COMCAST CORPORATION Overview
We are a global media and technology company with three primary businesses:Comcast Cable , NBCUniversal, and Sky. We present our operations for (1)Comcast Cable in one reportable business segment, referred to asCable Communications ; (2) NBCUniversal in four reportable business segments: Cable Networks, Broadcast Television,Filmed Entertainment andTheme Parks (collectively, the "NBCUniversal segments"); and (3) Sky in one reportable business segment. Cable Communications SegmentCable Communications is a leading provider of high-speed internet, video, voice, wireless, and security and automation services to residential customers under the Xfinity brand; we also provide these and other services to business customers and sell advertising. As ofJune 30, 2020 , our cable systems had 32.1 million total customer relationships, including 29.8 million residential and 2.4 million business customer relationships, and passed more than 59 million homes and businesses. Revenue is generated primarily from residential and business customers that subscribe to our services, which are marketed individually and as bundled services, and from the sale of advertising. NBCUniversal Segments NBCUniversal is one of the world's leading media and entertainment companies that develops, produces and distributes entertainment, news and information, sports, and other content for global audiences, and owns and operates theme parks worldwide. Cable Networks Cable Networks consists primarily of our national cable networks that provide a variety of entertainment, news and information, and sports content; our regional sports and news networks; our international cable networks; our cable television studio production operations; and various digital properties. Revenue is generated primarily from the distribution of our cable network programming to traditional and virtual multichannel video providers; from the sale of advertising on our cable networks and digital properties; from the licensing of our owned programming, including programming from our cable television studio production operations, to cable and broadcast networks and subscription video on demand services; and from the sale of our owned content on standard-definition DVDs and Blu-ray discs (together, "DVDs") and through digital distribution services such as iTunes. Broadcast Television Broadcast Television consists primarily of theNBC and Telemundo broadcast networks, ourNBC and Telemundo owned local broadcast television stations, the NBC Universo national cable network, our broadcast television studio production operations, and various digital properties. Revenue is generated primarily from the sale of advertising on our networks and digital properties, from the licensing of programming, including to cable and broadcast networks as well as to subscription video on demand services; from the fees received under retransmission consent agreements and associated fees received fromNBC -affiliated and Telemundo-affiliated local broadcast television stations; and from the sale of our owned programming on DVDs and through digital distribution services.Filmed Entertainment Filmed Entertainment primarily produces, acquires, markets and distributes filmed entertainment worldwide. Our films are produced primarily under theUniversal Pictures , Illumination,DreamWorks Animation andFocus Features names. Revenue is generated primarily from the worldwide distribution of our produced and acquired films for exhibition in movie theaters, from the licensing of produced and acquired films through various distribution platforms, and from the sale of produced and acquired films on DVDs and through digital distribution services.Filmed Entertainment also generates revenue from Fandango, a movie ticketing and entertainment business, consumer products, the production and licensing of live stage plays, and the distribution of filmed entertainment produced by third parties.Theme Parks Theme Parks consists primarily of our Universal theme parks inOrlando, Florida ;Hollywood, California ; andOsaka, Japan . In addition, we are developing a theme park inBeijing, China along with a consortium of Chinese state-owned companies, and an additional theme park inOrlando, Florida . Revenue is generated primarily from guest spending at our Universal theme parks. Sky Segment Sky is one ofEurope's leading entertainment companies, which primarily includes a direct-to-consumer business, providing video, high-speed internet, voice and wireless phone services, and a content business, operating entertainment networks, theSky News broadcast network andSky Sports networks. As ofJune 30, 2020 , Sky had 23.7 million retail customer relationships. 17
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Corporate and Other Our other business interests consist primarily of the operations of Comcast Spectacor, which owns thePhiladelphia Flyers and theWells Fargo Center arena inPhiladelphia, Pennsylvania , and other business initiatives, such as Peacock, which was made available to Comcast customers inApril 2020 and launched nationally inJuly 2020 . Impacts of COVID-19 The novel coronavirus disease 2019 ("COVID-19") and measures taken to prevent its spread across the globe continue to impact our businesses in a number of ways. OurCable Communications results of operations were strong in the first half of 2020, despite having been affected in the second quarter by the significant deterioration in domestic economic conditions and by the costs associated with our support of customer connectivity as people continued to work and learn remotely from home. COVID-19 had material negative impacts on NBCUniversal and Sky results of operations during the second quarter of 2020 primarily due to the temporary closure of our theme parks and the postponement and cancellation of many sporting events. We continue to implement and evaluate cost initiatives across our businesses that have impacted and will continue to impact our results of operations; certain costs incurred by our businesses in response to COVID-19, including severance and restructuring charges, are presented in Corporate and Other. We expect the impacts of COVID-19 will continue to have a material adverse impact on our consolidated results of operations over the near to medium term.Cable Communications • Our distribution network to date has performed well under the stress of
increased traffic and peak usage driven by increased video streaming,
gaming and videoconferencing as more customers work and learn remotely
from home.
• We incurred costs during the first half of 2020 associated withcompensating personnel in roles affected by COVID-19. These costs included
additional compensation for frontline personnel who worked to keep our
customers connected to our services and compensation for certain personnel
who were unable to work due to the closing or suspension of operations.
• We have pledged, continuing through the end of
qualifying customers for Internet Essentials, our low-income internet
adoption program, will receive 60 days of free internet services. We also
pledged through the end of June 2020 to waive certain fees and to not
disconnect internet, voice or wireless services for customers for
nonpayment, and are providing these customers a variety of flexible and
extended payment options. As a result, our customer metrics for the first
half of 2020 do not include certain high-risk customers who continue toreceive service following nonpayment or customers in the free Internet
Essentials offer.
• Many professional sports leagues have resumed or have announced plans to
resume, some with a reduced schedule for the remainder of the interrupted
seasons. Certain of our programming distribution agreements with regional
sports networks include contractual adjustment provisions if a minimum
number of sporting events does not occur. In the second quarter of 2020,
our programming expenses were reduced as a result of these provisions, and
our revenue was negatively impacted in similar amounts as a result of
adjustments that we anticipate passing through to our customers. Theseprovisions are also expected to impact future period revenue and expenses
in 2020. The ultimate amounts and timing of the adjustments are dependent
upon the extent to which the sports leagues are able to resume the
interrupted seasons.
• The deterioration of economic conditions and increased economic
uncertainty resulting from COVID-19 have resulted in reduced demand for
our residential and business services and reduced spending fromadvertisers, which have had, and likely will continue to have, negative
impacts on our revenue over the near to medium term. In addition, we
believe there is increased risk associated with collections on our
outstanding receivables, and we have incurred, and expect to continue to
incur, increases in our bad debt expense compared to the prior year
periods.
NBCUniversal
• The temporary closure of all of our theme parks in the first and second
quarters of 2020 had the most significant impact on our revenue and
Adjusted EBITDA for the three and six months ended
consolidated basis. Our parks in
capacity in June 2020 , while our park in Hollywood remains closed. We
expect the results of operations at our theme parks will continue to benegatively impacted in the near to medium term, and we cannot predict when
the
the level of attendance at any reopened parks. In addition, although we
currently expect that Universal Beijing Resort will open in 2021, we have
delayed certain construction projects, including the development of the
Epic Universe theme park in Orlando .
• The deterioration of economic conditions caused by COVID-19 resulted in
significant reductions in advertising spend by our customers in the Cable
Networks and Broadcast Television segments in the second quarter of 2020,
and we expect
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this trend to continue over the near to medium term. These conditions have also
resulted, and may continue to result, in an acceleration of subscriber losses at
our networks due to reduced consumer spending.
• We incurred costs during the first half of 2020 associated with
compensating personnel who were unable to work due to the closing or
suspension of operations, including at our theme parks and at our
production studios.
• The postponement and cancellation of many sporting events and professional
sports seasons impacted our first and second quarter 2020 results of
operations, since both advertising revenues and costs associated with
broadcasting these programs were not recognized. Many professional sports
leagues have resumed or have announced plans to resume, some with reduced
numbers of events for the remainder of the interrupted seasons. Certain of
our sports programming rights agreements and distribution agreements with
multichannel video providers include contractual provisions if a minimum
number of events does not occur. Our distribution revenue in the second
quarter of 2020 was negatively impacted as a result of credits accrued
relating to these provisions, and the programming costs that we will
recognize as the remaining events occur, which are now expected to be
primarily in the third quarter of 2020, will also be impacted. When, or
the extent to which, sporting events will occur in 2020 will impact thetiming, and potentially the amount, of revenue and expense recognition. In
addition, the 2020 Tokyo Olympics have been postponed from the third
quarter of 2020 to the third quarter of 2021, which will result in a
corresponding delay of the associated revenue and costs.
• The creation and availability of our film and television programming in
the United States and globally have been disrupted, including from the suspension of studio production operations. Additionally, with the temporary closure of many movie theaters worldwide, we have delayed or
altered the theatrical distribution strategy for certain of our films,
both domestically and internationally. Delays in theatrical releases will
affect both current and future periods as a result of corresponding delays
in subsequent content licensing windows. We expect results of operations
in our
over the near to medium term as a result of COVID-19.
Sky• Many sporting events and professional sports seasons were postponed
beginning in the second half of the first quarter of 2020, with certain
sports, including European soccer, resuming in May and June 2020 , which
resulted in significant impacts on Sky's results of operations in the
first and second quarters of 2020. Direct-to-consumer revenue has been
negatively impacted as a result of lower sports subscription revenue and
we expect continued negative impacts as a result of the impacts ofCOVID-19 on the reopening plans of our commercial customers. Additionally,
significant costs associated with broadcasting these programs were not
recognized as a result of the sporting events not occurring in the firstquarter of 2020 and for most of the second quarter. Although sporting
events have resumed, COVID-19 continues to result in uncertainty in the
ultimate timing of when, or the extent to which, sporting events will
occur in 2020; their broadcast is expected to impact the timing, and
potentially the amount, of revenue and expense recognition.
• We temporarily suspended certain sales channels due to COVID-19, which
negatively impacted net customer additions and revenue in the first andsecond quarters of 2020. Our sales channels generally resumed operations
in June.
• COVID-19 has resulted in the deterioration of economic conditions and
increased economic uncertainty in the U.K. and Europe , intensifying what
was an already deteriorating economic and advertising environment. Theseconditions negatively impacted revenue in the first and second quarters of
2020, and we expect will continue to reduce advertising spend and consumer
demand for our services for the remainder of 2020. In addition, there is
increased risk associated with collections on our outstanding receivables,
and we have incurred and expect to continue to incur increases in our bad
debt expense.
Global financial markets have been volatile and have experienced significant declines, and domestic and global economic conditions are showing signs of material weakness. At this point, it is impossible to predict the extent and duration of these and any other impacts of COVID-19 to our businesses, or the degree to which demand for our products and services, or supply of key inputs to those products and services, will be affected. This uncertainty makes it challenging for management to estimate with precision the future performance of our businesses. As ofJune 30, 2020 , we evaluated whether the facts and circumstances and available information resulted in the need for an impairment assessment for any of our long-lived assets, including goodwill, and concluded no assessment was required. We will continue to evaluate the impacts of COVID-19 to our businesses, including the impacts of overall economic conditions, which could result in the recognition of an impairment charge in the future. Our first and second quarter 2020 results were impacted by significant losses and gains, respectively, as a result of the volatility in the market values for publicly traded equity securities underlying our investments. 19
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Liquidity
Although negatively impacted by the effects of COVID-19, we expect that our businesses will continue to generate significant cash flow from operating activities and we believe that these cash flows, together with our existing cash, cash equivalents and investments, available borrowings under our existing credit facilities, and our ability to obtain future external financing, will be sufficient for us to meet our current and long-term liquidity and capital requirements. However, we expect the timing of certain priorities to be impacted, such as the pace of our debt reduction efforts and return to share repurchases, and the delay of certain capital projects. Competition All of our businesses operate in intensely competitive, consumer-driven and rapidly changing environments and compete with a growing number of companies that provide a broad range of communications products and services, and entertainment, news and information content to consumers. Technological changes are further intensifying and complicating the competitive landscape and challenging existing business models. In particular, consumers are increasingly turning to online sources for viewing and purchasing content, which has and likely will continue to reduce the number of our video customers and subscribers to our cable networks even as it makes our high-speed internet services more valuable to consumers. In addition, the increasing number of entertainment choices available to consumers has intensified audience fragmentation and disaggregated the way that content traditionally has been viewed by consumers. This increase has caused and likely will continue to cause audience ratings declines at our programming channels. For additional information on the competition our businesses face, see our 2019 Annual Report on Form 10-K and refer to Item 1: Business and Item 1A: Risk Factors. Within the Business section, refer to the "Competition" discussion, and within the Risk Factors section, refer to the risk factors entitled "Our businesses operate in highly competitive and dynamic industries, and our businesses and results of operations could be adversely affected if we do not compete effectively" and "Changes in consumer behavior driven by online video distribution platforms for viewing content continue to adversely affect our businesses and challenge existing business models." Seasonality and Cyclicality Each of our businesses is typically subject to seasonal and cyclical variations.Cable Communications' results are impacted by the seasonal nature of residential customers receiving our services in college and vacation markets. This generally results in fewer net customer relationship additions in the second quarter of each year. Revenue and operating costs and expenses (comprised of total costs and expenses, excluding depreciation and amortization expense and other operating gains) are cyclical as a result of our periodic broadcasts of major sporting events, such as theOlympic Games , which affect Cable Networks and Broadcast Television, and theSuper Bowl , which affects Broadcast Television. In particular, advertising revenue increases due to increased demand for advertising time for these events and distribution revenue increases in the period of broadcasts of theOlympic Games . Operating costs and expenses also increase as a result of our production costs for these broadcasts and the amortization of the related rights fees. Revenue inCable Communications , Cable Networks, Broadcast Television and Sky is also subject to cyclical advertising patterns and changes in viewership levels. Advertising revenue in theU.S. is generally higher in the second and fourth quarters of each year and in even-numbered years due to increases in consumer advertising in the spring and in the period leading up to and including the holiday season and advertising related to candidates running for political office and issue-oriented advertising, respectively. Revenue in Cable Networks and Broadcast Television fluctuates depending on the timing of when our programming is aired, which typically results in higher advertising revenue in the second and fourth quarters of each year. Revenue at Sky has seasonally higher audience levels in winter months and increased competition during major sporting events where public service broadcasters lease the rights, such as theOlympic Games and the FIFA World CupTM. Revenue inFilmed Entertainment fluctuates due to the timing, nature and number of films released in movie theaters, on DVDs, and through various other distribution platforms. Release dates are determined by several factors, including competition and the timing of vacation and holiday periods. As a result, revenue tends to be seasonal, with increases experienced each year during the summer months and around the holiday season. Content licensing revenue in our Cable Networks,Broadcast Television and Filmed Entertainment segments also fluctuates due to the timing of when our content is made available to licensees. Revenue inTheme Parks fluctuates with changes in theme park attendance that result from the seasonal nature of vacation travel and weather variations, local entertainment offerings and the opening of new attractions, as well as with changes in currency exchange rates.Theme Parks generally experiences peak attendance during the spring holiday period, the summer months when schools are closed and the Christmas holiday season. 20
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Sky's results are impacted by the seasonal nature of residential customers
receiving direct-to-home ("DTH") and over the top ("OTT") video services,
including the start of the new soccer seasons and the Christmas holiday. This
generally results in greater net customer relationship additions and higher
subscriber acquisition costs in the second half of each year due to higher
marketing expenses.
Exclusive sports rights, such as local European and Union des Associations
Européennes de Football Champions League ("UCL") soccer, Formula 1, and English
cricket, play a key role within Sky's wider content strategy. In Europe ,
broadcasting rights for major sports are usually tendered through a competitive
auction process, with the winning bidder or bidders acquiring rights over a
three to five-year period. This creates some level of cyclicality for Sky,
although the staggered timing of major sports rights auctions usually gives Sky
time to react to any material changes in the competitive dynamics of the
prevailing market. Certain of Sky's significant sports rights agreements require
payments at the start of each season, resulting in increases in sports rights
payments in the third and fourth quarter of each year.
Consolidated Operating Results
Three Months Ended Increase/ Six Months Ended Increase/
June 30, (Decrease) June 30, (Decrease)
(in millions, except
per share data) 2020 2019 % 2020 2019 %
Revenue $ 23,715 $ 26,858 (11.7 )% $ 50,324 $ 53,717 (6.3 )%
Costs and Expenses:
Programming and
production 6,817 8,255 (17.4 ) 15,118 16,824 (10.1 )
Other operating and
administrative 7,646 8,086 (5.5 ) 15,900 15,986 (0.5 )
Advertising, marketing
and promotion 1,341 1,885 (28.9 ) 3,279 3,773 (13.1 )
Depreciation 2,099 2,197 (4.5 ) 4,206 4,437 (5.2 )
Amortization 1,165 1,079 8.1 2,322 2,159 7.6
Operating income 4,647 5,356 (13.2 ) 9,499 10,538 (9.9 )
Interest expense (1,112 ) (1,137 ) (2.1 ) (2,324 ) (2,287 ) 1.6
Investment and other
income (loss), net 420 (55 ) NM (296 ) 621 (147.7 )
Income before income
taxes 3,955 4,164 (5.0 ) 6,879 8,872 (22.5 )
Income tax expense (946 ) (961 ) (1.5 ) (1,646 ) (2,037 ) (19.2 )
Net income 3,009 3,203 (6.0 ) 5,233 6,835 (23.4 )
Less: Net income
attributable to
noncontrolling
interests and
redeemable subsidiary
preferred stock 21 78 (73.6 ) 98 157 (37.5 )
Net income
attributable to
Comcast Corporation $ 2,988 $ 3,125 (4.4 )% $ 5,135 $ 6,678 (23.1 )%
Basic earnings per
common share
attributable to
Comcast Corporation
shareholders $ 0.65 $ 0.69 (5.8 )% $ 1.12 $ 1.47 (23.8 )%
Diluted earnings per
common share
attributable to
Comcast Corporation
shareholders $ 0.65 $ 0.68 (4.4 )% $ 1.11
Adjusted EBITDA(a)
All percentages are calculated based on actual amounts. Minor differences may exist due to rounding. 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 35 for additional information, including
our definition and our use of Adjusted EBITDA, and for a reconciliation from
net income attributable to
Consolidated RevenueTheme Parks , Sky, Cable Networks,Filmed Entertainment ,Broadcast Television and Cable Communications drove decreases in consolidated revenue for the three months endedJune 30, 2020 .Theme Parks , Sky,Filmed Entertainment and Cable Networks drove decreases in consolidated revenue for the six months endedJune 30, 2020 , which were offset by increases inCable Communications and Broadcast Television. Revenue for our segments and other businesses is discussed separately below under the heading "Segment Operating Results." 21
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Consolidated Costs and Expenses Sky, Cable Networks,Theme Parks ,Cable Communications ,Filmed Entertainment and Broadcast Television drove decreases in consolidated operating costs and expenses for the three months endedJune 30, 2020 . Sky, Cable Networks,Filmed Entertainment ,Theme Parks ,Cable Communications and Broadcast Television drove decreases in consolidated operating costs and expenses for the six months endedJune 30, 2020 . Operating costs and expenses for our segments and our corporate operations, businesses development initiatives and other businesses are discussed separately below under the heading "Segment Operating Results." Consolidated Depreciation and Amortization Expense Three Months Ended Increase/ Six Months Ended Increase/ June 30, (Decrease) June 30, (Decrease) (in millions) 2020 2019 % 2020 2019 % Cable Communications$ 1,937 $ 2,036 (4.9 )%$ 3,883 $ 4,071 (4.6 )% NBCUniversal 574 527 8.9 1,139 1,042 9.3 Sky 720 673 7.0 1,438 1,414 1.7 Corporate and Other 33 40 (18.1 ) 68 69 (0.8 ) Comcast Consolidated$ 3,264 $ 3,276 (0.4 )%$ 6,528 $ 6,596 (1.0 )% Consolidated depreciation and amortization expense decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to a decrease in depreciation atCable Communications related to a reduction in capital expenditures on customer premise equipment, partially offset by an increase in the amortization of certain trade names beginning in the first quarter of 2020, which were previously accounted for as indefinite-lived intangible assets (see Note 10). During the first quarter of 2019, we recorded adjustments to the purchase price allocation of Sky, primarily related to intangible assets and property and equipment. This change resulted in an adjustment recorded in the first quarter of 2019 related to the fourth quarter of 2018 that increased depreciation and amortization expense by$53 million . Amortization expense from acquisition-related intangible assets totaled$565 million and$1.1 billion for the three and six months endedJune 30, 2020 , respectively. Amortization expense from acquisition-related intangible assets totaled$499 million and$1 billion for the three and six months endedJune 30, 2019 , 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 Interest Expense Interest expense decreased for the three months endedJune 30, 2020 compared to the same period in 2019 primarily due to decreases in our debt outstanding. Interest expense increased for the six months endedJune 30, 2020 compared to the same period in 2019 primarily due to a$140 million charge in the first quarter of 2020 related to the early redemption of senior notes due 2021, partially offset by decreases in our debt outstanding.Consolidated Investment and Other Income (Loss), Net Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Equity in net income (losses) of investees, net$ 300 $ (202 ) $ (368 ) $ 60 Realized and unrealized gains (losses) on equity securities, net 5 194 (53 ) 408 Other income (loss), net 115 (47 ) 125 153 Total investment and other income (loss), net$ 420 $ (55 ) $
(296 )
Equity in Net Income (Losses) of Investees, Net The change in equity in net income (losses) of investees, net for the three and six months endedJune 30, 2020 compared to the same periods in 2019 were primarily due to our equity method investments in Atairos and Hulu. The income (losses) at Atairos were driven by fair value adjustments on its underlying investments. The equity in net income (losses) of Atairos and Hulu for the three and six months endedJune 30, 2020 and 2019 are presented in the table below. 22
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Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2020 2019 2020 2019
Atairos $ 446 $ (106 ) $ (135 ) $ 268
Hulu $ (79 ) $ (109 ) $ (161 ) $ (250 )
Realized and Unrealized Gains (Losses) on Equity Securities , Net
The change in realized and unrealized gains (losses) on equity securities, net
for the three months ended June 30, 2020 compared to the same period in 2019 was
primarily due to gains related to our investment in Peloton of $86 million ,
which we sold in the second quarter of 2020, offset by losses on certain
investments in the second quarter of 2020, compared to gains on investments,
including $96 million related to our investment in Snap in the second quarter of
2019. The change in realized and unrealized gains (losses) on equity securities,
net for the six months ended June 30, 2020 compared to the same period in 2019
was primarily due to losses on certain investments for the six months ended June
30, 2020 , partially offset by gains related to our investment in Peloton, which
we sold in the second quarter of 2020, compared to gains on investments,
including $258 million related to our investment in Snap, which was sold in the
fourth quarter of 2019.
Other Income (Loss), Net
The change in other income (loss), net for the three months ended June 30, 2020
compared to the same period in 2019 primarily relates to foreign exchange
remeasurement gains and gains related to insurance contracts in the second
quarter of 2020, compared to foreign exchange remeasurement losses and an
impairment of an equity method investment in the second quarter of 2019. The
change in other income (loss), net for the six months ended June 30, 2020
compared to the same period in 2019 primarily relates to foreign exchange
remeasurement gains for the six months ended June 30, 2020 compared to a gain of
$159 million recorded in the prior year period related to the dilution of our
Hulu ownership. See Note 9.
Consolidated Income Tax Expense
Income tax expense for the three and six months ended June 30, 2020 and 2019
reflects an effective income tax rate that differs from the federal statutory
rate primarily due to state and foreign income taxes and adjustments associated
with uncertain tax positions. The decrease in income tax expense for the three
and six months ended June 30, 2020 compared to the same periods in 2019 was
primarily due to lower income before income taxes.
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.
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Cable Communications Segment Results of Operations
Three Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Residential:
High-speed internet $ 5,000 $ 4,663 $ 337 7.2 %
Video 5,415 5,594 (179 ) (3.2 )
Voice 877 982 (105 ) (10.7 )
Wireless 326 244 82 33.9
Business services 2,004 1,933 71 3.6
Advertising 428 607 (179 ) (29.6 )
Other 378 427 (49 ) (11.0 )
Total revenue 14,428 14,450 (22 ) (0.2 )
Operating costs and expenses
Programming 3,203 3,372 (169 ) (5.0 )
Technical and product support 1,933 1,898 35 1.8
Customer service 601 624 (23 ) (3.7 )
Advertising, marketing and promotion 834 1,004 (170 ) (16.9 )
Franchise and other regulatory fees 398 390 8 2.0
Other 1,283 1,308 (25 ) (1.9 ) Total operating costs and expenses 8,252 8,596 (344 ) (4.0 ) Adjusted EBITDA$ 6,176 $ 5,854 $ 322 5.5 % Six Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue Residential: High-speed internet$ 10,001 $ 9,240 $ 761 8.2 % Video 11,047 11,222 (175 ) (1.6 ) Voice 1,776 1,972 (196 ) (9.9 ) Wireless 669 469 200 42.6 Business services 4,047 3,824 223 5.8 Advertising 985 1,163 (178 ) (15.3 ) Other 821 840 (19 ) (2.1 ) Total revenue 29,346 28,730 616 2.1 Operating costs and expenses Programming 6,682 6,791 (109 ) (1.6 ) Technical and product support 3,945 3,778 167 4.4 Customer service 1,238 1,249 (11 ) (0.9 ) Advertising, marketing and promotion 1,788 1,976 (188 ) (9.5 ) Franchise and other regulatory fees 804 781 23 2.9 Other 2,637 2,573 64
2.5
Total operating costs and expenses 17,094 17,148 (54 ) (0.3 ) Adjusted EBITDA$ 12,252 $ 11,582 $ 670 5.8 % 24
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Customer Metrics
Net Additions
Three Months Ended Six Months Ended
June 30, June 30, June 30,
(in thousands) 2020 2019 2020 2019 2020 2019
Customer relationships
Residential customer relationships 29,750 28,508 241 123 601 399
Business services customer relationships 2,384 2,356 (24 ) 29 (12 ) 53
Total customer relationships 32,134 30,864 217 152 589 453
Residential customer relationships mix
One product customers 11,332 9,526 531 231 1,085 512
Two product customers 8,742 8,952 (107 ) (57 ) (181 ) (40 )
Three or more product customers 9,676 10,030 (184 ) (50 ) (303 ) (72 )
High-speed internet
Residential customers 27,220 25,631 340 182 806 534
Business services customers 2,209 2,176 (17 ) 28 (6 ) 51
Total high-speed internet customers 29,429 27,807 323 209 800 584
Video
Residential customers 19,473 20,642 (427 ) (209 ) (814 ) (317 )
Business services customers 894 999 (51 ) (15 ) (72 ) (28 )
Total video customers 20,367 21,641 (477 ) (224 ) (887 ) (345 )
Voice
Residential customers 9,698 10,008 (142 ) (82 ) (236 ) (145 )
Business services customers 1,331 1,324 (16 ) 17 (12 ) 27
Total voice customers 11,029 11,331 (158 ) (65 ) (248 ) (118 )
Wireless
Wireless lines 2,393 1,586 126 181 342 351
Customer metrics are presented based on actual amounts. Minor differences may
exist due to rounding. 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
high-speed internet and video customers as of June 30, 2020 included prepaid
customers totaling approximately 286,000 and 9,000, respectively. Wireless lines
represent the number of activated eligible wireless devices on customers'
accounts. Individual customer relationships may have multiple wireless lines.
Customer metrics for 2020 do not include certain high-risk customers who
continue to receive service following nonpayment or customers in the free
Internet Essentials offer (refer to "Impacts of COVID-19" for further
discussion).
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Average monthly total revenue per
customer relationship $ 150.17 $ 156.44 $ 153.61 $ 156.29
Average monthly Adjusted EBITDA
per customer relationship $ 64.28 $ 63.38 $ 64.13 $ 63.01
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 high-speed internet, video and voice
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 and we also use average monthly Adjusted EBITDA per customer
relationship to evaluate the profitability of our customer base across our
service offerings. We believe these 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, including residential high-speed internet and business services.
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Cable Communications Segment - Revenue High-Speed Internet Revenue increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to increases in the number of residential high-speed internet customers and increases in average rates. Average rates in the second quarter of 2020 were negatively impacted by waived fees due to COVID-19 and the impacts of customer adjustments. Refer to video description for further information. Video Revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to declines in the number of residential video customers, partially offset by increases in average rates. Average rates in the second quarter of 2020 were negatively impacted by customer adjustments accrued as a result of provisions in our programming distribution agreements with regional sports networks related to canceled sporting events. For customers receiving bundled services, the revenue reduction was allocated across each of the services in the bundle. We have experienced, and expect that we will continue to experience, declines in the number of residential video customers due to competitive pressures, and we expect that our video revenue will continue to decline as a result of the economic and competitive environment and shifting video consumption patterns. We believe our X1 platform helps us compete more effectively against this competition, and have also continued to employ sales and marketing programs, such as promotions, bundled service offerings and service offerings targeted at specific market segments. Voice Revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to decreases in average rates and 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 six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to increases in the number of customer lines. Business Services Revenue increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to increases in the number of customers receiving our services and increases in average rates. The rates of growth were reduced due to the negative impacts of COVID-19 on small businesses. Advertising Revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to reduced spending from advertisers due to COVID-19, partially offset by increases in political advertising. For both the three and six months endedJune 30, 2020 and 2019, 4% of our advertising revenue was generated from our NBCUniversal segments. These amounts are eliminated in our condensed consolidated financial statements but are included in the amounts presented above. Other Revenue decreased for the three months endedJune 30, 2020 compared to the same period in 2019 due to certain waived billing and collection fees due to COVID-19 and decreases in security and automation services, partially offset by an increase in the licensing of our technology platforms to other multichannel video providers. Revenue decreased for the six months endedJune 30, 2020 compared to the same period in 2019 due to certain waived billing and collection fees due to COVID-19, partially offset by an increase in the licensing of our technology platforms to other multichannel video providers. Cable Communications Segment - Operating Costs and Expenses Programming expenses decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to adjustment provisions in our programming distribution agreements with regional sports networks related to canceled sporting events as a result of COVID-19. Excluding these adjustments, programming expenses increased due to increases in retransmission consent and sports programming fees, partially offset by declines in the number of video subscribers. We anticipate that our programming expenses will be impacted by higher rate increases compared to those experienced in 2019 due to the timing of contract renewals in 2020, partially offset by expected declines in the number of residential video customers and potentially additional contractual adjustments for regional sports networks. 26
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Technical and product support expenses increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to increased costs related to COVID-19, including additional compensation costs for certain personnel, and also increased costs associated with our wireless phone service, partially offset by cost savings initiatives and a reduction in activity in certain aspects of our business. Customer service expenses decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to lower labor costs as a result of reduced call volumes, partially offset by increases in costs as a result of additional Xfinity stores. Advertising, marketing and promotion expenses decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to decreases in spending. Franchise and other regulatory fees increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to increases in the related rates of these fees. Other operating costs and expenses decreased for the three months endedJune 30, 2020 compared to the same period in 2019 due to decreased costs associated with our advertising business, partially offset by increases in bad debt expense as a result of COVID-19 and personnel-related costs. Other operating costs and expenses increased for the six months endedJune 30, 2020 compared to the same period in 2019 due to increases in bad debt expense as a result of COVID-19 and personnel-related costs, partially offset by lower third party advertising costs. 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, including residential high-speed internet and business services, and on reducing losses related to our wireless phone service and improving overall operating cost management. Our operating margin for the three and six months endedJune 30, 2020 was 42.8% and 41.7%, respectively. While the accrued adjustments for regional sports networks did not impact Adjusted EBITDA in the second quarter of 2020, they resulted in an increase to operating margins. Our operating margin for the three and six months endedJune 30, 2019 was 40.5% and 40.3%, respectively. The most significant operating costs and expenses are the programming expenses we incur to provide content to our video customers, which decreased 5.0% and 1.6% for the three and six months endedJune 30, 2020 , respectively, compared to the same periods in 2019. Losses from our wireless phone service were$37 million and$96 million for the three and six months endedJune 30, 2020 , respectively, compared to losses of$88 million and$191 million for the three and six months endedJune 30, 2019 , respectively. NBCUniversal Segments Results of Operations Three Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue Cable Networks$ 2,515 $ 2,947 $ (432 ) (14.7 )% Broadcast Television 2,364 2,402 (38 ) (1.6 ) Filmed Entertainment 1,194 1,457 (263 ) (18.1 ) Theme Parks 87 1,464 (1,377 ) (94.1 ) Headquarters, other and eliminations (36 ) (64 ) 28 NM Total revenue$ 6,124 $ 8,206 $ (2,082 ) (25.4 )% Adjusted EBITDA Cable Networks$ 1,243 $ 1,201 $ 42 3.5 % Broadcast Television 641 534 107 20.0 Filmed Entertainment 228 183 45 24.8 Theme Parks (399 ) 590 (989 ) (167.7 ) Headquarters, other and eliminations (75 ) (184 ) 109 NM Total Adjusted EBITDA$ 1,638 $ 2,324 $ (686 ) (29.5 )% 27
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Six Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Cable Networks $ 5,374 $ 5,815 $ (441 ) (7.6 )%
Broadcast Television 5,048 4,869 179 3.7
Filmed Entertainment 2,564 3,225 (661 ) (20.5 )
Theme Parks 956 2,740 (1,784 ) (65.1 )
Headquarters, other and eliminations (84 ) (130 ) 46 NM
Total revenue $ 13,858 $ 16,519 $ (2,661 ) (16.1 )%
Adjusted EBITDA
Cable Networks $ 2,491 $ 2,463 $ 28 1.1 %
Broadcast Television 1,142 921 221 24.0
Filmed Entertainment 334 547 (213 ) (38.8 )
Theme Parks (323 ) 1,088 (1,411 ) (129.7 )
Headquarters, other and eliminations (259 ) (358 ) 99 NM
Total Adjusted EBITDA $ 3,385 $ 4,661 $ (1,276 ) (27.4 )%
Cable Networks Segment Results of Operations
Three Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Distribution $ 1,455 $ 1,707 $ (252 ) (14.8 )%
Advertising 679 931 (252 ) (27.0 )
Content licensing and other 381 309 72 23.1
Total revenue 2,515 2,947 (432 ) (14.7 )
Operating costs and expenses
Programming and production 881 1,274 (393 ) (30.9 )
Other operating and administrative 333 370 (37 ) (10.2 )
Advertising, marketing and promotion 58 102 (44 ) (42.9 )
Total operating costs and expenses 1,272 1,746 (474 ) (27.2 )
Adjusted EBITDA $ 1,243 $ 1,201 $ 42 3.5 %
Six Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Distribution $ 3,163 $ 3,442 $ (279 ) (8.1 )%
Advertising 1,513 1,783 (270 ) (15.1 )
Content licensing and other 698 590 108 18.3
Total revenue 5,374 5,815 (441 ) (7.6 )
Operating costs and expenses
Programming and production 1,999 2,417 (418 ) (17.3 )
Other operating and administrative 719 729 (10 ) (1.3 )
Advertising, marketing and promotion 165 206 (41 ) (19.9 )
Total operating costs and expenses 2,883 3,352 (469 ) (14.0 )
Adjusted EBITDA $ 2,491 $ 2,463 $ 28 1.1 %
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Cable Networks Segment - Revenue Cable Networks revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to decreases in distribution revenue and advertising revenue, which were offset by increases in content licensing and other revenue. Distribution revenue decreased primarily due to credits accrued at some of our regional sports networks resulting from the reduced number of games planned by professional sports leagues due to COVID-19. Certain of our distribution agreements with multichannel video providers require contractual adjustments if a minimum number of sporting events does not occur. Excluding these credits, distribution revenue decreased due to increased declines in the number of subscribers at our cable networks, partially offset by increases in the contractual rates charged under distribution agreements. Advertising revenue decreased compared to the same periods in 2019 primarily due to reduced spending from advertisers as a result of COVID-19, including from the postponement and cancellation of sporting events and continued audience ratings declines at our networks. The decrease in advertising revenue for the six months endedJune 30, 2020 compared to the same period in 2019 was partially offset by higher prices for advertising units sold. Content licensing and other revenue increased primarily due to the timing of content provided under our licensing agreements, including transactions with Peacock in the second quarter of 2020. For the three and six months endedJune 30, 2020 , 13% and 14%, respectively, of our Cable Networks segment revenue was generated from ourCable Communications segment. For both the three and six months endedJune 30, 2019 , 15% of our Cable Networks segment revenue was generated from ourCable Communications segment. These amounts are eliminated in our condensed consolidated financial statements but are included in the amounts presented above. Cable Networks Segment - Operating Costs and Expenses Operating costs and expenses decreased for the three months endedJune 30, 2020 compared to the same period in 2019 due to decreases in programming and production costs, advertising, marketing and promotion costs and other operating and administrative costs. The decrease in programming and production costs was primarily due to decreases in sports programming costs recognized as a result of professional sports leagues postponing and canceling events as a result of COVID-19, partially offset by an increase in other programming costs at our networks. The decrease in advertising, marketing and promotion costs was due to lower spending on marketing related to our cable networks. The decrease in other operating and administrative costs was primarily due to lower employee-related and other overhead costs as a result of cost savings initiatives. Operating costs and expenses decreased for the six months endedJune 30, 2020 compared to the same period in 2019 primarily due to decreases in programming and production costs and advertising, marketing and promotion costs. The decrease in programming and production costs was primarily due to decreases in sports programming costs recognized as a result of professional sports leagues postponing and canceling events as a result of COVID-19, partially offset by increases in other programming costs at our networks. The decrease in advertising, marketing and promotion costs was due to lower spending on marketing related to our cable networks and digital properties. Broadcast Television Segment Results of Operations Three Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue Advertising$ 959 $ 1,329 $ (370 ) (27.9 )% Content licensing 749 472 277 58.5 Distribution and other 656 601 55 9.2 Total revenue 2,364 2,402 (38 ) (1.6 ) Operating costs and expenses Programming and production 1,323 1,369 (46 ) (3.4 ) Other operating and administrative 357 395 (38 ) (9.7 ) Advertising, marketing and promotion 43 104 (61 ) (58.4 ) Total operating costs and expenses 1,723 1,868 (145 ) (7.8 ) Adjusted EBITDA$ 641 $ 534 $ 107 20.0 % 29
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Six Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Advertising $ 2,277 $ 2,646 $ (369 ) (13.9 )%
Content licensing 1,484 1,032 452 43.7
Distribution and other 1,287 1,191 96 8.1
Total revenue 5,048 4,869 179 3.7
Operating costs and expenses
Programming and production 2,975 2,946 29 1.0
Other operating and administrative 768 777 (9 ) (1.2 )
Advertising, marketing and promotion 163 225 (62 ) (27.6 )
Total operating costs and expenses 3,906 3,948 (42 ) (1.1 )
Adjusted EBITDA $ 1,142 $ 921 $ 221 24.0 %
Broadcast Television Segment - Revenue
Broadcast Television revenue decreased for the three months ended June 30, 2020
compared to the same period in 2019 due to decreases in advertising revenue,
partially offset by increases in content licensing revenue and distribution and
other revenue. Advertising revenue decreased for the three months ended June 30,
2020 compared to the same period in 2019 due to reduced spending from
advertisers as a result of COVID-19, including from the postponement and
cancellation of sporting events, and continued declines in audience ratings. The
increase in content licensing revenue was primarily due to the timing of content
provided under our licensing agreements, including transactions with Peacock in
the second quarter of 2020. The increase in distribution and other revenue was
primarily due to increases in fees recognized under our retransmission consent
agreements.
Broadcast Television revenue increased for the six months ended June 30, 2020
compared to the same period in 2019 due to increases in content licensing
revenue and distribution and other revenue, partially offset by decreases in
advertising revenue. The increase in content licensing revenue was primarily due
to the timing of content provided under our licensing agreements, including
transactions with Peacock in the second quarter of 2020. The increase in
distribution and other revenue was primarily due to increases in fees recognized
under our retransmission consent agreements. The decrease in advertising revenue
compared to the same period in 2019 was due to reduced spending from advertisers
as a result of COVID-19, including from the postponement and cancellation of
sporting events, and continued declines in audience ratings, which were
partially offset by higher prices for advertising units sold.
Broadcast Television Segment - Operating Costs and Expenses
Operating costs and expenses decreased for the three months ended June 30, 2020
compared to the same period in 2019 due to decreases in advertising, marketing
and promotion costs, programming and production costs, and other operating and
administrative costs. The decrease in advertising, marketing and promotions
costs was primarily due to reduced spending on marketing related to our
programming. The decrease in programming and production costs was primarily due
to decreases in the recognition of sports programming costs as a result of
professional sports leagues postponing and canceling events as a result of
COVID-19, decreases in entertainment programming costs and due to the impact of
the updated accounting guidance, which removed certain limitations on the
amounts capitalized for episodic television series and had a favorable impact on
programming and production expense in the current period (see Note 8), partially
offset by higher studio production costs. The decrease in other operating and
administrative costs was due to decreased overhead costs as part of cost savings
initiatives and lower employee-related costs.
Operating costs and expenses decreased for the six months ended June 30, 2020
compared to the same period in 2019 primarily due to decreases in advertising,
marketing and promotion costs, partially offset by increases in programming and
production costs. The decrease in advertising, marketing and promotion costs was
due to lower spending on marketing related to our programming. The increase in
programming and production costs was primarily due to higher studio production
costs, which was partially offset by decreases in the recognition of sports
programming costs as a result of professional sports leagues postponing and
canceling events as a result of COVID-19, as well as the impact of the adoption
of updated accounting guidance in the first quarter of 2020, which removed
certain limitations on the amounts capitalized for episodic television series
and had a favorable impact on programming and production expense in the current
period (see Note 8).
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Filmed Entertainment Segment Results of Operations
Three Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Theatrical $ 8 $ 252 $ (244 ) (96.8 )%
Content licensing 850 712 138 19.5
Home entertainment 229 229 - 0.2
Other 107 264 (157 ) (59.6 )
Total revenue 1,194 1,457 (263 ) (18.1 )
Operating costs and expenses
Programming and production 594 601 (7 ) (1.0 )
Other operating and administrative 206 294 (88 ) (30.5 )
Advertising, marketing and promotion 166 379 (213 ) (56.1 )
Total operating costs and expenses 966 1,274 (308 ) (24.2 )
Adjusted EBITDA $ 228 $ 183 $ 45 24.8 %
Six Months Ended Increase/
June 30, (Decrease)
(in millions) 2020 2019 $ %
Revenue
Theatrical $ 325 $ 697 $ (372 ) (53.4 )%
Content licensing 1,541 1,529 12 0.8
Home entertainment 400 496 (96 ) (19.2 )
Other 298 503 (205 ) (40.8 )
Total revenue 2,564 3,225 (661 ) (20.5 )
Operating costs and expenses
Programming and production 1,202 1,334 (132 ) (9.9 )
Other operating and administrative 470 555 (85 ) (15.6 )
Advertising, marketing and promotion 558 789 (231 ) (29.2 )
Total operating costs and expenses 2,230 2,678 (448 ) (16.8 )
Adjusted EBITDA $ 334 $ 547 $ (213 ) (38.8 )%
Filmed Entertainment Segment - Revenue
Filmed Entertainment revenue decreased for the three months ended June 30, 2020
compared to the same period in 2019 due to decreases in theatrical revenue and
other revenue, partially offset by increases in content licensing revenue. The
decrease in theatrical revenue was primarily due to theater closures as a result
of COVID-19. The decrease in other revenue was primarily due to decreases in
revenue from our movie ticketing and entertainment business and live stage
plays, which were impacted by theater and entertainment venue closures as a
result of COVID-19. The increase in content licensing revenue was primarily due
to the timing of when content was made available under licensing agreements,
including making certain 2020 releases available on demand after theater
closures due to COVID-19, including Trolls World Tour and The King of Staten
Island , as well as transactions with Peacock in the second quarter of 2020.
Filmed Entertainment revenue decreased for the six months ended June 30, 2020
compared to the same period in 2019 due to decreases in theatrical revenue,
other revenue, and home entertainment revenue, partially offset by increases in
content licensing revenue. The decrease in theatrical revenue was primarily due
to theater closures as a result of COVID-19. The decrease in other revenue was
primarily due to decreases in revenue from our movie ticketing and entertainment
business and live stage plays, which were impacted by theater and entertainment
venue closures as a result of COVID-19. The decrease in home entertainment
revenue was primarily due to higher sales of 2019 releases, including Dr. Seuss'
The Grinch, How to Train Your Dragon: The Hidden World and Glass compared to the
sales of 2020 releases, including 1917, Dr. Dolittle , and continued sales of
Fast and Furious Presents: Hobbs and Shaw. The increase in content licensing
revenue was primarily due to the timing of when content was made available under
licensing agreements, including making certain 2020 releases available on demand
after theater closures due to COVID-19, including Trolls World Tour, The
Invisible Man, and The King of Staten Island , as well as transactions with
Peacock in the second quarter of 2020.
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Filmed Entertainment Segment - Operating Costs and Expenses Operating costs and expenses decreased for the three months endedJune 30, 2020 compared to the same period in 2019 primarily due to decreases in advertising, marketing and promotion costs and other operating and administrative costs. The decrease in advertising, marketing and promotion costs was due to lower spending on current period releases as a result of COVID-19. The decrease in other operating and administrative costs was due to lower costs associated with our movie ticketing and entertainment business and live stage plays, which were impacted by theater and entertainment venue closures as a result of COVID-19. Operating costs and expenses decreased for the six months endedJune 30, 2020 compared to the same period in 2019 due to decreases in advertising, marketing and promotion costs, programming and production costs, and other operating and administrative costs. The decrease in advertising, marketing and promotion costs was due to lower spending on current period releases as a result of COVID-19. The decrease in programming and production costs was primarily due to higher amortization of film production costs in the prior year period. The decrease in other operating and administrative costs was due to lower costs associated with our movie ticketing and entertainment business and live stage plays, which were impacted by theater and entertainment venue closures as a result of COVID-19. Theme Parks Segment Results of Operations Three Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ 87 $ 1,464 $ (1,377 ) (94.1 )% Operating costs and expenses 486 874 (388 ) (44.3 ) Adjusted EBITDA$ (399 ) $ 590 $ (989 ) (167.7 )% Six Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ 956 $ 2,740 $ (1,784 ) (65.1 )%
Operating costs and expenses 1,279 1,652 (373 ) (22.6 ) Adjusted EBITDA
$ (323 ) $ 1,088 $ (1,411 ) (129.7 )% Theme Parks Segment - RevenueTheme Parks revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 due to the temporary closures of our theme parks as a result of COVID-19, beginning in late February inJapan and mid-March for our theme parks inOrlando andHollywood . Our theme parks inOrlando andJapan reopened with limited capacity in June, while our park inHollywood remains closed. Theme Parks Segment - Operating Costs and ExpensesTheme Parks operating costs and expenses decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to decreases in costs related to park operations due to the park closures, partially offset by pre-opening costs associated withUniversal Beijing Resort . 32
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Sky Segment Results of Operations
Constant
Three Months Ended Increase/ Currency
June 30, (Decrease) Growth(a)
(in millions) 2020 2019 $ % %
Revenue
Direct-to-consumer $ 3,524 $ 3,889 $ (365 ) (9.4 )% (6.7 )%
Content 234 376 (142 ) (37.7 ) (35.7 )
Advertising 321 563 (242 ) (43.0 ) (41.2 )
Total revenue 4,079 4,828 (749 ) (15.5 ) (12.9 )
Operating costs and
expenses
Programming and
production 1,543 2,239 (696 ) (31.0 ) (29.0 )
Direct network costs 498 414 84 20.4 24.7
Other 1,289 1,403 (114 ) (8.3 ) (5.5 )
Total operating costs and
expenses 3,330 4,056 (726 ) (17.9 ) (15.5 )
Adjusted EBITDA $ 749 $ 772 $ (23 ) (2.9 )% 0.2 %
Constant
Six Months Ended Increase/ Currency
June 30, (Decrease) Growth(a)
(in millions) 2020 2019 $ % %
Revenue
Direct-to-consumer $ 7,203 $ 7,723 $ (520 ) (6.7 )% (4.3 )%
Content 559 746 (187 ) (25.1 ) (23.3 )
Advertising 834 1,156 (322 ) (27.9 ) (26.1 )
Total revenue 8,596 9,625 (1,029 ) (10.7 ) (8.4 )
Operating costs and
expenses
Programming and
production 3,607 4,540 (933 ) (20.5 ) (18.5 )
Direct network costs 955 799 156 19.6 22.9
Other 2,734 2,851 (117 ) (4.1 ) (1.7 )
Total operating costs and
expenses 7,296 8,190 (894 ) (10.9 ) (8.6 )
Adjusted EBITDA $ 1,300 $ 1,435 $ (135 ) (9.4 )% (7.2 )%
All percentages are calculated based on actual amounts. Minor differences may
exist due to rounding.
(a) Constant currency growth is a non-GAAP financial measure. Refer to the
"Non-GAAP Financial Measures" section on page 35 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
Three Months Ended Six Months Ended
June 30, June 30, June 30,
(in thousands) 2020 2019 2020 2019 2020 2019Total customer relationships 23,716 24,016 (214 ) 304 (279 ) 416
Sky customer relationships represent the number of residential retail customers that subscribe to at least one of Sky's four primary services of video, high-speed internet, voice and wireless phone service. Commercial retail customers include hotels, bars, workplaces and restaurants with an active subscription for the purpose of providing Sky services to customers. Sky reports commercial customers based on the number of commercial agreements per venue in theU.K. , and generally based on a residential equivalent unit using the multiple of residential customer revenue inItaly and the number of active venues (bars and restaurants) or rooms (hotels and clinics) inGermany . Constant Constant Three Months Ended Increase/ Currency Six Months Ended Increase/ Currency June 30, (Decrease) Growth(a) June 30, (Decrease) Growth(a) 2020 2019 % % 2020 2019 % % Average monthly direct-to-consumer revenue per customer relationship$ 49.29 $ 54.31 (9.2 )% (6.5 )%$ 50.32 $ 54.06 (6.9 )% (4.5 )%
(a) Constant currency growth is a non-GAAP financial measure. Refer to the
"Non-GAAP Financial Measures" section on page 35 for additional information,
including our definition and our use of constant currency, and for a
reconciliation of Sky's constant currency growth rates.
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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 this metric 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 and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, revenue decreased primarily due to decreases in average revenue per customer relationship, driven by the impacts of COVID-19, which has resulted in lower sports subscription revenue, as well as a decrease in customer relationships. Content Revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, revenue decreased primarily due to decreases in wholesale revenue from sports programming as a result of professional sports leagues postponing events as a result of COVID-19. Advertising Revenue decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, revenue decreased primarily due to overall market weakness, which has worsened due to COVID-19, the postponement of sporting events due to COVID-19, and the impact of changes in legislation related to gambling advertisements in theU.K. andItaly that occurred in the third quarter of 2019. Sky Segment - Operating Costs and Expenses Programming and production costs decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, programming and production costs decreased primarily due to decreases in sports programming costs recognized as a result of professional sports leagues postponing events as a result of COVID-19. Sporting events, including European soccer leagues, resumed in May andJune 2020 and the costs associated with broadcasting these sporting events will be recognized in future periods depending on the timing and extent of future events. Direct network costs increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, direct network costs increased primarily due to increases in costs associated with Sky's high-speed internet and wireless phone services as a result of increases in the number of customers receiving these services. Other expenses decreased for the three and six months endedJune 30, 2020 compared to the same periods in 2019. Excluding the impact of foreign currency, other expenses decreased primarily due to lower advertising costs, resulting from the impact of COVID-19. Corporate, Other and Eliminations Corporate and Other Results of Operations Three Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ 46 $ 56 $ (10 ) (16.7 )% Operating costs and expenses 568 353 215 60.5 Adjustment for Sky transaction-related costs (16 ) (84 ) 68 NM Adjusted EBITDA$ (506 ) $ (213 ) $ (293 ) (136.9 )% Six Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ 166 $ 164 $ 2 1.3 % Operating costs and expenses 954 699 255 36.3 Adjustment for Sky transaction-related costs (30 ) (135 ) 105 NM Adjusted EBITDA$ (758 ) $ (400 ) $ (358 ) (89.2 )%
Percentage changes that are considered not meaningful are denoted with NM.
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Corporate and Other - Revenue Revenue primarily relates to Comcast Spectacor, which owns thePhiladelphia Flyers and theWells Fargo Center arena inPhiladelphia, Pennsylvania , and, beginning in the second quarter of 2020, revenues at Peacock. Corporate and Other - Operating Costs and Expenses Expenses primarily include overhead, personnel costs, the costs of other business initiatives, such as Peacock, and operating costs and expenses associated with Comcast Spectacor. Expenses increased for the three and six months endedJune 30, 2020 compared to the same periods in 2019 primarily due to certain costs incurred in the second quarter of 2020 in response to COVID-19, including severance and restructuring charges related to our NBCUniversal segments, and costs associated with Peacock, which were partially offset by a reduction in costs related to the Sky transaction. Beginning in the second quarter of 2020, Peacock costs include amortization of film and television costs and we expect to continue to incur significant costs related to additional content and marketing for the new platform. Corporate and Other Adjusted EBITDA excludes Sky transaction-related costs. Eliminations Three Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ (962 ) $ (682 ) $ 280 41.0 % Operating costs and expenses (832 ) (661 ) 171 25.7 Adjusted EBITDA$ (130 ) $ (21 ) $ 109 NM Six Months Ended Increase/ June 30, (Decrease) (in millions) 2020 2019 $ % Revenue$ (1,642 ) $ (1,321 ) $ 321 24.2 %
Operating costs and expenses (1,520 ) (1,312 ) 208 15.8 Adjusted EBITDA
$ (122 ) $ (9 ) $ 113 NM Percentage changes that are considered not meaningful are denoted with NM. Beginning in the second quarter of 2020, revenue and operating costs and expenses eliminations increased as a result of licensing of content between our NBCUniversal segments and Peacock. Refer to Note 2 for further 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 toComcast Corporation before net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock, 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. 35
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We reconcile consolidated Adjusted EBITDA to net income attributable toComcast Corporation . This measure should not be considered a substitute for operating income, net income (loss), net income attributable toComcast Corporation , or net cash provided by operating activities that we have reported in accordance with GAAP. Reconciliation from Net Income Attributable toComcast Corporation to Adjusted EBITDA Three Months Ended Six Months Ended June 30, June 30, (in millions) 2020 2019 2020 2019 Net income attributable to Comcast Corporation$ 2,988 $ 3,125 $ 5,135 $ 6,678 Net income (loss) attributable to noncontrolling interests and redeemable subsidiary preferred stock 21 78 98 157 Income tax expense 946 961 1,646 2,037 Investment and other (income) loss, net (420 ) 55 296 (621 ) Interest expense 1,112 1,137 2,324 2,287 Depreciation 2,099 2,197 4,206 4,437 Amortization 1,165 1,079 2,322 2,159 Adjustment for Sky transaction-related costs 16 84 30 135 Adjusted EBITDA$ 7,927 $ 8,716 $ 16,057 $ 17,269 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 outsidethe United States that are conducted in local currencies. As a result, the comparability of the financial results reported inU.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 Six Months Ended June 30, June 30, Constant Constant Constant Constant Actual Currency Currency Growth Actual Currency Currency Growth (in millions, except per customer data) 2020 2019 % 2020 2019 %
Revenue
Direct-to-consumer$ 3,524 $ 3,774 (6.7 )%$ 7,203 $ 7,525 (4.3 )% Content 234 364 (35.7 ) 559 727 (23.3 ) Advertising 321 547 (41.2 ) 834 1,127 (26.1 ) Total revenue 4,079 4,685 (12.9 ) 8,596 9,379 (8.4 ) Operating costs and expenses Programming and production 1,543 2,176 (29.0 ) 3,607 4,424 (18.5 ) Direct network costs 498 400 24.7 955 778 22.9 Other 1,289 1,362 (5.5 ) 2,734 2,778 (1.7 ) Total operating costs and expenses 3,330 3,938 (15.5 ) 7,296 7,980 (8.6 ) Adjusted EBITDA$ 749 $ 747 0.2 %$ 1,300 $ 1,399 (7.2 )% Average monthly direct-to-consumer revenue per customer
relationship$ 49.29 $ 52.72 (6.5 )%$ 50.32 $ 52.68 (4.5 )% 36
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Liquidity and Capital Resources 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 facilities; and our ability to obtain future external financing. Refer to "Impacts of COVID-19" for additional discussion. We maintain significant availability under our revolving credit facilities and commercial paper programs to meet our short-term liquidity requirements. As ofJune 30, 2020 , amounts available under our revolving credit facilities, net of amounts outstanding under our commercial paper programs and outstanding letters of credit and bank guarantees, totaled$9.2 billion . Operating Activities Components of Net Cash Provided by Operating Activities Six Months Ended June 30, (in millions) 2020 2019 Operating income$ 9,499 $ 10,538 Depreciation and amortization 6,528 6,596 Noncash share-based compensation 621 533
Changes in operating assets and liabilities (15 ) 95 Payments of interest
(1,936 ) (2,111 )
Payments of income taxes (333 ) (1,634 )
Other 103 254
Net cash provided by operating activities
The variance in changes in operating assets and liabilities for the six months endedJune 30, 2020 compared to the same period in 2019 was primarily due to the impact of COVID-19 on the timing of our film and television costs, including sports rights, as well as the timing of our accounts payables and accrued expenses, which was partially offset by the timing of our accounts receivable. The decrease in payments of income taxes for the six months endedJune 30, 2020 compared to the same period in 2019 was primarily due to the extension of due dates for second quarter 2020 federal estimated income tax payments to the third quarter. Payments of income taxes for the second half of 2020 will also include payments relating to the taxable gain associated with theAirTouch redemption which approximated the proceeds received. Investing Activities Net cash used in investing activities for the six months endedJune 30, 2020 consisted primarily of capital expenditures, cash paid for intangible assets and the construction ofUniversal Beijing Resort , which were partially offset by proceeds from sales of businesses and investments. Net cash used in investing activities for the six months endedJune 30, 2019 consisted primarily of capital expenditures, purchases of investments and cash paid for intangible assets. Capital expenditures decreased for the six months endedJune 30, 2020 compared to the same period in 2019 primarily due to decreases in spending by ourCable Communications andTheme Parks segments. We anticipate further declines in spending across our segments as a result of COVID-19, even as we continue to invest in scalable infrastructure to increase network capacity in ourCable Communications segment. Proceeds from sales of businesses and investments increased for the six months endedJune 30, 2020 compared to the same period in 2019 primarily due to$1.7 billion of proceeds received from the sale of our investment inAirTouch . See Note 9. Financing Activities Net cash used in financing activities for the six months endedJune 30, 2020 consisted primarily of repayments of debt, dividend payments and payments related to the redemption and repayment of subsidiary preferred shares presented in other financing activities (see Note 9), which were partially offset by proceeds from borrowings. Net cash used in financing activities for the six months endedJune 30, 2019 consisted primarily of repayments of debt and dividend payments. In the first quarter of 2020, we issued$4.0 billion of fixed rate senior notes maturing between 2025 and 2040,$3.2 billion (using exchange rates on the date of issuance) of fixed rate Euro senior notes maturing between 2027 and 2040 and$1.8 billion (using exchange rates on the date of issuance) of fixed rate Sterling senior notes maturing between 2029 and 2036. InMay 2020 , we issued$4.0 billion of fixed rate senior notes maturing between 2031 and 2051. For the six months endedJune 30, 2020 , we made debt repayments totaling$10.7 billion , including the early redemption and purchase of$9.0 billion of senior notes maturing between 2021 and 2047. 37
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InJune 2020 , we announced our election to exercise our option to redeem at par$1.4 billion of senior notes due 2046 inAugust 2020 . As ofJune 30, 2020 , we had no commercial paper outstanding and there were no amounts outstanding under our revolving credit facilities. 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. See Notes 6 and 7 for additional information on our financing activities. Share Repurchases and Dividends EffectiveJanuary 1, 2017 , our Board of Directors increased our share repurchase program authorization to$12 billion , which does not have an expiration date. Under the authorization, we may repurchase shares in the open market or in private transactions. We have paused our share repurchase program in order to accelerate the reduction of indebtedness we incurred in connection with the acquisition of Sky, and no common shares were repurchased under the authorization for the six months endedJune 30, 2020 . We paid$269 million for the six months endedJune 30, 2020 related to employee taxes associated with the administration of our share-based compensation plans. InJanuary 2020 , our Board of Directors approved a 10% increase in our dividend to$0.92 per share on an annualized basis. InMay 2020 , our Board of Directors approved our second quarter dividend of$0.23 per share paid inJuly 2020 . We expect to continue to pay quarterly dividends, although each dividend is subject to approval by our Board of Directors. OnApril 22, 2020 , we paid dividends of$1.1 billion . Guarantee Structure Our debt is primarily issued at Comcast, although we also have debt at certain of our subsidiaries as a result of acquisitions and other issuances. A substantial amount of this debt is subject to guarantees by Comcast and by certain subsidiaries that we have put in place to simplify our capital structure. We believe this guarantee structure provides liquidity benefits to debt investors and helps to simplify credit analysis with respect to relative value considerations of guaranteed subsidiary debt. Debt and Guarantee Structure (in billions) June 30, 2020 December 31, 2019 Debt subject to cross-guarantees Comcast$ 86.5 $ 80.4 NBCUniversal(a) 3.8 5.8 Comcast Cable(a) 2.1 2.1 92.4 88.3 Debt subject to one-way guarantees Sky 8.5 9.2 Other(a) 2.9 4.1 11.4 13.3 Debt not guaranteed Universal Beijing Resort(b) 1.8 1.3 Other 0.9 1.0 2.7 2.3 Debt issuance costs, premiums, discounts, fair value adjustments for acquisition accounting and hedged positions, net (1.7 ) (1.7 ) Total debt$ 104.8 $ 102.2
(a) NBCUniversal,
subject to one-way guarantees) are each consolidated subsidiaries subject to
the periodic reporting requirements of the
related disclosures in this section, together with Exhibit 22, satisfy these
reporting obligations.
(b)
additional information.
Cross-guarantees
Comcast, NBCUniversal andComcast Cable (the "Guarantors") fully and unconditionally, jointly and severally, guarantee each other's debt securities. NBCUniversal andComcast 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 38
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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 ofU.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 orComcast Cable of Comcast's debt securities, or by NBCUniversal ofComcast 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 ofJune 30, 2020 andDecember 31, 2019 , the combined Guarantors have noncurrent notes payable to non-guarantor subsidiaries of$123 billion and$122 billion , respectively, and noncurrent notes receivable from non-guarantor subsidiaries of$23 billion and$21 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 theSEC . Comcast also provides a full and unconditional guarantee of$185 million principal amount of subordinated debt issued byComcast 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 thisComcast 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 ofComcast 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 inComcast Cable and NBCUniversal, respectively. As ofJune 30, 2020 andDecember 31, 2019 ,Comcast andComcast Holdings , the combined issuer and guarantor of the guaranteed subordinated debt, have noncurrent senior notes payable to non-guarantor subsidiaries of$93 billion and$92 billion , respectively, and noncurrent notes receivable from non-guarantor subsidiaries of$20 billion and$18 billion , respectively. This financial information is that ofComcast andComcast Holdings presented on a combined basis with intercompany balances betweenComcast andComcast Holdings eliminated. The combined financial information excludes financial information of non-guarantor subsidiaries ofComcast andComcast Holdings . The underlying net assets of the non-guarantor subsidiaries ofComcast andComcast Holdings are significantly in excess of the obligations ofComcast andComcast Holdings . Excluding investments in non-guarantor subsidiaries, external debt and the noncurrent notes payable and receivable with non-guarantor subsidiaries,Comcast andComcast 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. 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 2019 Annual Report on Form 10-K. Recent Accounting Pronouncements See Note 8 for additional information related to recent accounting pronouncements. 39
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