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Comcast Is Squeezing Synergies Out of the Sky Deal

Anders Bylund, The Motley Fool

Cable giant and content studio Comcast (NASDAQ: CMCSA) reported business results early Thursday morning covering the first quarter of the 2019 fiscal year. The company continued to add broadband subscribers while losing cable TV customers, and the integration of Sky PLC continues apace.

Comcast's first-quarter results: The raw numbers

Metric

Q1 2019

Q1 2018

Year-Over-Year Change

Revenue

$26.9 billion

$22.8 billion

18%

Net income attributable to Comcast

$3.55 billion

$3.12 billion

14%

GAAP earnings per share (diluted)

$0.77

$0.66

17%

Data source: Comcast. GAAP = generally accepted accounting principles.

What happened with Comcast this quarter?

  • The acquisition of European TV broadcaster Sky, which closed early in the fourth quarter, added $4.8 billion to Comcast's first-quarter revenue. On a pro forma basis, calculated as if the buyout had been completed at the start of 2017, Sky's sales fell 5% year over year, while Comcast's remaining sales decreased by 3.2%.
  • Sky boosted its customer count 3.5% above the year-ago period, landing at 23.7 million, and 112,000 new customers signed on in the first quarter alone. The network benefited from new content deals that gave Sky the right to broadcast soccer games from the premier leagues in Germany and Italy.
  • Comcast's own cable operations grew its customer base by 3.6%, to 30.7 million accounts. Here, the relationship count increased by 300,000 in the first quarter. Video and voice customers continued to fall away, while Comcast added 375,000 high-speed internet customers in this reporting period and 1.3 million over the last four quarters.
  • The NBCUniversal content studio saw its TV-based sales plunging due to a difficult comparison against the Winter Olympics in the year-ago period. Meanwhile, theme-park sales held steady at $1.28 billion, while the hit movies Us and How to Train Your Dragon: The Hidden World drove sales 7.6% higher in the filmed entertainment sub-division.
  • The complete Comcast-plus-Sky package added up to a 49% year-over-year increase in free cash flow, stopping at $4.59 billion. Adjusted EBITDA profits rose 18%, to $8.55 billion.
A young couple watching TV and sharing a bucket of popcorn by the handful on their couch. Woman has mouth open in surprise and man is stuffing popcorn in his mouth.

Image source: Getty Images.

What management had to say

On the earnings call, Comcast CEO Brian Roberts discussed how adding Sky to his company should produce synergies and entirely new business opportunities. According to Roberts:

As we begin this new chapter of our combined company, it's early days but we are finding significant areas for collaboration. A couple of notable examples this quarter included the expansion of AdSmart, bringing together NBCUniversal's advanced targeting solutions and Sky's addressable advertising tools in a first step toward creating a global premium video offering for advertisers. We also announced plans to combine key NBCUniversal and Sky assets, including some European TV channels and global content distribution businesses, which will provide better scale to accelerate growth and innovation. And we're also exploring launching a global NBC-Sky news channel later this year.

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Anders Bylund has no position in any of the stocks mentioned. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.