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Xfinity 100 Gift Card - David N. Watson; President & CEO of Comcast Cable Company; Comcast Corporation Brett Joseph Feldman; Equity Analyst; Goldman Sachs Group, Inc., Craig Eder Moffett Research Division; Co-Founder, Co-Founder & Senior Research Analyst; MoffettNathanson LLC Jessica Jean Reif Ehrlich Cohen; MD in Equity Research; BofA Securities, Philip A. Cusick Research Division; MD and Senior Analyst; JPMorgan Chase & Co. Research Division Good morning, ladies and gentlemen, and welcome to Comcast's First Quarter Earnings Conference Call. (Instructions for Operators) Please note that the conference call is being recorded. I will now turn the call over to the Executive Vice President, Investor Relations, Ms. Marci Ryvicker. Please go ahead, Ms. Ryvicker. Thank you, operator, and welcome to the earnings call for the first quarter of 2023. You will hear first from Brian Roberts, Mike Cavanagh and Jason Armstrong. Then Dave Watson will join us and be available for Q&A. As a reminder, at the beginning of this first quarter, we changed the presentation of the operating results of the 2 primary business segments: Networks & Platforms and Content & Experiences. For more details, please refer to the 8-K filed on March 13, which is available on our Investor Relations page at www.cmcsa.com. I will now refer you to Slide 2 of the presentation accompanying this call, which is also available on our Investor Relations website and includes a safe harbor disclaimer. This conference call may contain forward-looking statements that are subject to certain risks and uncertainties. Additionally, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K schedule and the changes that came out this morning for a reconciliation of these non-GAAP financial measures to GAAP. With that, I'll turn the call over to Brian. Thanks, Marci, and good morning, everyone. Before we get into the quarter, let me acknowledge the news you all saw earlier this week. Obviously, a difficult moment. But we're very fortunate to have an incredible leadership team at NBCUniversal. You go down the list, and you will see many of them have been leading their sectors within the company for at least 10 years and are truly the best in the business. We are also fortunate to have Mike Cavanagh at the helm of NBCUniversal as president. Mike is a fantastic operator as many of you know very well. He will work closely with each of NBCUniversal's management teams to continue our positive momentum. Mike, along with Jason Armstrong, will lead the earnings calls on a development basis. Today, you will hear from them about their strategic focus and growth drivers now and in the long term. Jason will go into great detail about the first quarter results. Dave Watson and I are here for a Q&A. You'll hear a lot more about the great acceleration of businesses in Networking & Platform later in the call. Dave, thanks for a great start to this year. But before I hand it over to Mike, I just want to share my quick view of our recent performance. This was a really strong quarter to start the year, especially in the context of what remains a tight macro environment. We grew adjusted EBITDA by 3% and adjusted EPS by 7%. Additionally, we generated $3.8 billion in free cash flow and returned $3.2 billion in capital to all shareholders while continuing to make significant investments in several major initiatives, which is a real testament to A healthy balance sheet. Two things out of many important things that stand out to me, that I am really proud of. One is the animation business. By consolidating and combining our capabilities at DreamWorks and Chris Meledandri's Illumination, we've had great success creating franchises that people know and love around the world: Me, Shrek, The Animals, Minions and most recently, Puss in Boots and now Super Mario Bros., which just broke a number of records, including the world's biggest opening of any animated film of all time. These are the results of the strategic decision we made years ago to be a leader in animation and the conviction to continue investing in the business even during the depths of the crisis, which are now clearly emerging. The second is Connectivity & Platforms. The significant expansion we achieved this quarter, along with 4.5% growth in residential broadband ARPU, demonstrates successful discipline and superior management in a highly competitive environment. We are focused on delivering a superior experience and profitably serving our customers, and it shows. And with that, let me turn the call over to Mike. Thanks, Brian. We are off to a great start in 2023 and are gearing up for another strong year. We have incredible talent at all levels of our company and a DNA that fosters innovation and collaboration, resulting in operational excellence second to none. Couple that with our position as a scale leader in large and profitable markets with tens of millions of customers paying us more than $100 a month as well as hundreds of millions of TV and streaming viewers, and we have a healthy balance sheet. , which enables us to invest in all of our strategic opportunities and great returns while also returning a healthy amount of capital to shareholders. As pleased as we are with our results in the first quarter, each company's performance in the quarter is only an improvement on the strategy and long-term plan. And so before we delve into the details of the past months, I would like to spend a few minutes talking about our long-term growth drivers and where we are focusing most of our time and resources. I put these into 4 buckets: local networking, business services networking, our theme parks and experiences and creating value content. I'll start with local connectivity, which includes local broadband, local wireless and international connectivity. Broadband is a fantastic business. It is a great product for consumers and the demand is increasing. People are connecting more and more devices to our network, and they are consuming more and more data. Currently, the average monthly data usage of a broadband customer that does not take us video is around 700 gigabytes. And there is an increase related to the importance of reliability and speed with approximately 1/3 of our customers at 1 gigabit or higher and almost 3/4 at or higher 400 megabits. For us, customers are already advanced and the increasing level of expectation expected from their extensive experience is a significant change. And while the market is competitive as adding subs in the near future is likely to be a challenge, I fully expect that we will eventually return to consumer growth. We have the best hand to beat all competing technologies, whether it's fiber or fixed wireless. We see fiber as our long-term competitor. We have been successfully competing in fiber for over 20 years and have built a base of 32 million customers over this period. Our strategy is to have the most robust network, which we're doing even better as we transition to DOCSIS 4.0 around our industry-leading expertise with multiple services that provide added value. Now we are able to offer customers a connected package that includes excellent wireless products based on a large-light model with good economy and high-quality Wi-Fi. A new competitor is fixed wireless, which we see as a temporary non-standard solution for a specific segment based on their current needs. Our approach is to compete reasonably. We know how to segment the market. We have packages that cater to customers who want the fastest speeds and premium features and others that are more targeted to those looking for value-based solutions. We tested several targeted bids to this lower end during the quarter. We are happy with the results and will continue to follow through and respond effectively to each category. Meanwhile, as the local connectivity market and the macroeconomic environment continue, our focus will be on serving our existing base, growing our ARPU, increasing our wireless penetration and making active investments to expand our footprint at the fastest speed in our history. . You saw us do this throughout last year and in the first quarter, and I expect this trend to continue. Our second major growth opportunity, business services, approaching $10 billion in annual revenue, is growing in the mid-single digits with new reported margins just shy of 60% and delivering adjusted EBITDA growth in the high range. single digits. Here too, advanced and adaptable network infrastructure is more suitable for serving commercial and government environments compared to legacy landline and wireless providers. We are moving fast and have the ability to reliably and cost effectively meet the needs of our customers. We already have more than 2.5 million domestic business customers, more than any other competitor and we are targeting a $50 billion market opportunity within our footprint and a $70 billion to $100 billion market opportunity that we can now pursue by leveraging our technology and partners beyond our footprint. Our third opportunity for great growth is creating experiences with our intellectual property as well as exclusive IP that we license from others and bring to life theme parks such as Harry Potter or Nintendo characters such as Mario. Our parks interact with our customers, and this segment is clearly on a roll. Japan has bounced back and Beijing is back in the spotlight after last year when both were operating under COVID-related restrictions. And domestically, Orlando continues to do well, and Hollywood opened Super Nintendo World with great success. This outstanding performance gives us further confidence that our investments in new territories and attractive locations will also generate strong returns. We are excited about the following: Donkey Kong, another Nintendo land that will be opened in Japan in 2024, Epic Universe in Orlando in 2025 and also the ideas of the small parks that we recently announced: a horror experience in Las Vegas and the new park in Texas that is specifically designed for young guests and their families. Our fourth growth area is composed specifically of the stream side. We have a decades-deep library of original television movies. And we spend more than $20 billion each year to produce and deliver programming in all genres, sports, news, entertainment, drama and movies, which is beyond the reach of any media company. More than 100 million people engage with our content every month. In film, we were #2 at the worldwide box office last year with Jurassic, Minions and Halloween. Based on the current course, we are going to do even better in 2023. We started the year off with a home run and great momentum, the transfer of Puss in Boots, the success of M3GAN and now Super Mario Bros., which is only 3 It's weekend has already crossed $875 million at the international box office. We're really proud of our animation business. We've been in the film business for 100 years, and it's exciting how we've been able to create and leverage all of our films in and out of the frame and in so many ways, including transitions. The new thing we did in the movie windows. . We made the strategic decision to put a Pay-One window on Peacock, which actually folded at the end of last year. We now have one of the most complex movie shows on the air. The hits we have at the box office are going to Peacock, and this is proving to be both a successful acquisition and a retention tool. Add to that, the strength of content from our TV studio, which powers NBC's content and has helped make us #1 for many years across systems like Dick Wolf and SNL along with highly popular content on Bravo, all of this for continues Peacock The next day. Add this to our original, where we just started, shows like Poker Face, which launched and immediately settled near the top of the US original streaming list by Nielsen. And more to come. Among all this, we have an amazing line-up of sports, Sunday Night Football, the Premier League and recently, the Big 10. We believe that we have the right strategy for Peacock and one that fits our strengths: premium content with double revenue. streaming, both advertising and subscription fees. And we're encouraged by our results so far, growing paid clients and engagement rates of up to 20 hours per client per month, fueling strong growth in ad revenue. We're investing, but the results we're seeing give us confidence that we're on the right track for Peacock to break through and get out there. Looking at our organization as a whole, I couldn't think of a more profitable position to be in to take advantage of the growing demand and expectations as well as the changing habits of the global consumer. We are the best broadband company with the best content available in the best parts of distribution and aggregation. We are excited about all of our growth areas. Together, they represent the majority of our revenue and our high-margin businesses. As a result, these growth areas should be the top driver of our financial results in the coming years. With that, I'll turn it over to Jason to talk about the quarter. Thanks, Mike, and good morning, everyone. In late February, we announced that starting this quarter, we will report our results in 2 reportable business segments: Networks & Platforms and Content & Experiences. More closely aligning our like-minded businesses reflects how we manage our company and demonstrates our growth opportunities as a global integrated information distribution company. We also provide additional disclosures in areas that are critical to our overall results, namely business services and Peacock. Let's start with a summary of the first quarter results on Slide 4. The company's total revenue of $29.7 billion was down 4% due to a strong comparison to last year's Winter Olympics and Super Bowl as well as the negative impact of foreign currency, while the total of Our company's adjusted EBITDA grew by 3%, thanks to the continued strong performance of our Networking & Platforms business. Excluding the impact of the Winter Olympics and the Super Bowl and constant currency adjustments, the company's total revenue increased 1.5%. We grew adjusted earnings per share 7% to $0.92 and generated $3.8 billion in free cash flow while returning $3.2 billion in capital to shareholders in the first quarter. This is in addition to significant investments to support and grow our business, including our transition to DOCSIS 4.0 and the extensive footprint expansion, Epic Building as well as a steady stream of new lands and attractions at our theme parks and attractions. our studio's content production, which feeds into Peacock, a solid third-party licensing opportunity and a truly successful film business. Combined, these investment areas accounted for more than half of the company's total revenue in the first quarter with growth of 10% year over year. Now let's turn to our business results. Start on Slide 5 with Networking & Platforms. As a reminder, our largest foreign currency is the British Pound, which has depreciated by 9% year-on-year. So to show the underlying performance of the business, I will discuss our results on Networking & Platforms on a regular basis. Income is flat for a quarter, but this is worth unlocking. Core communications revenue, residential and commercial, rose more than 7% to $10 billion, while video, advertising and other revenues fell 7% to $9.8 billion. Year-over-year, we have generated 160 basis points of over-expansion in Networks & Platforms in total. This reflects our strategy of investing in and stimulating the growth of excess businesses while protecting the profitability of businesses with secular headwinds through systematic cost control. For more details, home networking revenue grew 8% with 5% domestic growth, 27% wireless growth and 18% global growth. In the business services segment, revenue continued to grow at a healthy mid-point pace. Our broad customer base for residential properties in the quarter was stable both last year and in the quarter with declines below pre-crisis levels. Although we had some success at the end of the quarter with several offers targeting the lower end of the market, the balcony environment is still very competitive right now, especially at the lower end. And so, our view remains that 2023 will be a tough time for us to add subs. Our growth vision and strategy has been consistent. We will compete hard but we will do it financially. While we hope to return to broad customer growth over time, in the interim as well as the long term, we will focus on maintaining and growing our broad ARPU. We are pleased with the 4.5% year-over-year increase in ARPU in the quarter. We expect continued strong revenue growth through 2023 and expect ARPU to be the primary driver. Domestic wireless revenue growth was a function of higher service revenue driven by continued strong momentum in customer lines, which rose 1.4 million or 32% year-over-year to 5.7 million in total, including 355,000 lines we just added, which was a record high for the first quarter. There is clearly a need for an integrated offering that delivers fast, reliable speeds, both domestically and internationally. We are well positioned to take advantage of this trend and have a long way to grow as less than 10% of our mass accounts currently adopt mobile payments. A new area of discovery for us is global networking. About 2/3 of global network revenues are expanding, growing at mid-decade levels. The remaining 1/3 is wireless, a large part of which comes from device sales and therefore, tends to change at the time the device is launched. The rest of wireless is service revenue, which is growing well because of additional subscriber lines and healthy ARPU growth. The strong revenue growth of our network businesses has decreased in visibility due to the loss of customers compared to last year, other revenue reflecting similar activities in wireline voice and advertising, which was affected by a difficult environment in addition to low political income. our domestic market. On the expense side, every expense item decreased in the first quarter except for direct product costs, which are based on success and directly related to the significant growth of our network businesses. The team's strong execution to deliver sustainable operational efficiencies, combined with strong growth in our advanced networking business, led to Networking & Platforms EBITDA growth of 4% to $8.1 billion. And as I mentioned a moment ago, the adjusted margin is expanding by 160 basis points year-over-year. And that's despite temporary headwinds in our global business related to revenue pressures due to the tough macro environment and costs. the top programs of sports channels, which have increased this year in terms of the time of events. Margin in our domestic legacy Cable business improved 250 basis points, reaching a record high of 46.5%. We've added innovation this quarter and moved forward to break down the gap between residential and commercial services. Networking Environments & Platforms EBITDA increased by 3% as the margin increased by 140 points to reach 37.8%, indicating positive revenue trends. The EBITDA business services network grew by 8%, while the margin expanded by 150 points to reach 58.3%. Over the years, we've talked about business services as a margin growth driver, and we're excited to expand our coverage in this area for the first time. Our results for the quarter and our new reporting structure clearly demonstrate that. This is a business that generated more than $5 billion in EBITDA by 2022 with significant growth ahead and should be a contributor to our growth profile in Networks & Platforms and overall. Together with Connections & Platforms, we are proud that the team is successfully managing the change we are managing in businesses with secular winds with an appropriate level of high ethical value by investing in others and clearly with revenue growth and margin features. Now let's turn to Content & Experiences Slide 6. Content & Experiences revenue was down nearly 10%, reflecting a strong comparison to last year, which included $1.5 billion in revenue from the Winter Olympics and The Super Bowl is covered in our Media section. And EBITDA was down 1% in the first quarter on parks and strong studio growth led by the successful blockbuster movie was offset by a planned increase in our investment in Peacock as well as lower direct advertising sales. In addition to the release of these results, media revenue was down 21% compared to reported and 2% excluding the Olympics and Super Bowl primarily due to a 6% decrease in domestic advertising, reflecting the general ad market's weakness, which appears to have stabilized. , offset by strong growth in Peacock's advertising revenue. When you exclude the Olympics and the Super Bowl, Peacock's ads increased by an impressive 90%. Domestic distribution revenue was down 8% but was up 4% excluding Olympic run by Peacock where distribution revenue was up 83%. Overall, Peacock's revenue increased 45% to $685 million, led by strong growth in paid subscribers, which were up 60% for the full year, ending the quarter with nearly 22 million subsidy, which was another landmark for our progress. way to scale the service. We are inspired by the trends we are seeing at Peacock. While we have proven that exclusive content and major events such as the World Cup at the end of last year can be important sales drivers, perhaps equally or even more important is the regular engagement that follows this type of event. such as content acquisition and retention payments. We saw that in the first quarter. We look forward to reporting more momentum on the enhanced offerings we are currently offering at Peacock, including a revenue breakdown between advertising and distribution and costs that separate programming and production versus marketing, promotion and others. Another new category that we have added to our Broadcasting Media is international networks. This is mostly distribution revenue for Sky Sports, and the lower single-digit revenue growth in the quarter was driven by higher distribution revenue, partially offsetting the negative impact of foreign currency translation. Other income decreased 21% due to lower content licensing. Media EBITDA was down 26%, including a $704 million EBITDA loss at Peacock. We see Media as one business. Although we have made cost reductions in our direct network, we have allocated some of these resources to Peacock with the goal of maximizing short-term and long-term profitability of streaming and vertical. We continue to expect Peacock's loss for the year to be approximately $3 billion, which we believe will be Peacock's highest loss since then and begin to steadily improve. Studios, this was a great quarter for our film division with strong theatrical revenue growth driven by the success of Puss in Boots: The Last Wish, which opened at the end of the fourth quarter, as well as new releases such as M3GAN and Cocaine Bear. Although revenue growth was partially offset by lower content licensing in our television studio, the acceleration of our film business resulted in a 13% increase in Studio EBITDA, which also included marketing and promotional costs related to the April 5 release of Super Mario Bros. is fueling a strong start to our second quarter. In Theme Parks, revenue grew by 25% and EBITDA by 46% to $658 million, thanks to the continued recovery after the lifting of the COVID restrictions and witnessing the significant investment we have made in our parks. Although demand and financial results were strong across the board, our international parks delivered the majority of growth this quarter. While Japan was not affected by the COVID restrictions, our Osaka farm continued to recover. And we see great demand for Super Nintendo World, which we opened in early 2021. But given the restrictions related to COVID that were in place, many people could not visit the park. Our garden in Beijing was also affected by the restrictions related to COVID last year and is now growing at a very healthy rate. Beijing showed strong year-over-year growth and was profitable in the quarter despite typical winter winds. On the domestic front, Hollywood enjoyed record first-quarter results due to the highly successful opening of Super Nintendo World, while Orlando continues to outperform previous disaster levels. We'll now wrap up with free cash flow and capital allocation on Slide 7. As I mentioned earlier, we generated $3.8 billion in free cash flow this quarter and we achieved this through our absorption rate. higher working capital and making meaningful investments in our network and theme parks. These investments resulted in a 37% increase in total capital expenditure primarily due to higher CapEx. In Connectivity & Platforms, CapEx increased by 30% with CapEx strengthening at 9.7% primarily driven by investments to further strengthen and expand our network. By 2022, CapEx intensity for Networking & Platforms was 10%. We expect to reach the same level in 2023, which includes our previous guidance for our domestic Cable business by the end of the year as we continue to transition our US network to DOCSIS 4.0 as well as accelerate our residential growth. Content & Experience CapEx increased by $343 million driven by theme parks with Epic accounting for the majority of spending this quarter. As we mentioned in our year-end call, we expect the farm's CapEx in 2023 to increase to approximately $1.2 billion, remain high in 2024 and then decrease in 2025, the year we open Epic. In summary, since this is my first quarter as CFO, let me review our capital allocation framework. First we have to invest in growing our business. We talked about many examples today: Epic, our extensive network, streaming and aggregation to name a few. Midda labaad waa in aan ilaalino booskeena hadhaaga iyada oo leverage la beegsanayo ku dhawaad 2.4x. Tani waa heerka ugu wanagsan, waxaanu aaminsanahay, in la ilaaliyo suuqyada raasamaalka ee balaadhan oo qoto dheer iyada oo loo marayo meerto, si taxadar leh loo miisaamo fursada dib u soo celinta sinnaanta levered. Saddexaad waa in lacag caddaan ah loo celiyo saamilayda. Waxaan ku faanayaa inaan dib u soo iibsanay $12 bilyan oo saami ah 12kii bilood ee la soo dhaafay, oo ay ku jiraan $2 bilyan rubucii, hoos u dhac ku yimid saamigayada 7% muddada xaddidan marka lagu daro faa'iido caafimaad leh oo sii kordheysa, taas oo aan kordhinay in ka badan 7% bishii Janaayo. Taas, waxaan ku celin doonaa wicitaanka Marci si aan u helo Q&A. Marci? Mahadsanid, Jason. Hawl-wadeen, aynu furno wacitaanka su'aalaha, fadlan. (Tilmaamaha Hawl-wadeenada) Su'aashayada koowaad waxay ka timid Ben Swinburne oo ka socda Morgan Stanley. Laba su'aalood, mid ku saabsan NBC iyo mid ku saabsan wireless-ka. Ma garanayo inay tani u badan tahay Mike. Mike, marka aad eegto NBCUniversal, waxaad u badan tahay inaad heshay meherado si ka wanaagsan sidii hore u shaqaynaya markaad eegto jardiinooyinka iyo istuudiyahaaga. Sida cadna, waxaa jira khalkhal badan oo ku yimid ganacsiga Warbaahinta. Waxa kaliya oo aan la yaabanahay, marka la eego silsiladda maamulka iyo nooca doorkaaga ballaadhan, tani miyay fursad u tahay in aad dib u eegto ganacsigaas si istiraatiji ah, oo ka hawlgala dhinaca qaab dhismeedka qiimaha, kaliya indho cusub? Waxaan xaqiiqsaday inaad si cad madaxweyne u ahayd oo aad ganacsigaas daawatay in muddo ah. Laakiin waxaan rabay in aan maqlo fikradahaaga oo kaliya marka la eego waxa ka socda NBC. Kadibna waxaa laga yaabaa Dave, ganacsiga wirelessku wuxuu sii wadaa inuu cabbiro. Waxaad ka hadashay dalabaadka dalabaadka la isku daray oo cad oo xoogan. Waa maxay hamigaagu halkan markaad eegto inta ka hartay '23' si aad u sii wado dardargelinta kobaca ganacsigaas? Sidee baad u wadaa nimanyahow galitaanka saldhiggaaga ballaadhan si macno sare leh? Ben, waa Mike. Markaa waan boodayaa. Waad ku mahadsan tahay su'aasha. Markaa ka bogo faallooyinka. Waxaan halkan joogay - way adag tahay in la rumaysto inay ku jiri doonto 2 toddobaad gudahood, waxaan halkan joogi doonaa, 2 ama 3 toddobaad, 8 sano si aan shuraako ula ahaa Brian iyo inta kale ee kooxda hoggaanka. Markaa waa sax in aan arrimahaas oo dhan u dhawaaday, maahan dhawaan oo aan ahay Madaxweynaha nus-sanad ee u dambeeyay laakiin runtii tan iyo markii aan ku biiray. Markaa ka fekerida xeeladaha NBC, waxaan u malaynayaa in habka aad uga fikiri karto ay tahay habka aan uga hawlgalno ganacsiyada oo dhan, oo ay ku jirto NBC, waa in xeeladaha ay sameeyeen kooxda hoggaanka oo dhan. Brian wuxuu xusay sida ugu fiican ee aan u leenahay koox ganacsi oo kala duwan, jardiinooyin, istuudiyo, TV, adeegyo baahinta, wararka, ciyaaraha. Markaa waxaad qiyaasi kartaa istaraatiijiyadaas oo ay isku duba rideen kooxaha hoggaamiyeyaasha, sida cad, iyadoo lala kaashanayo hoggaamiyaha ugu dambeeya ka dibna Brian iyo naftayda. Markaa waxaanu si qoto dheer uga qayb qaadanaynay muddo dheer oo dheer waxa ay xeeladahaasi ku saabsan yihiin iyo dabagalka sida aanu wax u wadno. Markaa in kasta oo ay nasiib darro tahay in isbeddel lama filaan ah lagu sameeyo hoggaanka, haddana waxaan idiin sheegayaa, ma aha -- ma jirto sabab uu qof u malaynayo in aannu dib u eegayno istiraatijiyad taas ka dhalatay. Waa iskeed. Sida cad waan ka falcelin doonaa marka deegaanka nagu wareegsan uu is beddelo. Laakiin sidaad tilmaantay, ganacsigu hadda si fiican ayuu u shaqaynayaa. Markaa shaqada #1 aniga ahaan waa inaan dejiyo wax walba oo aan hubiyo in ganacsigu yahay iyo hoggaamiyeyaasha ganacsi ee NBCU ay diiradda saaraan shaqada gacanta ku haysa. Oo runtii waxaan dareemayaa dhawrkii maalmood ee ugu horreeyay tan, laakiin taasi si fiican ayay u socotaa. Aniguna run ahaantii uma maleynayo in ganacsigu uu lumi doono garaac. Taas, waxaan ku wareejin doonaa Dave. Waad ku mahadsan tahay Mike. Ben, Markaa wireless-ka, wireless-ku wuxuu sii ahaanayaa qayb muhiim ah oo ka mid ah istiraatiijiyadeena guud. Dib ugu soo noqoshada ilbiriqsi, waxaan runtii jecelnahay bilawga sanadka ee jihadayada. Rubucan, waxaanu dhignay rikoodh kale oo rubuci hore ah oo lagu daray 355,000. Oo markaa tani waxay ina gelinaysaa khadka 5.7 milyan. Markaa bilow wanaagsan sanadka. Waxaana wali ka yar 10% galey baladh-bandheeyaha, sidaa awgeed waxa ay ina siinaysaa run-way dheer oo kaa horeeya iyo halka aad ka eegayso '23. But our strategy is to focus very much on our core service offerings of By the Gig, which we still have and use, unlimited tiers. And it gives us a strong -- real strong value proposition to all segments that we serve. So it's important to note that we leverage mobile in all aspects of how we go to market, in acquisition, base management and retention. So mobile does very well in all 3. But as connects are a little bit softer through the cycle, base management has been very strong as we go to existing customers and provide a great upgrade opportunity for them. So our pricing focus is our core services, but we do go in and out in terms of promotions, with gift cards, some device subsidies that we've historically done, really no different there. But we also had a $50 combined broadband, mobile offering that all helped. There was a little bit of a lift there and a great value message to the existing base. So long term, less than 10% penetration, a lot of upside for us in wireless in a large revenue pool that we have, I think, a unique position given our broadband network is ubiquitous, our go-to-market mobile opportunity is ubiquitous within our footprint. And so you look at it, there's upside in residential and commercial. There's a domestic and international upside with mobile. There's an opportunity us to consider long-term cost side with offloading traffic. And then we have our existing capital-light MVNO, which we think is great and helps us compete footprint-wide. And then on top of all of that, we have Wi-Fi. That is just a terrific offload mechanism in and of itself. So as our competitors face trade-offs and whether it's geographic or capacity, we can go to market with one approach across our entire footprint, and wireless is a big part of that strategy. So we'll go in and out with offers, but we feel good about our momentum. Two questions if I could. First, you reported really exceptional margins in what would have been your old domestic Cable business. I'm wondering if you could just talk about the contribution to that improvement from wireless, the extent to which wireless is either offsetting the customer acquisition cost or just the gross margin rate and how that's impacting margins overall?And then on the NBCU side, the NBA playoffs have had exceptionally good ratings, and there's been a lot of talk about your potential interest in the NBA. I wonder if you could just discuss that a bit, and maybe just talk about what role sports might play as you go forward with Peacock and your NBC business? Thanks, Craig. It's Jason. Let me start with the margin question. I'll turn it over to Dave after that for some follow-up and then over to Mike on the NBA question. So on margins overall, pleased with the quarter. Obviously, we grew connectivity margins broadly by 160 basis points year-over-year. We've said in the domestic Cable business, margin's up 250 basis points to a record 46.5% strong margin performance. I think when we look at the drivers of that, number one, mix shift, high-margin businesses, i.e., the connectivity businesses, broadband, business services, wireless sort of in that category, a $10 billion book of business growing at 7%, and it's margin accretive. In addition to that, really strong expense management by Dave and the team. If you look at every expense category outside of direct product costs, which are the costs that go into feed the connectivity business growth, every single category down year-over-year. So I think really strong performance on margins in general. As we look at wireless, in particular, I'd put it in the broad bucket of the connectivity category. It obviously supports and augments broadband, which is one of our, if not the highest margin products. And so wireless is a contributor to that. Craig, Dave here. So it does start -- if you look at the domestic margins, the 250 basis points and the 46.5%, there's a host of things. It all starts, as Jason said, with margin-accretive connectivity businesses, both residential and commercial. I think that we continue to benefit. There are -- transactional activity is lowered. A lot of this is just constantly being focused on the customer experience and taking out unnecessary transactions. That continues. But we're also very disciplined and stay focused on fixed costs. So that we look at every part of the business in terms of opportunities to do a good job, be competitive, be aggressive, but also take out unnecessary costs. And then there's also -- one of the things I think the good things that Cable does and we've been focused at Comcast is we leverage our existing network, our great network and our operational capabilities to do new lines of business. Business services is a great example of that, but wireless is another one, of which our existing sales channels, our existing capabilities in an MVNO-light way, it just -- it's a big part of the connectivity story. So I think we do well when we can leverage our strength, and our strength there will continue to be our network and our go-to-market approaches that we've done, I think, a pretty good job over the years. But everything we do, inbound sales, digital, we leverage wireless. And Craig, it's Mike. On NBA, obviously a tremendous product, and the playoffs are great. I think the negotiation is there. That's a ways out. But obviously, [NB] Sports does a great job partnering with the leagues we partner with, broadcast, streaming and otherwise. So time will tell. But as we look at things, we always look at a overall financial envelope. What's the right portfolio of overall sports rights we want to have and do that in a way that, as we've said and Jason said earlier, we manage linear, broadcast and Peacock as one business. So that's the way we would look at any of the rights that are out there in the future. Our next question comes from Doug Mitchelson with -- from Crédit Suisse. Two questions for Dave actually. First, on broadband. I'm just curious, both from a competition standpoint and a health of the consumer viewpoint, how voluntary and involuntary churn are trending and how the base reacted to the price increase this cycle versus prior cycles? And then secondly, I know it's relatively recent, but I'm just curious on the planned upgrades with 10G launched in February and progress in 40 markets that was highlighted in the slide show. If there's any kind of practical experience in the marketplace as to how the network is reacting and how the consumer is reacting post upgrades? Well, thanks, Doug. So starting with competition and churn, so overall, the environment is -- there's still, as I mentioned, overall transactional activity in general is down. There's 2 parts of that. One is as you brought up, there's -- it continues to be pretty intense competitively. That's been the case for a while. But also, there's just less activity period with less moves. And so the thing that it really stands out continues to be the case that our churn is near record lows in terms of compared to pre-pandemic periods. So we're not seeing, in terms of churn, any material spikes when it comes to competition. We are seeing an impact in terms of connects. And so some of that is a transactional activity, some of it is competitive pressure, but it's more felt on the connect side of things and a little bit more on video as we have less video attachment on that side. But broadband, you look at our broadband base, we have a very stable base, 32 million residential broadband customers. Churn, very healthy and certainly lower than pre-pandemic period times. We watch the competitive landscape every day. And so while certain -- theres fixed wireless, the fiber group, but we continue to fare well in terms of kind of all tiers and in terms of churn. So it's not -- we haven't seen a spike in voluntary or the nonpay in regards to the economy. So -- but in terms of the network and the investments that we've made, we're pleased with our progress. We have about 20% of our footprint we've upgraded around the multi-gig capabilities that we have on track to continue that to over 30% come year-end and setting ourselves up very nicely for DOCSIS 4. At the end of the year, we'll be testing it. And I think next year will be a pretty big year for that. But every step of the way, we're delivering increased value. And it's where the customer is going in terms of the increased focus, every application of streaming, of gaming. And you look at where the customer is today, the 700 gigabits -- gigabytes in terms of HSD-only consumption, events like the Thursday Night Football that just caused a spike and then yesterday that Man City against Arsenal, Peacock, having a great Premier League match so that -- see a little bit of a bump in terms of broadband usage. So there's going to be more of that. The customer is going to do more with broadband, not less. And so I think that serves us well long term competitively, and we'll continue to be a champion of every single broadband great application as they come along. This is Brian. I just want to add one thought. The last point Dave made, I think you did a fabulous job explaining it. I just want to underscore how much I personally believe that, that's what makes us in a great position. If you think about less linear and more streaming, is that trend going to continue? Absolutely. It seems very, very likely. And who is best positioned to provide more and more capacity, and this path to 10G, we have a north star that we -- the team has created. We know what we want to bring to customers over the next several years. And as more and more needs come about, we're going to be the network there to deliver. So we're the provider of all that connectivity is a really special place to be. Our next question comes from Jessica Reif Ehrlich with BofA Securities. I have a bigger NBCU question and smaller cable. But Mike, you're the President of Comcast and the Head of NBCU. So 2 giant jobs. Is this a permanent solution? And in the meantime, obviously, the media landscape has changed drastically since you guys bought NBCU over a decade ago. So can you address the cyclical and secular challenges as well as opportunities, including, but I'm certainly not limiting it to a pending WGA strike, Disney's battle in Florida with Governor DeSantis that might affect Universal theme parks, the scale needed to compete in direct-to-consumer and the range of Hulu outcomes that would significantly affect your business, whether it's scaling up or cash coming in the door? And then the smaller cable question, sorry, is the video loss is accelerating. Do you have a point of view -- does this trend continue? Or is there a level of stability that you expect? Okay, Jessica, it's Mike. So I'll dive in. I think the short answer to the question is that I think what -- the way me stepping in to oversee NBC is quite sustainable. And why I say that is as President, I was already overseeing all of this and close to the people that run the NBC businesses and the Cable businesses and the corporate areas. And I think what's really important to understand is that we've got high-quality operators and leaders in all of the seats around the company: Philadelphia, L.A., New York, Orlando and so forth. So while I'll have to work a little harder and frankly, I'm energized to do so because I look forward actually to spending time getting closer to the NBCU businesses and spending more time deeper in them and with the leaders there. And frankly, since I'm going to be here for a long time, I actually think that's good for me and good for the company over the long term. So I would put no timetable at all on -- no time pressure to do anything other than make sure the businesses hum, which they're -- that's what they're doing right now, and that's what I see continuing. And maybe someday, we'll think there's a better way to approach it, but I'll never be moving far away from the businesses no matter what. And I'm going to own the outcome anyway it turns out. So I think -- think of me as being there for a while. In terms of the cyclical versus secular and the laundry list there of all the things we're dealing with, I'd say all that's embedded in the plans that we have. When you think about our Content & Experiences businesses, you think about our Parks business, which is just doing tremendously well, and we've got tremendous growth investments behind that. And it had nothing to do with the challenges for eyeballs and the movement of traditional television to different forms of consumer consumption. So think of parks as -- put it aside, it is an incredibly valuable and growing business. And then I think in the traditional TV businesses, we're -- that's why we're -- exactly why we're doing Peacock. And remember, we're at 22 million subs now. We were 20 when we ended last year. We were 15 when we ended the third quarter of last year. So I think we're really pleased as we're 1 quarter into 2023 to have held level of engagement in the product, hours watched and so forth and kept churn very low. As we look ahead, some really good content coming later in the balance of the year. So on track, and then some. We'll have our role to pay and Comcast customers coming over to and more the second half of the year. So I think we feel really good about the strategy of how we're managing on the Media business side. And then really on Studios, you look at -- Brian covered it, but you look at the power of our Studios, both film and television. And they're incredibly strong, and leadership is excellent. And the -- Brian mentioned animation, but we've got Fast 10 coming out in a couple of weeks. We've had great hits on the television side and more to come. So I think that's also, I think, a strategy around Studios that is -- and we've stayed, as we've said, agnostic, I guess, to whether it's the word to use, whether things need to necessarily end on our platforms, Peacock or linear or someone else's. So I think there's durable value in that side of things sort of no matter how some of these trends work out. And I'll leave it at that and talk more some other day about some of the details. I'm not going to talk about Hulu. And on strikes, we certainly hope that we find an equitable outcome that avoids a strike, and that's what our team is planning for. Over to you, Dave. You got it. Jessica, Dave here. So on video, we continue to segment the marketplace. We have a lot of options. But the main point that has really developed is the video attachment being down. And so there -- and our rate approach is to not subsidize unprofitable video relationships. And I've shifted some time ago anticipating how things evolve that are focusing on the overall relationship and the connectivity opportunity. So the main -- one of the key points, though, that to make sure that folks understand, we did see certainly an uptick in customers dropping video. But we've also seen these customers that are retaining broadband. And so our full disconnect churn, video and broadband, remains at record low levels and is down nearly 25% since the pre-pandemic period. So we're able to have managed through the cycle. And still, there's some video packaging that we're going to be very focused on and based on the segment. And we'll fight hard, whether it's acquisition, base management or retention. So it's important to us, but we have figured out a way to manage it financially. And if you look at broadband, the net result is broadband is faring well and holding the line in terms of the base. And so as things continue to evolve more towards streaming, I think we're in a great position there. And we also have invested in our platforms. So we have the platforms of Flex. We have X1 and the new Charter JV with Xumo that we feel great about long term. So yes, the video losses did a bit of an uptick, but we did offset it with some of these platform relationships that I think long term are going to be very important. Sort of a 2-part question about connectivity CapEx. You seem pretty comfortable that you can continue this pace of footprint expansion within that CapEx profile you previously talked about. You also seem pretty happy with the traction you're having as you broaden the footprint.So I'm curious how you think about the merits of maybe building even faster, whether that's organically or if you would simply be waiting to see whether it makes sense to participate in some of these government subsidy programs. And then I think in the past, you provided some statistics about this enormously high share of your customers' true mobile traffic that happens in a very small portion of your geographic footprint. And that data point alone would imply that there's a very high ROI associated with deploying your own mobile infrastructure and bringing that on net. And you obviously have all the resources you need to do that, including spectrum. I'm curious why that hasn't happened yet? Or what would be the circumstances under which that could become a really attractive use of incremental capital investment in the connectivity business?
Source: broadbandnow.com
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