectively, of Studios segment content licensing revenue resulted from transactions with other segments, primarily with the Media segment. For the three and nine months ended September 30, 2021, approximately 37% and 41%, respectively, of Studios segment content licensing revenue resulted from transactions with other segments, primarily with the Media segment. Eliminations increase or decrease to the extent that additional content is made available to our other segments. Refer to Note 2 for further discussion of transactions between our segments.
Sky Segment Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Constant Currency Change(a) | Nine Months Ended September 30, | Increase/ (Decrease) | Constant Currency Change(a) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | % | 2022 | 2021 | % | % | ||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct-to-consumer | $ | 3,510 | $ | 4,127 | (15.0) | % | (0.4) | % | $ | 11,073 | $ | 12,415 | (10.8) | % | (1.1) | % | ||||||||||||||||||||||||||||||||||||||||
| Content | 273 | 300 | (9.1) | 6.4 | 833 | 1,013 | (17.8) | (9.3) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Advertising | 471 | 561 | (15.9) | (1.6) | 1,623 | 1,777 | (8.7) | 1.1 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total revenue | 4,253 | 4,988 | (14.7) | (0.2) | 13,529 | 15,205 | (11.0) | (1.4) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Operating costs and expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Programming and production | 1,570 | 1,779 | (11.7) | 3.3 | 5,080 | 6,710 | (24.3) | (16.2) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Direct network costs | 635 | 647 | (1.9) | 14.8 | 1,944 | 1,903 | 2.2 | 12.7 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 1,348 | 1,591 | (15.2) | (0.8) | 4,320 | 4,697 | (8.0) | 2.0 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total operating costs and expenses | 3,553 | 4,016 | (11.5) | 3.5 | 11,344 | 13,310 | (14.8) | (5.6) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 701 | $ | 971 | (27.9) | % | (15.5) | % | $ | 2,185 | $ | 1,895 | 15.3 | % | 28.7 | % |
(a)Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section on page 27 for additional information, including our definition and our use of constant currency, and for a reconciliation of Sky’s constant currency growth rates.
Customer Metrics
| Net Additions / (Losses) | |||||||||||||||||||||||||||||
| September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Total customer relationships | 22,986 | 22,966 | 320 | (233) | (41) | (259) |
Customer metrics are presented based on actual amounts. Customer relationships represent the number of residential customers that subscribe to at least one of Sky’s four primary services of video, broadband, voice and wireless phone service. Sky reports business customers, including hotels, bars, workplaces and restaurants, generally based on the number of locations receiving our services.
| Three Months Ended September 30, | Increase/ (Decrease) | Constant Currency Change(a) | Nine Months Ended September 30, | Increase/ (Decrease) | Constant Currency Change(a) | ||||||||||||||||||||||||||||||
| 2022 | 2021 | % | % | 2022 | 2021 | % | % | ||||||||||||||||||||||||||||
| Average monthly direct-to-consumer revenue per customer relationship | $ | 51.25 | $ | 59.60 | (14.0) | % | 0.7 | % | $ | 53.48 | $ | 59.72 | (10.4) | % | (0.7) | % |
(a)Constant currency is a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section on page 27 for additional information, including our definition and our use of constant currency, and for a reconciliation of Sky’s constant currency growth rates.
Average monthly direct-to-consumer revenue per customer relationship is impacted by rate adjustments and changes in the types and levels of services received by Sky’s customers. Each of Sky’s services has a different contribution to Adjusted EBITDA. We believe average monthly direct-to-consumer revenue per customer relationship is useful in understanding the trends in our business across all of our direct-to-consumer service offerings.
Sky Segment – Revenue
Direct-to-Consumer
Revenue decreased for the three months ended September 30, 2022 compared to the same period in 2021. Excluding the impact of foreign currency, revenue remained consistent for the three months ended September 30, 2022 compared with the prior year period primarily due to a lower number of customer relationships during the current year period, offset by an increase in average revenue per customer relationship. The lower number of customer relationships was driven by declines in Italy, partially offset by increases in Germany and the United Kingdom compared to the prior year period. The increase in average revenue per customer relationship reflected an increase in average rates in Italy and the United Kingdom, partially offset by a decline in average rates in Germany. Sky results have been affected by worsening macroeconomic conditions in the United Kingdom and continental Europe.
Revenue decreased for the nine months ended September 30, 2022 compared to the same period in 2021. Excluding the impact of foreign currency, revenue decreased for the nine months ended September 30, 2022 compared with the prior year period primarily due to a lower number of customer relationships during the current year period and a decrease in average revenue per customer relationship. The lower number of customer relationships was driven by declines in Italy, partially offset by increases in the United Kingdom and Germany compared to the prior year period. The decrease in average revenue per customer relationship reflected declines in average rates in Italy and Germany, partially offset by the impacts of COVID-19 on business customers in the United Kingdom in the prior year period and the impact of rate increases in the United Kingdom. The decline in customer relationships and average revenue per customer relationship in Italy included the effects of the reduced broadcast rights for Serie A, which we had held through the end of the 2020-21 season. Beginning with the 2021-22 season in the third quarter of 2021 and through the 2023-24 season, we have nonexclusive broadcast rights to fewer matches, which has resulted in declines in revenue in Italy in 2022.
Content
Revenue decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Excluding the impact of foreign currency, revenue increased for the three months ended September 30, 2022 compared with the prior year period primarily due to the timing of licensing of owned content to other platforms. Excluding the impact of foreign currency, revenue decreased for the nine months ended September 30, 2022 compared with the prior year period primarily due to lower sports programming licensing revenue driven by changes in licensing agreements in Italy and Germany.
Advertising
Revenue decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Excluding the impact of foreign currency, revenue decreased for the three months ended September 30, 2022 compared with the prior year period primarily as a result of decreased advertising revenue in Italy. Excluding the impact of foreign currency, revenue increased for the nine months ended September 30, 2022 compared with the prior year period primarily as a result of an overall advertising market improvement in the United Kingdom in the first half of the year compared to the prior year period, partially offset by decreased advertising revenue associated with Serie A.
Sky Segment – Operating Costs and Expenses
Programming and production costs decreased for the three and nine months ended September 30, 2022 compared to the same period in 2021. Excluding the impact of foreign currency, programming and production costs increased for the three months ended September 30, 2022 primarily due to the timing of recognition of costs related to sporting events, including a shift of certain football matches to the third quarter in advance of the 2022 FIFA World Cup, which will occur in the fourth quarter of 2022. The timing of this event will also result in lower sports programming expenses in the fourth quarter of 2022, as well as an increase in the first half of 2023. This increase was partially offset by lower entertainment programming costs in the current year period. Excluding the impact of foreign currency, programming and production costs decreased for the nine months ended September 30, 2022 primarily reflecting lower costs associated with Serie A in Italy as a result of the reduced broadcast rights and lower costs associated with other sports contracts in Germany in the current year period, partially offset by the timing of recognition of costs related to sporting events.
Direct network costs decreased for the three months ended September 30, 2022 and increased for the nine months ended September 30, 2022 compared to the same periods in 2021. Excluding the impact of foreign currency, direct network costs increased for the three and nine months ended September 30, 2022 primarily due to increases in costs associated with Sky’s broadband and wireless phone services as a result of increases in the number of customers receiving these services and increases in the sales of handsets.
Other expenses decreased for the three and nine months ended September 30, 2022 compared to the same periods in 2021. Excluding the impact of foreign currency, other expenses remained consistent for the three months ended September 30, 2022 compared to the prior year. Excluding the impact of foreign currency, other expenses increased for the nine months ended September 30, 2022 primarily due to higher administrative costs.
Corporate, Other and Eliminations
Corporate and Other Results of Operations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||||||||
| Revenue | $ | 147 | $ | 65 | 126.3 | % | $ | 549 | $ | 246 | 123.2 | % | |||||||||||||||||||||||||||||
| Operating costs and expenses | 525 | 400 | 31.3 | 1,493 | 1,122 | 33.0 | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | (378) | $ | (335) | (12.8) | % | $ | (944) | $ | (876) | (7.7) | % |
Corporate and other primarily includes overhead and personnel costs, the results of other business initiatives and Comcast Spectacor, which owns the Philadelphia Flyers and the Wells Fargo Center arena in Philadelphia, Pennsylvania. Other business initiatives primarily include costs associated with Sky Glass smart televisions and the related hardware sales and, beginning in the end of the second quarter of 2022, the operations of our streaming platform joint venture with Charter Communications. This consolidated joint venture, which was formed in June 2022, is focused on developing and offering a streaming platform on a variety of devices, including XClass TV smart televisions, and also operates the Xumo streaming service.
Revenue increased for the three months ended September 30, 2022 compared to the same period in 2021 primarily due to revenue at our streaming platform joint venture related to Xumo and sales of Sky Glass smart televisions. Revenue increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to sales of Sky Glass smart televisions, increases at Comcast Spectacor as a result of the impacts of COVID-19 in the prior year period and revenue at our streaming platform joint venture related to Xumo.
Expenses increased for the three and nine months ended September 30, 2022 compared to the same periods in 2021 primarily due to costs related to Sky Glass and our streaming platform joint venture. We expect to continue to incur increased costs in 2022 related to the launches of Sky Glass and our streaming platform joint venture.
Eliminations
| Three Months Ended September 30, | Increase/ (Decrease) | Nine Months Ended September 30, | Increase/ (Decrease) | |||||||||||||||||||||||||||||||||||
| (in millions) | 2022 | 2021 | % | 2022 | 2021 | % | ||||||||||||||||||||||||||||||||
| Revenue | $ | (660) | $ | (871) | (24.1) | % | $ | (2,196) | $ | (2,304) | (4.7) | % | ||||||||||||||||||||||||||
| Operating costs and expenses | (686) | (773) | (11.2) | (2,103) | (2,218) | (5.2) | ||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 26 | $ | (98) | NM | $ | (93) | $ | (87) | 7.0 | % |
Percentage changes that are considered not meaningful are denoted with NM.
Amounts represent eliminations of transactions between Cable Communications, NBCUniversal, Sky and other businesses. Eliminations of transactions between NBCUniversal segments are presented separately. Amounts reflect increases in eliminations associated with the Beijing and Tokyo Olympics in the first quarter of 2022 and third quarter of 2021, respectively. Refer to Note 2 for a description of transactions between our segments.
Non-GAAP Financial Measures
Consolidated Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and is the primary basis used to measure the operational strength and performance of our businesses as well as to assist in the evaluation of underlying trends in our businesses. This measure eliminates the significant level of noncash depreciation and amortization expense that results from the capital-intensive nature of certain of our businesses and from intangible assets recognized in business combinations. It is also unaffected by our capital and tax structures, and by our investment activities, including the results of entities that we do not consolidate, as our management excludes these results when evaluating our operating performance. Our management and Board of Directors use this financial measure to evaluate our consolidated operating performance and the operating performance of our operating segments and to allocate resources and capital to our operating segments. It is also a significant performance measure in our annual incentive compensation programs. Additionally, we believe that Adjusted EBITDA is useful to investors because it is one of the bases for comparing our operating performance with that of other companies in our industries, although our measure of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.
We define Adjusted EBITDA as net income attributable to Comcast Corporation before net income (loss) attributable to noncontrolling interests, income tax expense, investment and other income (loss), net, interest expense, depreciation and amortization expense, and other operating gains and losses (such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets), if any. From time to time, we may exclude from Adjusted EBITDA the impact of certain events, gains, losses or other charges (such as significant legal settlements) that affect the period-to-period comparability of our operating performance.
We reconcile consolidated Adjusted EBITDA to net income attributable to Comcast Corporation. This measure should not be considered a substitute for operating income (loss), net income (loss), net income (loss) attributable to Comcast Corporation, or net cash provided by operating activities that we have reported in accordance with GAAP.
Reconciliation from Net Income Attributable to Comcast Corporation to Adjusted EBITDA
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| Net income (loss) attributable to Comcast Corporation | $ | (4,598) | $ | 4,035 | $ | 2,347 | $ | 11,102 | |||||||||||||||
| Net income (loss) attributable to noncontrolling interests | (68) | (104) | (295) | (249) | |||||||||||||||||||
| Income tax expense | 1,014 | 1,235 | 3,562 | 4,354 | |||||||||||||||||||
| Investment and other (income) loss, net | 266 | (766) | 975 | (2,374) | |||||||||||||||||||
| Interest expense | 960 | 1,050 | 2,922 | 3,161 | |||||||||||||||||||
| Depreciation | 2,150 | 2,177 | 6,525 | 6,407 | |||||||||||||||||||
| Amortization | 1,183 | 1,301 | 3,824 | 3,815 | |||||||||||||||||||
| Goodwill and long-lived asset impairments | 8,583 | — | 8,583 | — | |||||||||||||||||||
| Adjustments(a) | (9) | 30 | 15 | 79 | |||||||||||||||||||
| Adjusted EBITDA | $ | 9,482 | $ | 8,957 | $ | 28,459 | $ | 26,297 |
(a)Amounts represent the impact of certain events, gains, losses or other charges that are excluded from Adjusted EBITDA, including costs related to our investment portfolio, and Sky transaction-related costs in 2021.
Constant Currency
Constant currency and constant currency growth rates are non-GAAP financial measures that present our results of operations excluding the estimated effects of foreign currency exchange rate fluctuations. Certain of our businesses, including Sky, have operations outside the United States that are conducted in local currencies. As a result, the comparability of the financial results reported in U.S. dollars is affected by changes in foreign currency exchange rates. In our Sky segment, we use constant currency and constant currency growth rates to evaluate the underlying performance of the business, and we believe it is helpful for investors to present operating results on a comparable basis period over period to evaluate its underlying performance.
Constant currency and constant currency growth rates are calculated by comparing the comparative period results in the prior year adjusted to reflect the average exchange rates from the current year period rather than the actual exchange rates in effect during the respective prior year periods.
Reconciliation of Sky Constant Currency Growth Rates
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| Actual | Constant Currency | Constant Currency Change | Actual | Constant Currency | Constant Currency Change | ||||||||||||||||||||||||||||||
| (in millions, except per customer data) | 2022 | 2021 | % | 2022 | 2021 | % | |||||||||||||||||||||||||||||
| Revenue | |||||||||||||||||||||||||||||||||||
| Direct-to-consumer | $ | 3,510 | $ | 3,525 | (0.4) | % | $ | 11,073 | $ | 11,197 | (1.1) | % | |||||||||||||||||||||||
| Content | 273 | 256 | 6.4 | 833 | 919 | (9.3) | |||||||||||||||||||||||||||||
| Advertising | 471 | 479 | (1.6) | 1,623 | 1,605 | 1.1 | |||||||||||||||||||||||||||||
| Total revenue | 4,253 | 4,260 | (0.2) | 13,529 | 13,720 | (1.4) | |||||||||||||||||||||||||||||
| Operating costs and expenses | |||||||||||||||||||||||||||||||||||
| Programming and production | 1,570 | 1,520 | 3.3 | 5,080 | 6,062 | (16.2) | |||||||||||||||||||||||||||||
| Direct network costs | 635 | 553 | 14.8 | 1,944 | 1,726 | 12.7 | |||||||||||||||||||||||||||||
| Other | 1,348 | 1,359 | (0.8) | 4,320 | 4,234 | 2.0 | |||||||||||||||||||||||||||||
| Total operating costs and expenses | 3,553 | 3,431 | 3.5 | 11,344 | 12,022 | (5.6) | |||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 701 | $ | 829 | (15.5) | % | $ | 2,185 | $ | 1,698 | 28.7 | % | |||||||||||||||||||||||
| Average monthly direct-to-consumer revenue per customer relationship | $ | 51.25 | $ | 50.91 | 0.7 | % | $ | 53.48 | $ | 53.87 | (0.7) | % |
Other Adjustments
From time to time, we present adjusted information, such as revenue, to exclude the impact of certain events, gains, losses or other charges. This adjusted information is a non-GAAP financial measure. We believe, among other things, that the adjusted information may help investors evaluate our ongoing operations and can assist in making meaningful period-over-period comparisons.
Liquidity and Capital Resources
| Nine Months Ended September 30, | |||||||||||||||||
| (in millions) | 2022 | 2021 | |||||||||||||||
| Cash provided by operating activities | $ | 20,530 | $ | 21,457 | |||||||||||||
| Cash used in investing activities | $ | (10,158) | $ | (8,406) | |||||||||||||
| Cash used in financing activities | $ | (13,299) | $ | (12,946) |
| (in millions) | September 30, 2022 | December 31, 2021 | |||||||||
| Cash and cash equivalents | $ | 5,695 | $ | 8,711 | |||||||
| Short-term and long-term debt | $ | 92,452 | $ | 94,850 |
Our businesses generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements, including fixed charges, through our cash flows from operating activities; existing cash, cash equivalents and investments; available borrowings under our existing credit facility; and our ability to obtain future external financing. We anticipate that we will continue to use a substantial portion of our cash flows from operating activities in repaying our debt obligations, funding our capital expenditures and cash paid for intangible assets, investing in business opportunities, and returning capital to shareholders.
We maintain significant availability under our revolving credit facility and our commercial paper program to meet our short-term liquidity requirements. Our commercial paper program provides a lower-cost source of borrowing to fund our short-term working capital requirements. As of September 30, 2022, amounts available under our revolving credit facility, net of amounts outstanding under our commercial paper program and outstanding letters of credit and bank guarantees, totaled $11.0 billion.
Operating Activit****ies
Components of Net Cash Provided by Operating Activities
| Nine Months Ended September 30, | |||||||||||
| (in millions) | 2022 | 2021 | |||||||||
| Operating income | $ | 9,511 | $ | 15,996 | |||||||
| Depreciation and amortization | 10,349 | 10,222 | |||||||||
| Goodwill and long-lived asset impairments | 8,583 | — | |||||||||
| Noncash share-based compensation | 989 | 1,019 | |||||||||
| Changes in operating assets and liabilities | (2,736) | (1,057) | |||||||||
| Payments of interest | (2,341) | (2,943) | |||||||||
| Payments of income taxes | (4,022) | (2,201) | |||||||||
| Proceeds from investments and other | 197 | 420 | |||||||||
| Net cash provided by operating activities | $ | 20,530 | $ | 21,457 |
The variance in changes in operating assets and liabilities for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily related to the timing of amortization and related payments for our film and television costs, including the return to normal production levels and the timing of sporting events, and decreases in accounts receivable, which included the impact of our broadcast of the Tokyo Olympics in the prior year period.
The decrease in payments of interest for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to the timing of interest payments following the debt exchange in August 2021, a decrease in average debt outstanding in the current year period and cash proceeds from the settlement of interest rate swaps related to the collateralized obligation.
The increase in payments of income taxes for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to a tax benefit from our senior notes exchange in 2021, which reduced payments by $0.7 billion in the prior year, higher taxable income in the current year period and payments made in 2022 related to the preceding tax year.
The decrease in proceeds from investments and other for the nine months ended September 30, 2022 compared to the same period in 2021 was primarily due to decreased cash distributions received from equity method investments.
Investing Activities
Net cash used in investing activities increased for the nine months ended September 30, 2022 compared to the same period in 2021, primarily reflecting purchases of short-term investments in the current year period (see Note 7) and increased capital expenditures and cash paid for intangible assets related to software development. These increases were partially offset by proceeds from the maturity of short-term investments and the sale of a business in the current year period, decreased cash paid related to the construction of Universal Beijing Resort in the current year period and cash paid for the acquisition of a business in the prior year period. Capital expenditures, which are our most significant recurring investing activity, increased for the nine months ended September 30, 2022 compared to the same period in 2021, primarily reflecting increased spending at Theme Parks primarily related to the development of the Epic Universe theme park in Orlando, and at Cable Communications due to increased spending on line extensions, scalable infrastructure, support capital and customer premise equipment. These increases were partially offset by decreased spending at Sky primarily related to customer premise equipment.
In 2022, we formed the SkyShowtime joint venture with Paramount Global. The new direct-to-consumer streaming service was made available in select European markets in September 2022, and the partners have committed to a multiyear funding plan that began in 2022.
Financing Activities
Net cash used in financing activities increased for the nine months ended September 30, 2022 compared to the same period in 2021 primarily due to increases in repurchases of common stock under our share repurchase program and employee plans in the current year and higher proceeds from borrowings in the prior year period, partially offset by higher repurchases and repayments of debt in the prior year period. Other financing activities included initial contributions related to our streaming platform joint venture with Charter Communications received in the current year period under a multiyear funding plan and payments related to the redemption of NBCUniversal Enterprise redeemable subsidiary preferred stock in the prior year period.
We have made, and may from time to time in the future make, optional repayments on our debt obligations, which may include repurchases or exchanges of our outstanding public notes and debentures, depending on various factors, such as market conditions. Any such repurchases may be effected through privately negotiated transactions, market transactions, tender offers, redemptions or otherwise. See Notes 5 and 7 for additional information on our financing activities.
Share Repurchases and Dividends
In the second quarter of 2021, we restarted our share repurchase program, which had been paused since the beginning of 2019. In September 2022, our Board of Directors approved a new share repurchase program authorization of $20 billion, effective September 13, 2022. During the nine months ended September 30, 2022, we repurchased a total of 225.7 million shares of our Class A common stock for $9.5 billion. Under the new authorization, which does not have an expiration date, we expect to repurchase additional shares during the remainder of 2022, which may be in the open market or in private transactions.
In addition, we paid $307 million for the nine months ended September 30, 2022 related to employee taxes associated with the administration of our share-based compensation plans.
In January 2022, our Board of Directors approved an 8% increase in our dividend to $1.08 per share on an annualized basis. On July 27, 2022, we paid dividends of $1.2 billion. In July 2022, our Board of Directors approved our third quarter dividend of $0.27 per share, which was paid in October 2022. We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors.
Guarantee Structure
Our debt is primarily issued at Comcast, although we also have debt at certain of our subsidiaries as a result of acquisitions and other issuances. A substantial amount of this debt is subject to guarantees by Comcast and by certain subsidiaries that we have put in place to simplify our capital structure. We believe this guarantee structure provides liquidity benefits to debt investors and helps to simplify credit analysis with respect to relative value considerations of guaranteed subsidiary debt.
Debt and Guarantee Structure
| (in billions) | September 30, 2022 | December 31, 2021 | ||||||
| Debt Subject to Cross-Guarantees | ||||||||
| Comcast | $ | 84.6 | $ | 85.9 | ||||
| Comcast Cable(a) | 2.0 | 2.1 | ||||||
| NBCUniversal(a) | 1.6 | 1.6 | ||||||
| 88.2 | 89.6 | |||||||
| Debt Subject to One-Way Guarantees | ||||||||
| Sky | 5.8 | 6.3 | ||||||
| Other(a) | 0.1 | 0.1 | ||||||
| 5.9 | 6.5 | |||||||
| Debt Not Guaranteed | ||||||||
| Universal Beijing Resort(b) | 3.3 | 3.6 | ||||||
| Other | 1.2 | 1.2 | ||||||
| 4.5 | 4.7 | |||||||
| Debt issuance costs, premiums, discounts, fair value adjustments for acquisition accounting and hedged positions, net | (6.2) | (6.0) | ||||||
| Total debt | $ | 92.5 | $ | 94.8 | ||||
(a)NBCUniversal, Comcast Cable and Comcast Holdings (included within other debt subject to one-way guarantees) are each consolidated subsidiaries subject to the periodic reporting requirements of the SEC. The guarantee structures and related disclosures in this section, together with Exhibit 22, satisfy these reporting obligations.
(b)Universal Beijing Resort debt financing is secured by the assets of Universal Beijing Resort and the equity interests of the investors. See Note 7 for additional information.
Cross-Guarantees
Comcast, NBCUniversal and Comcast Cable (the “Guarantors”) fully and unconditionally, jointly and severally, guarantee each other’s debt securities. NBCUniversal and Comcast Cable also guarantee other borrowings of Comcast, including its revolving credit facility. These guarantees rank equally with all other general unsecured and unsubordinated obligations of the respective Guarantors. However, the obligations of the Guarantors under the guarantees are structurally subordinated to the indebtedness and other liabilities of their respective non-guarantor subsidiaries. The obligations of each Guarantor are limited to the maximum amount that would not render such Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of U.S. and non-U.S. law. Each Guarantor’s obligations will remain in effect until all amounts payable with respect to the guaranteed securities have been paid in full. However, a guarantee by NBCUniversal or Comcast Cable of Comcast’s debt securities, or by NBCUniversal of Comcast Cable’s debt securities, will terminate upon a disposition of such Guarantor entity or all or substantially all of its assets.
The Guarantors are each holding companies that principally hold investments in, borrow from and lend to non-guarantor subsidiary operating companies; issue and service third-party debt obligations; repurchase shares and pay dividends; and engage in certain corporate and headquarters activities. The Guarantors are generally dependent on non-guarantor subsidiary operating companies to fund these activities.
As of September 30, 2022 and December 31, 2021, the combined Guarantors have noncurrent notes payable to non-guarantor subsidiaries of $127 billion and $126 billion, respectively, and noncurrent notes receivable from non-guarantor subsidiaries of $27 billion and $30 billion, respectively. This financial information is that of the Guarantors presented on a combined basis with intercompany balances between the Guarantors eliminated. The combined financial information excludes financial information of non-guarantor subsidiaries. The underlying net assets of the non-guarantor subsidiaries are significantly in excess of the Guarantor obligations. Excluding investments in non-guarantor subsidiaries, external debt and the noncurrent notes payable and receivable with non-guarantor subsidiaries, the Guarantors do not have material assets, liabilities or results of operations.
One-Way Guarantees
Comcast provides full and unconditional guarantees of certain debt issued by Sky and other consolidated subsidiaries not subject to the periodic reporting requirements of the SEC.
Comcast also provides a full and unconditional guarantee of $138 million principal amount of subordinated debt issued by Comcast Holdings. Comcast’s obligations under this guarantee are subordinated and subject, in right of payment, to the prior payment in full of all of Comcast’s senior indebtedness, including debt guaranteed by Comcast on a senior basis, and are structurally subordinated to the indebtedness and other liabilities of its non-guarantor subsidiaries (for purposes of this Comcast Holdings discussion, Comcast Cable and NBCUniversal are included within the non-guarantor subsidiary group). Comcast’s obligations as guarantor will remain in effect until all amounts payable with respect to the guaranteed debt have been paid in full. However, the guarantee will terminate upon a disposition of Comcast Holdings or all or substantially all of its assets. Comcast Holdings is a consolidated subsidiary holding company that directly or indirectly holds 100% and approximately 37% of our equity interests in Comcast Cable and NBCUniversal, respectively.
As of September 30, 2022 and December 31, 2021, Comcast and Comcast Holdings, the combined issuer and guarantor of the guaranteed subordinated debt, have noncurrent senior notes payable to non-guarantor subsidiaries of $98 billion and $96 billion, respectively, and noncurrent notes receivable from non-guarantor subsidiaries of $26 billion and $29 billion, respectively. This financial information is that of Comcast and Comcast Holdings presented on a combined basis with intercompany balances between Comcast and Comcast Holdings eliminated. The combined financial information excludes financial information of non-guarantor subsidiaries of Comcast and Comcast Holdings. The underlying net assets of the non-guarantor subsidiaries of Comcast and Comcast Holdings are significantly in excess of the obligations of Comcast and Comcast Holdings. Excluding investments in non-guarantor subsidiaries, external debt, and the noncurrent notes payable and receivable with non-guarantor subsidiaries, Comcast and Comcast Holdings do not have material assets, liabilities or results of operations.
Critical Accounting Judgments and Estimates
The preparation of our condensed consolidated financial statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and contingent liabilities. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe our judgments and related estimates associated with the valuation and impairment testing of goodwill and cable franchise rights are critical in the preparation of our condensed consolidated financial statements. We performed our annual impairment testing of goodwill and cable franchise rights as of July 1, 2022. In connection with our impairment assessment process, in order to support our qualitative assessments, we typically perform quantitative assessments of our reporting units approximately once every four years. Pursuant to this practice, our current year impairment testing for our cable franchise rights and goodwill in our Cable Communications and NBCUniversal segments was based on quantitative assessments, and no impairment was required.
The goodwill in our Sky segment resulted from our acquisition of Sky in the fourth quarter of 2018, and given this was a recent transaction, the fair value of the Sky reporting unit has been in close proximity to its carrying value. We performed a quantitative assessment for goodwill in our Sky reporting unit and determined that the fair value had declined, resulting in an impairment of $8.1 billion (see Note 8). In preparing the quantitative assessment, we estimated the fair value of the Sky reporting unit using a discounted cash flow analysis. This analysis involved significant judgment, including market participant estimates of future cash flows expected to be generated by the business, including the estimated impacts of macroeconomic conditions in the Sky territories, as well as the selection of the discount rate, which increased by 125 basis points compared to the analysis in 2021. When analyzing the fair value indicated under the discounted cash flow model, we also considered multiples of earnings from comparable public companies and recent market transactions.
Changes in market conditions, laws and regulations, and key assumptions made in future quantitative assessments, including expected cash flows, competitive factors and discount rates, could negatively impact the results of future impairment testing and could result in the recognition of an impairment charge.
For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our condensed consolidated financial statements, please refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K.
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