Q4 2020 Comcast Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to Comcast fourth quarter and full year 'twenty 'twenty earnings Conference call. At this time all participants are in a listen only mode. Please note that this conference call is being recorded I will now turn the call over to senior Vice President Investor Relations Ms Marci ride the cure.
Please go ahead Mr <unk>.
Thank you operator and welcome everyone.
Joining me on this morning's call are Brian Roberts, Mike Cavanagh, Dave Watson, Jeff Shell and Jeremy Darroch.
Brian and Mike will make formal remarks, and Dave Jeff and Jeremy will also be available for Q&A.
Let me now refer you to slide two which contains our safe Harbor disclaimer and remind you that this conference call may include forward looking statements subject to certain risks and uncertainties. In addition, during this call we will refer to certain non-GAAP financial measures.
See our 8-K and trending schedules for the reconciliations of these non-GAAP financial measures the gas.
With that let me turn the call over to Brian Roberts for his comments Brian.
Thanks, Marty and good morning, everyone.
I'm really proud of our fourth quarter results and look forward to giving you a glimpse of what we're focused on and excited about once we come out of this pandemic.
Our most recent performance was highlighted by cable, which grew EBITDA by over 12%.
Net cash flow by 26%.
As of the best results of the year kind of any fourth quarter in over a decade.
We also have good news to share on our pork segment, which reached breakeven excluding Beijing, even with Hollywood being closed.
Our premium AD supported streaming service Peacock now has 33 million sign ups within just six months of its nationwide launch.
And encouragingly Sky's customer and revenue base essentially returned to pre COVID-19 levels this past quarter.
Clearly our company is strong a testament to the tough decisions made by our leadership team.
Excellent execution and coordination by our dedicated employees.
Looking back over the whole here 2020, with one of the most uncertain and challenging periods that any of us can remember but.
But we rose to the occasion, ensuring the safety and protection of our employees, providing customers with unparalleled service of innovative products that they relied on more than ever.
Strengthening of our investment grade balance sheet.
<unk> to invest for long term growth and success.
This year's cable results were nothing short of exceptional hitting a number of company records.
We generated $2 million net broadband additions for the year at 538000 for the fourth quarter, reaching record low churn.
High speed Internet drove our highest ever full year net customer relationship additions of $1 6 million, bringing.
Bringing us to $33 million total customer relationships.
With just the only 50% penetration of our footprint there remains plenty of opportunity for future growth.
We also delivered outstanding EBITDA growth of nearly 9% and cash flow growth of 16%.
All of 2020.
Broadband is the cornerstone of what we do powered by our robust flexible and reliable network.
Many years of investments we've made have been on full display.
We've continued to enhance our market leading competitive position, while keeping people connected protected informed and entertained by proactively managing our network, increasing broadband speeds expanding our internet essentials program for low income households.
Riding payment plans for customers struggling the most and offering peacock and flex for free.
This pandemic has forced us to rethink the way we operate in service of our customers.
The immediately we moved all of our care reps to work remotely from home.
Which has gone so well that we're leaning towards embracing this model permanently.
In addition, we promoted further adoption of our digital self help tools, such as Xfinity assistant which are available 24 seven.
We also expanded our self installation of eligibility and now over two thirds of our customers of connecting to our services. This way.
We are working hard with our communications and marketing efforts to enhance awareness of all we have to offer which enables us to take costs out of the business, while delivering a better experience for our customers.
The fact in the past 12 months, we've reduced the agent handled calls by over $16 billion and truck rolls by $1 6 million, all while adding the more than one 5 million net new customer relationships.
Our efforts to reduce costs have been extremely successful, but what's even more exciting are the investments, we're making to grow the overall business the.
Great example, is flex, which is offered to all of our broadband only customers for free so that they can connect seamlessly to the streaming services a law.
Within the first half of this year of flex along with X. One we'll be carrying all of the top streaming apps the United States.
Just added HBO, Max will be adding Disney plus in the near future and we have many more on the roadmap.
<unk> has been a major win for us and we continue to have really high hopes.
Xfinity mobile just came off a strong fourth quarter with nice sequential improvement in customer additions, resulting from a number of significant changes as we fully integrate mobile into our core cable operations and re prioritize our sales channels and we're really excited for 2021 as we've recently expanded.
<unk> parts of our <unk> agreement with horizon that will enable us to improve our range of offerings and acquire more customers more profitably as we said from the beginning and enviable led capital light wireless model is the right one for us and has even more strategic opportunity in the years ahead.
Business services came back faster than we expected.
This quarter, we added 26000, net new customers and generated revenue growth of four 8% the highest we've seen since the pandemic began.
With less than 20% share of an approximately $50 billion total addressable commercial market in our footprint.
We still have plenty of runway.
So all in all of cable had a fantastic 2020, and we look forward to a very strong 2021 and beyond.
While the global pandemic has had a more significant impact on NBC Universal we took advantage of this moment to make a number of changes in both management and operations that sets us up for success.
The most notable example is the reorganization of our cable networks of broadcast television businesses, which are now combined along with Peacock in the structure meant to drive long term cost efficiencies and revenue opportunities.
We finished the year, having renewed a number of carriage agreements with many of our valuable distribution partners, putting us in a position of strength as we enter 2021.
Peacock has had an exceptional start.
Feeding all of our internal targets.
Of this premium hybrid Avon service, which has a light AD load and is unlike any other offers a breadth of content that appeals to just about every demographic at an unbeatable consumer value much of it for free.
Momentum has further accelerated with the addition of the office, which we own and began streaming exclusively on Peacock as of January one.
Not only is the office driving incremental users, but the.
These viewers are naturally finding and watching other programs on the platform like parks and Rec Yellowstone our latest original saved by the Bell Mega hit movies from Universal and other studios and sporting events, such as the Premier League golf uneven and NFL Wild card game and.
And earlier this week, we announced that modern family will be coming to the Peacock next month.
Followed by the WWE in March.
And film our decision to release, our titles direct to consumer via of premium video on demand when theaters where of course to close has proven to be profitable and the right move for us.
While we look forward to when we can enjoy the theatrical release of many franchise films such as fast nine and the next minions and Jurassic World.
We'll lean into what has become a successful hybrid distribution model.
Covid had the most direct impact on our theme parks, which are either closed or running at limited capacity for the bulk of 2020.
But I am pleased with how quickly we were able to reopen Orlando and of soccer, while ensuring the safety of our staff and guests.
We continue to provide an amazing entertainment experience.
Guests are responding as confirmed by our steadily increased attendance at our most recent financial results.
We saw this fourth quarter, especially in Orlando gives us even more conviction in the momentum of our theme parks will experience when we reach of sustainable recovery.
We may experience some near term setbacks with the most recent pickup in Covid cases per annum.
<unk> optimistic as ever about the long term trajectory of this very special business.
Scott had a strong and encouraging fourth quarter, we added net new customers in every market bring your customer base essentially back to pre COVID-19 levels.
The same can be said for revenue, which was essentially flat from what we generated in the fourth quarter of 2019.
And we've continued to make meaningful progress on our strategic initiatives Sky, Q, which integrate screaming.
Past, 60% penetration in the U K and is poised to continue with recent additions of Disney plus discovery, plus an Amazon Prime video.
We're really pleased with the success of Sky originals, which contributed to the 20% increase in viewership on our Sky Entertainment channels during the fourth quarter and all of 2020.
Reaffirming our commitment to creating Sky studios and expanding original programming.
While the recent wave of Covid infections and related Lockdowns across Europe are once again, creating disruption we're implementing the same protocols and procedures that worked the first time around and we have confidence of a similar pattern as this latest locked out receipts.
We really look forward to the second half of this year. When we will also start to see the benefits from the reset of major sports rights contracts and cost savings that should result from the new leaner operating model and we're still on plan to double 2020 EBITDA over the next several years as Jeremy recently laid out.
Speaking of Jeremy I wanted to thank him for his exceptional leadership of Sky and for his partnership since the acquisition.
He and the team have establish a unique world class brand and a strong well run business that's now fully integrated.
I'm thrilled for Dana strong who has now taken over as CEO of Sky.
Many of you on this call of met with Dana since she joined our cable business as head of consumer services back in 2018.
Excuse me accomplished executive with a wonderful ability to transform inspire and drive positive change.
On top of all of that she also has over 20 years of international experience with nearly half of it spend in Europe.
2021 offers a lot of promise for Comcast and hopefully for the entire world.
While the first half will be more challenged in the second due to the most recent strain of Covid.
We're really encouraged by the promise of of vaccine, which is the first step in putting the parts of our business that have been most impacted.
Back on a path toward growth.
This optimism is shared by our board of directors, which this morning announced an increase in our dividend for the 13th consecutive year.
I'm also pleased that is now our expectation that we will return to repurchasing shares in the back half of this year.
While 2020 with not with any of US had imagined a year ago at this time.
Our execution cooperation and fast decision, making enabled all parts of Comcast NBC, Universal and sky to respond and manage through a difficult environment for <unk>.
Arguably well.
I am truly proud of what we've accomplished in our fourth quarter shows just how well this company is positioned to succeed.
Mike over to you.
Thanks, Brian and good morning, everyone.
Now I'll review, our fourth quarter 2020 results and make some comments on current conditions.
And where possible on the year ahead.
Let's begin on slides four and five with our consolidated results.
Revenue declined two 4% to $27 7 billion for the fourth quarter.
And four 9% to $103 6 billion for the full year.
Adjusted EBITDA declined 15% to $7 2 billion for the fourth quarter and 10% to $38 billion for the full year.
Covid related severance and restructuring charges were $590 million in the fourth quarter and $828 million for the full year as we took actions to position our businesses for success in a post Covid world.
The corporate and other segment includes these charges and also includes peacock for its launch year.
For 2020 kickoff generated revenue of over $100 million.
While EBITDA losses approached $700 million.
We continue to expect that EBITDA losses for 2020 in 2021 combined for Peacock will total roughly $2 billion.
Adjusted earnings per share declined 29% of 56 cents for the quarter and 17% to $2 61 for the year.
Finally free cash flow was $1 7 billion in the quarter and $13 3 billion for the full year, reflecting the decline in EBITDA and the benefit from a reduction of working capital and capital expenditures in part due to the pandemic.
Now, let's review our business segments, starting with cable communications on slide six for.
For the fourth quarter cable communications revenue increased six 3%, while EBITDA increased 12% and adjusted EBITDA less capital grew 26%.
For the full year, we grew customer relationships by $1 6 million of 41% increase year over year with 455000 net additions in the fourth quarter driven by high speed Internet, where we added 2 million net new residential and business customers this year and 538.
In the fourth quarter.
These record customer additions were the primary driver of our high speed Internet revenue growth of 13% for the quarter and 10% for the full year.
Other revenue highlights include acceleration in both business services and wireless.
Business services posted four 8% revenue growth and 26000 net new customer additions, primarily driven by improvement in small businesses wire.
Wireless revenue grew 36% with 246000 net new lines in the quarter, bringing us to $2 8 million total lines at year end.
Wireless is a strategic priority for us and should accelerate on the back of several actions we have taken.
First we've expanded our horizon <unk> agreement.
We fully integrated mobile into our core operations and third we've refined our marketing and activated all of our sales channels and we're seeing a nice lift in our retail stores, which are now fully open.
Per video revenue declined 7% with higher rates implemented in the beginning of 2020 more than offset by subscriber declines, including a 248000 net loss of <unk> customers this quarter and advertising revenue increased 34% year over year or two 2% <unk>.
<unk> political which almost doubled what we have generated in the last presidential election cycle in 2016.
Turning to expenses cable communications fourth quarter expenses increased two 4%.
Programming expenses were up seven 2%, primarily due to the number of contract renewals that started the cycle through in 2020, combined with annual escalators and existing agreements.
Non programming expenses declined slightly reflecting lower technical and product support and customer service costs, which were partially offset by higher advertising marketing and promotion spend to drive topline growth.
And higher expenses associated with the increased political advertising activity this quarter.
Non programming expenses per customer relationship decreased five 1%, despite a record customer growth.
Cable communications EBITDA grew by 12% in the quarter and eight 6% for the full year with margins, reaching 42, 1% an improvement of 170 basis points, excluding the <unk> adjustments that impacted results earlier in the year.
Cable capital expenditures decreased one 1%, resulting in capex intensity of 13, 5%.
For the full year capital expenditures declined four 4%, resulting in capex intensity of 11% our lowest full year on record and an improvement of 100 basis points year over year exclusive of <unk> adjustments driven by lower spending on customer premise equipment and support capital.
The offset by higher spending on scalable infrastructure, which was driven by our ongoing investment to enhance the capacity of our network to support increased data usage.
Turning to the current environment.
High speed Internet customer additions remain healthy and we have all of the pieces in place for 2021 to be of very strong year.
We also have to remember that 2020 was exceptional on many accounts and because of that we view 2019, which was also very strong for us as the more appropriate year against which to benchmark our performance.
Turning to video we expect the higher video rates, we implemented at the beginning of this year, resulting from our current programming of renewal cycle to drive video sub losses back to the levels. We had experienced in the first half of 2020.
Our video strategy is centered on profitability, we do not chase unprofitable video subscribers as we can now offer flex for free to those who prefer of streaming only entertainment option.
Looking to the full year, we expect cable communications revenue growth to exceed the three 4%, we just reported for 2020.
As we remain focused on driving our connectivity businesses.
With better year over year comparisons in the first half.
We expect programming expense growth to increase at high single digit levels similar to the fourth quarter as programming carriage renewals rolled through in 2021 of programming expense growth is expected to moderate in 2022 and thereafter non.
Non programming operating expense growth should normalize at a low single digit increase to 2019 levels as we support the higher level of customer relationships and accelerate growth in our wireless business, which we expect will achieve standalone profitability in 2021.
With our consistent discipline on expenses and capital investment coupled with the trends at work as we remained focused on connectivity. We are confident in our ability to increase profitability expand margins and improve capex intensity, both in 2021 and thereafter.
Now, let's turn to slide seven for NBC Universal.
For the fourth quarter NBC, Universal revenue decreased 18% to $7 5 billion and EBITDA decreased 21% to $1 6 billion.
Cable networks revenue was down six 4% in the fourth quarter, driven by a 38% decline in content licensing and other revenue.
While the distribution revenue was flat compared to a year ago, reflecting the absence of carriage renewals combined with modest sequential improvement in subscriber losses.
The delay to the start of the NBA and NHL seasons had a negative impact on our advertising revenue, which declined four 2% while the related shift of sports rights amortization out of the quarter was the benefit to EBITDA, which grew 22% year over year.
For the full year cable networks, EBITDA increased 4%, primarily driven by the sports related impacts of Covid.
Fewer sporting events in 2020 contributed to lower distribution and advertising revenue as well as lower programming and production expenses of $655 million year over year.
Seasons were shortened earlier in the year and current seasons were delayed pushing of number of events and the related rights amortization costs for 2021.
So looking to 2021, we expect healthy distribution revenue growth as a result of recent successful carriage renewals.
We also currently expect significantly more sporting events compared to 2020, which should result in higher advertising revenue, but also a significant increase in sports related programming and production costs equating to a low double digit decline in cable network's EBITDA this year.
Turning to broadcast revenue decreased 12% in the fourth quarter due to a 39% decline in content licensing and of nine 6% decline in advertising revenue partially offset.
<unk> offset by another quarter of double digit increases in retransmission consent fees.
The content licensing revenue declines at both broadcast and cable networks were timing related as sales to streaming platforms, including Peacock, we're more heavily concentrated in the first nine months of the year.
We also had a difficult comparison to a significant library deal and last year's fourth quarter.
The decline in advertising revenue was driven by lower ratings.
Partly due to the delayed launch of our fall season.
This was somewhat offset by record levels of political advertising of our local stations.
The lower revenues were partially offset by a decline in operating costs, reflecting lower content licensing and the delay in production due to COVID-19, resulting in a decline of 24% to $356 million in broadcast EBITDA.
Filmed entertainment revenue declined eight 3% and EBITDA increased to 65% to $151 million for the fourth quarter.
The <unk> revenue declined 70% due to the theaters being either closed or operating at limited capacity, while content licensing increased 23% driven by <unk>.
Expenses were significantly lower due to fewer releases as a result of COVID-19.
In 2021, we hope to debut of number of our franchise films in theaters, such as fast nine and minions two but the situation remains fluid and we're still adjusting our 2021 slate to maximize value as evidenced by our recent decision to push back the release of boss Baby <unk>.
From March to September.
Theme parks revenue was $579 million in the quarter with an EBITDA loss of $15 million.
These results reflect universal Orlando resort, and Universal Studios, Japan operating at limited capacity, while Hollywood remains closed.
Results also include $45 million of Universal Beijing Preopening costs.
For 2021 keep in mind that the first quarter tends to be seasonally light in terms of attendance and we also expect an increased COVID-19 impact given new restrictions in Japan, which have also caused us to delay the opening of Super Nintendo World.
We are pleased the university of aging remains set to open this summer with preopening costs ramping to $300 million in the first half of this year.
One last item I'd like to highlight we will be changing the way we report for NBC Universal starting in the first quarter of 2021 with the largest impact being to our television businesses as we combine cable networks and broadcast into one segment along with Peacock.
Now, let's turn to slide eight per sky, which I'll speak to on a constant currency basis.
Sky revenue for the fourth quarter declined 9% to $5 2 billion.
The reflecting a two 8% decline in direct to consumer revenue driven mostly by our hospitality or pubs and clubs segment, which was challenged by additional COVID-19 related lockdowns during the quarter, excluding hospitality direct to consumer revenue was essentially flat year over year with solid low single digit growth in the.
Okay.
Somewhat offsetting the decline in direct to consumer revenue was a 10% increase in content revenue as we monetize our original programming while advertising revenue grew three 9% as sky outperformed a challenge to advertising market helped by a strong performance in the U K.
Sky added 244000, net new customers in the quarter, bringing us essentially back to pre COVID-19 levels of total customer relationships with the additions in all markets driven by a very healthy streaming business.
We've also seen strong uptake in our broadband and mobile products in the U K.
<unk> EBITDA was $139 million as the fourth quarter was impacted by a number of expense items, such as incremental sports rights amortization related to the shift of sporting events that had been delayed as the result of COVID-19.
Higher investments in entertainment programming.
The costs related to the launch of our new Sky channels last may as well as higher marketing spend to promote strategic initiatives such as sky Q growth in our mobile product in the UK and broadband in Italy.
Looking ahead, we would characterize 2021 is a tale of two halves. The first half is under pressure due to the recent increase in COVID-19 related restrictions due to the extreme levels, we experienced at the beginning of the pandemic.
With the government mandated the closure of pubs and clubs as well as many retail outlets, we are experiencing weakness in hospitality in advertising and we now expect Sky's first quarter revenue to decline slightly year over year.
We also expect first half expenses to be elevated when compared to 2020 as higher sports rights amortization, resulting from sporting events being postponed from 2020 to 2021 will be with us through the second quarter.
And non sports related costs, we will see an increase as we grow broadband and mobile in the U K broadband in Italy and launch the SMB business in the UK later this quarter.
In the second half of 'twenty, one we expect a quick recovery in hospitality and advertising revenue. Once these latest restrictions are lifted and an acceleration in EBITDA growth from the <unk> related to our major sports rights resets and more efficient operating structure.
I'll wrap up with free cash flow of capital allocation on slide nine we.
We generated $13 3 billion in free cash flow and paid $4 1 billion of dividends to our shareholders in 2020.
Consolidated total capital, which includes capex as well as software and intangibles decreased six 4% per the year two of $11 $6 billion, while working capital improved by $2 $2 billion to a decline of $178 million for the full year, both reflecting an impact from COVID-19.
Looking to 2021, we anticipate total capital will remain relatively flat to 2020 levels, while the working capital drag will increase relative to the levels. We saw in 2019, which is the more appropriate comparison due to the increase in content investment our broadcast of the Olympics and the reversal of Covid really.
<unk> onetime tax deferrals.
Turning to capital allocation, our strategy has always been a balance of several important priorities, maintaining a strong balance sheet investing in profitable organic growth and returning capital to shareholders.
First on our balance sheet, we've made great progress, reducing net debt from 108 billion post the Sky acquisition at the end of 2000 $18 billion to $90 billion at the end of 2020.
Second we remain focused on organic investment in our businesses to grow the long term earnings power of the company, including our Capex investment in broadband at parks and continued investment behind other growth initiatives, where we see strong return on investments such as <unk> mobile Peacock and flex Sky Q.
<unk> and broadband in Italy.
Third we are committed to returning capital to shareholders through dividends and buybacks and we have a proven track record. We have increased our dividend 13 years in a row at a 17% CAGR significantly in excess of the S&P over that same time period.
In addition, we of a demonstrated history of buying back stock, having reduced our share count by nearly 20% between the NBC Universal and Sky acquisitions. In 2021, we believe we will be able to return to our historical practice of returning ample capital to our shareholders.
We are again, raising the dividend by <unk> of share to a one dollar per share.
And we are planning to return to buying back our stock.
As Brian mentioned, our hope is to start in the back half of this year gradually ramping up to historical levels, while we continue to pace towards hitting our intended target leverage levels, which we currently expect to reach by year end 2022 the.
The specific timing and magnitude of our buyback activity will be subject to improvement in our businesses most impacted by the pandemic and the implications related to potential changes in tax policy.
So thanks for joining us on the call. This morning, and I'll now hand, it back to Marci to handle Q&A.
Thanks, Mike Regina, let's open the call for questions. Please.
Thank you we will now begin the question and answer session. If you have a question. Please press star and then the number one on your Touchtone phone if you wish to be removed from the queue. Please press the pound key.
You are using a speakerphone you may need to pick up the handset first before pressing the numbers once again, if there are any questions.
Star then the number one on your Touchtone phone.
Our first question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.
Thank you good morning.
One for I guess, Brian and Dave on cable and then one for Jeff on NBC.
So.
Obviously really strong customer metrics in 2020, particularly on the broadband side and I was curious.
When you look at what transpired last year in terms of the increased demand for the product and also how you guys operated the business what are the things that you think of Covid specific versus durable I mean, I know you talked about 2019 as the benchmark year, but as we think about the longer term how do you look at last year's performance and.
Of the specific drivers in terms of their durability beyond the pandemic and then free Jeff you guys laid out I realize this is prior to your <unk>.
Elevation of CEO, I think 30% to 35 million active accounts on Peacock by 'twenty four I know sign ups in active accounts of different metrics, but it seems like youre of nicely ahead of that trajectory can you just sort of reframe the opportunity with peacock for us today.
Versus kind of the initial outlook and when might revenues become kind of materials. The NBC for that business. Thanks, everyone.
Well Ben.
Dave.
The kick off on the cable side.
I think it starts with the the main point that we've had great momentum in broadband.
<unk>.
The many quarters now well before COVID-19, so theres been real strength in the category for Us and I think we point towards the fundamentals of.
Of broadband and the fundamentals have been very consistent.
For us it starts with the market the market is growing.
Taken share and the sources are geographic all over the country, where we serve an across the board competitively with DSL sources telco wired wireless and other competitors. So yeah.
I think while they're in 'twenty truly.
A an exceptional year for performance and as Brian said I think the right way of looking at 'twenty you got to look at the full year results and when you do that you know the.
$2 million.
Net customer additions it really is extraordinary.
The fundamentals that we see going forward low churn, we compete well on the front end.
We've consistently invested in of the best network in the marketplace.
Debt is ubiquitous.
We deliver the best overall service redefined the category and speed coverage control and now streaming.
And so you add up all of those things I think it points towards strong organic growth.
But as you look to next year as Mike said.
We do have a healthy start to the year, we're really encouraged.
What we're seeing right out of the gates, but I do think 2020 as everybody went home and there is just a lot more in a short period of time folks that were working from home schooling from home.
I think there is debt.
The unique moment, but I think the fundamentals continue we have penetration upside there is growth opportunities there.
We believe strongly I think 19 was a very strong year too by the way I think that is the right one to look at as the best day.
<unk> on a go forward basis.
Our next question will come from the line of Jessica Reif, <unk> with Bank of America, and so we.
Peacock, obviously is a.
<unk> is primarily in a barge service and we have a number of metrics the one.
John that we that Brian and Mike talked about today of sign ups with one set of every quarter, which we reached $33 million. This week.
People sign up then they use it actively and then the the usage per user that drives the amount of hours that we sell in advertising and we are up significantly over all of our metrics versus what we anticipated going into the business where only we.
Launched this on Comcast just over nine months ago and nationally just over six months ago. So we're at the very beginning.
Of this of this business, but we're very confident based on the small amount of time that the business model is exactly the right business model people are signing up they're using that more than we expected and advertisers are very interested in buying it. So the steady growth is very promising for us and.
And we don't have anything to reframe at this point, but I think that the performance that is as much better than we expected. It gives us a lot of optionality going forward, but we're just going to continue to drive this business model now and.
And focus on the advertising revenue.
Thank you Thanks, Ben Regina next question please.
The next question is from the line of Jessica Reif Ehrlich with Bank of America. Please go ahead.
Alright. Thank you I also of two questions first on the NBC Hugh.
Can you talk about the cause of the <unk>.
[noise] timeframe.
Where you'll see the benefits of the restructuring and within that like what is the long term view of cable networks.
The all eventually being peacock and on the cable side.
Several of you mentioned I think Brian I think of all of you mentioned the benefits of the new voice and then forget all the deal.
We have about show up will be in revenue additional services, what's the timeframe for that as well. Thank you.
Jeff do you want to say.
Yes, Thanks, Brian Hi, Jessica So so we view, obviously, our TV business as a whole as Mike says, we're going to we're going to.
Redo, how we report starting next quarter and we view of the whole TV business as a whole and while our restructuring definitely took a lot of cost out of the business, but you are starting to see in the numbers the <unk>.
Real purpose of that was to allow us to grow in the future and and and really run it as one business. So cable networks of obviously are a big part of the business. There is still the the biggest EBITDA driver and I don't expect that to change anytime in the near future, but we're looking at the two revenue streams of the business is subscription and advertising as one.
<unk> broadcast cable and Peacock and we're programming and as such we're selling of to advertisers as one platform as such and so I think over time, it'll be harder and harder to distinguish between the profitability of cable networks and the rest of our TV business because we're looking at it is as one business, but the restructuring of allows us.
To run it like that and we think that that's going to allow us to really.
Grow the business over time.
If you want to check in on wireless Yeah, Hi, Jessica So Doug.
If the <unk>.
Brian we've been really pleased with the relationship with Verizon.
We've had a great partnership.
And you know glad the.
The one important aspect of of.
Of things as it improved the NV in Oh, Brian.
Brian mentioned the capital light approach is working for US we think that's going to work in the future. So I think as the starting point certainly will enable us to amplify.
What we're already doing.
It really pushed towards the range of of offers that keep us.
Very competitive we continue to grab switching share in the mobile space, but you back up for a second and.
We're just overall, we have been pleased and we're very optimistic about.
Of the mobile business of what it will do in particular continues to perform very well for broadband retention.
And so we're committed to accelerating growth in mobile.
And we mentioned this last time.
While the <unk> enhancement of a nice step forward there are a lot of other things that we're doing like.
Really going after every single sales channel that we have we reopened retail and of safe mode, New safety protocols.
Every single sales channel, whether it's digital Paul centers you name. It we're really focusing on mobile. So we're also leading into <unk>, we will participate very much in <unk> and we're featuring mobile in packaging with broadband.
Leading in some cases when there is a new product NPI, whether it's Apple Samsung we use that moment of literally lead.
With the with mobile so I think overall, we're real pleased and and I think it.
We feel good about the runway I would also point towards our overarching plan debt.
One we have access to the.
The country's best network.
With Verizon and so I've talked about that I think we also are leveraging continue to leverage Wi Fi and weird, we've always uniquely provided a great experience not just in the home, we're improving things outside of the public area and then over time I think being of the key thing.
<unk> is being able to add a third layer, which could be our own targeted.
Wireless infrastructure, which we might use to supplement the Verizon network.
It really go after the high dense usage areas. The spectrum that we've already acquired so I think all of these factors point towards or think of unique opportunity for us.
Thank you. Thank you Jessica Regina next question Paul. Your next question comes from the line of Doug Mitchelson with Credit Suisse. Please go ahead.
Thanks, so much if I could just follow up on wireless when you said that you can improve the range of offerings to more customers as part of the new M can.
Could you address business customers now with your wireless service of perhaps you could before but any clarification on that.
And what are the new offerings, and where are the new customers that you can address as a result of the changes of the M. B now and then.
Brian not to put you on the spot, but any thoughts on the Olympics and its likelihood and the.
Potential benefits, the Peacock, where the rest of the operations. Thank you.
Well I think I'm on the wireless question I think this is the beginning of the year. So I think we'll have more to report as the year goes on with the tougher.
Follow up on what Dave just said, but we think including.
Some offerings to businesses.
But.
We're kind of it's early in the year, so stay tuned, but I think what we wanted to convey today is that the piece parts are in place.
And we have momentum and it's a strategic part of our bundle as Steve just said in terms of.
Reducing churn and also driving us toward.
Keeping in end of profitability and.
This was these were important elements to get right. So.
I would say more to follow.
The question about Olympics is what will it happen.
Or.
You're a bit more specific if you don't mind, Doug Yeah, sorry, Brian I guess there is there is some concern out there of that.
Whether or not the Olympics will happen and I know, it's sort of important for driving your businesses and I was hoping you were excited about in terms of marketing Peacock last year and as you've taken a step forward of Peacock in the had some initial success. How do you think about using the Olympics as of.
The goal to drive usage and the awareness of Peacock.
Yep understood well first of all I want to Echo, what Jeff said really pleased with how fast Peacock.
As of.
The exceeded this year, even without the Olympics that we had hoped for and that was going to be the big launch moment.
I think the.
The team is doing an outstanding job and giving us the the <unk>.
Fast start the debt I think everyone would want to have an even better than that perhaps so that gives us Jim.
Great the expectation for the future so.
Sitting here today I believe there will be an Olympics.
I hope to be an Olympics and I think that's our best.
Intelligence at this time.
And we're excited about debt I think it can be done in a variety of ways as we've seen sporting events all over the world take place from Premier League to the NFL.
The others.
Sure.
With limited spectators.
No spectators or wherever the world may be.
In Japan in July that'll be up to the host country and the host committee.
If in the event it doesn't happen we have another Olympics coming in Beijing.
Seven months later or so so.
I don't know, Jeff, whether you want to add anything to that but we're very hopeful and believe.
The they'll find a way to safely and successfully how the Olympics, which for US is the TV event and would be an amazing moment for the world to come back together post what we've all globally been true.
Which is so unprecedented so we're super hopeful and optimistic.
Thank you, yes, I guess all the time.
Go ahead, Jeff go ahead, no I was just kind of I was just kind of add to what Brian said I think advertisers also are optimistic but the.
The Olympics are coming we continue to pace.
The last earnings call I said, we were up over where we were a year ago. When we thought the Olympics will be a year ago that gap has grown even further as advertisers just kind of jumped in.
The buy so.
Anything can happen in this COVID-19 world, we don't know what's going to happen, but we're pretty confident the ones Olympics is going to happen and advertisers are are kind of jumping in and agreeing with Brian sentiments.
Thank you.
Regina an hour of writing for the next question. Thanks. Your next question comes from the line of Bill Cusick with JP Morgan. Please go ahead.
Hi, guys. Thank you.
Thanks for the buyback commentary should we still look at two five times trailing 12 months EBITDA as of the test for buybacks and can you remind us what the year end of 'twenty two target is.
And then Mike to confirm your comments on margins and capital intensity I think youre guiding the cable margins capital intensity of improvements versus 2020, but not giving of level I assume thats against the reported numbers. Despite all the moving pieces can you give us any sort of direction on that level and and why not guide this year versus previous years.
Thanks.
Sure, Phil It's Mike and Dick I'll do the second one first I think Dave gave plenty of color in terms of.
Well as I think in the in the earlier comments about the.
The the activities of the cable division in terms of focus on expenses walking in programming renewals, which.
No.
And just driving the business towards.
The connectivity and wireless towards profitability and all of those factors come together and when you look at the long term trajectory of the business, including our comment is that we are confident in our ability to increase profitability expand.
Margins and improved capital intensity not just in 2021 and that is versus reported 2002 2020 numbers.
To your question.
But really thereafter, I mean, I think the the.
The business is set up for that for.
The long term horizon beyond just the year ahead so.
The calling out specific numbers I think is of less utility frankly than giving you. The broad backdrop that gives you the long term lens through which you can judge of all of those pieces, but we're quite confident that all of those things coming together expense discipline and efficiency on the capital side combined with innovation and focus on connectivity allows us.
To give that outlook.
Of improving.
Margins and capital intensity looking out ahead.
In terms of Dave I don't know if you have anything to add there.
Yes, I think the focus.
All of us really going after.
The margin capital intensity of improvements you know that's not going to stop starts with connectivity.
And building customer relationships and of profitable way.
Managing this video transition.
Like we're doing in extreme focus around expenses that we and the healthy way, Mike talked about Brian talked about it just taken a lot of transactions out of our digital focus and self install kits. These are things that I think of very durable that'll go beyond.
What we're dealing with in this environment I think we've learned a ton and will continue to operate the business and the unique way. So I think you'll look towards those kinds of activities of the amount.
That's K today, two thirds of the transactions. The connects are that way and then three quarters of our digital.
Capable transactions are being completed through our digital tools, we're going to continue to focus on all of those things that just drive non.
Non programming costs and so we'll stay focused on all of that.
And then just.
The elaborating I think earlier comments really.
Covered at all on buybacks, but I'll, just expand a bit I mean, obviously, we've been talking Brian and I and the team for a while about our desire to get back into the historical balance on capital allocation, which you know.
As you know is keeping the balance sheet strong.
Making healthy investments in the organic growth across our businesses, which I think from listening to the call today anyone would I hope gather that we continue to be very lean very much leaning into doing that where we see returns and opportunities to make investments in these businesses for growth and then get back to.
Our balance.
Balance with complete capital return the 13th year, we've increased the dividend, but we turned off the buybacks for a while and want to return to.
Being in that.
A portion of the return element as well so.
As I said, we're pleased with where the balance sheet as we've gotten net debt down to $90 billion from 108 after sky.
Just the evidence that we're seeing in parks in the fourth quarter, we were breakeven.
Ex the patient pre operating cost, even with Hollywood closed and even with the capacity constraints just gives us a high degree of confidence that when.
People can return to travel on the other side of the vaccinations outpacing the virus that we were going to see the COVID-19 impacted EBITDA businesses snap back to historical levels to your point, it's going to take 12 months for it to run through and get a full and get it fully back hence our point that.
In the second half of this year, we would expect to see the beginnings of that and rather than wait for a full 12 months. We will start you know, we hope and plan to begin our buyback at that moment, we will keep it at the historical level, you know call it as much as $5 billion ramp up to that and probably stay there until we.
We actually get to the.
Definition that you called out with on a trailing 12 month trailing basis to get to around or just inside of two five times and I expect that to happen by.
By the end of 2022.
That's helpful. Thanks for taking the next question please.
Your next question comes from the line of Craig Moffett with Moffett Nathan Cheng. Please go ahead.
Yeah, Hi, two questions if I could.
First.
Brian you talked a little bit about how pleased you are with flex, we certainly get more questions about it from our clients know that.
And then had been the case with a lot of enthusiasm for what flex could become so I wonder if you could just expand on flex a little bit and talk about what your hopes and expectations are for flex and could you grow that into a national.
The product that is widely distributed or even a global product the two.
Lightly distributed.
As an aggregator platform and then with respect to wireless.
Wonder if you could just update us on your thinking about the Cbr's spectrum now that we're out of the CPR S. A quiet period and and what you might do now with.
With the strand mounted small cells for traffic offload, whether you're testing that in any markets or how much traffic you expect you might be able to offload from the from the envy of no agreement.
Steve Why don't you take the second one first about wireless in CCAR I don't know if theres anything to add at this moment.
But and if were.
You want to feel free to talk about that.
Well Craig.
And then if you want to start on flex, that's fine and I can quality of so we can do.
Yeah, well, let me touch on the first one then and go into the CVR aspect the on flex.
Starting Craig with the current strategy, just a little bit the where we package it with broadband another great way of surrounding broad bandwidth products that drive.
Better retention outcomes.
It's working it's working very well so we targeted to the streaming segment and give the customer great experience with the X one voice and all of the apps. So the tons of apps will have just about everything pleased with the Peacock performance for sure all the other apps that we've launched.
Including HBO Max and soon to be later on this quarter Disney.
Today, It is more targeted but as you mentioned I really do think the next phase that we're working on and developing for and turning our innovation focus as the debt. This is a long term platform opportunity for us.
And.
Aspect of the company that we have called zoom out debt. Thank you all know the.
That's one piece of being able to drive help drive advertising, we could participate in revenue.
And the App splits that we get and so we think of this with scale.
As you build a common software stack that includes sky do it together, which we're already working on and then you have opportunities and which we've talked about going to smart Tvs, but really leveraging unique scale internationally that we can have whether it's the device.
Or whether it's a software solution.
I think these are the things that we will look at it right now it's working Greg within footprint, but we're building out plans beyond that.
So I do like the hang.
Hang on one second let me just add to that then.
That you.
The whole.
The articulation of the company's strategy with broadband.
And the aggregation and screaming.
I think as embodied inside flex so peacock success very much partially.
Due to the early success to what flex can do for broadband customers I wished and other programmers are.
Coaching us with their content and seeing what both the <unk> one platform the <unk> platform.
Next platform can do for them. So that's led us to the looking at what David was just talking about what are other opportunities that are in.
The <unk> can be taken advantage of the scale of this platform at the end.
And the ability to.
Bundle of things that way.
And I think we'll have more to talk about throughout the year same sort of answer on the wireless question I think what we're set up.
Or future opportunities with some of the investments we've made in some of our early success. So I share your clients' enthusiasm I think the product is going to continue to improve we'll have some more updates on that as we go along.
But I'm very encouraged as well and I think the team that created flex has done the great service for the company.
David I think the only other point on wireless and Brian and Craig would be we are.
Looking at and.
Working on development plans around the targeted use of the CVR of spectrum in dense high usage areas and how we could offload traffic.
Have the experience be terrific and doing so so nothing more really to come at this point. This is a multiyear effort.
So, but a lot of focus is on it right now.
Thank you. Thank you. The next question please.
Your next question comes from the line of Brett Feldman with Goldman Sachs. Please go ahead.
Thanks, and if you don't mind I'm asking is going to follow up on sales question. So Mike when you were responding to <unk> question on the buybacks you talked about ramping back up towards the historical level of 5 billion of year until you get back to sort of that long term leverage target of about two five turns but if I think longer term. If you were to sort of remain at your.
Oracle buyback pace, you would probably continue to delever and I think actually quite rapidly.
Historically, you've tended to redeploy that excess liquidity into your strategic M&A program and so the question is how do you think about the the medium to long term importance of preserving dry powder for that type of flexibility.
Versus whether your current asset portfolio is sufficiently well suited to meet your long term operating targets. Thank you.
Sure Brian can obviously chime in but I think we feel very good about the collection of businesses that we have how they fit together how the how sky is enabled together with cable NBC thing the our advances in the three pillars that Brian described broadband streaming and aggregation so I wont rich.
Pete too many of those proof points of of what we are as a company.
But.
We'll always look at M&A, but I don't think there is any.
Any doubt that we are very pleased and don't see any strategic gaps in the portfolio that we have.
So we'll talk about it when we get to the.
The two five times, but.
I wouldn't suggest that.
Beyond that stage, we would just delever I mean, we'd get inside that number and you know and.
From there we will of options and we'll discuss it with folks as we as we get there but it's.
That's where we stand today, Brian anything else you want to add.
I would just add two other things I think is an important moment for us.
Today in getting to a point that we feel the businesses are healthy that we can see we believe and we hope obviously things can change with the progress with the vaccinations and.
And the pair of businesses really having to.
The road map to the.
A full recovery.
And beyond and so getting back in balance with as Mike described earlier I think is really important something that I, certainly really have wanted us to get to.
Second we've also said that we like the mix of businesses.
Roughly 70% of the company.
Being broadband centric.
As the proved to be a really successful model and.
We've had.
10 of wonderful years of growth with NBC Universal.
The last year was the only exception to that so we expect you know.
Greg crews and all of our businesses, but having a mix with with.
With the businesses can work together, but having majority of the company being a broadband centric.
That's worked really well for us so.
It's a.
We're very pleased with the company. We've got we got a great scale, we've got momentum that's where our focus on the main priority was today to get to this announcement of.
Our expectations and then go ahead and hopefully see the world go into right direction here and continue on the path, we're on and get to the.
The execution of that later in this year so.
An important step today.
Thank you. Thank you, Brian but generally of time for one last question.
Final question will come from the line of John Hodulik with UBS. Please go ahead.
Great. Thanks, Jim.
Two quick ones I think maybe first a follow up for Jeff on Peacock.
Can you give us a sense of what content is resonating and any color you have on engagement or <unk> or paid subject.
Should we expect more spending on sports rights for the platform following up on the WWE deal and then maybe for Brian just.
Thoughts on how the regulatory backdrop will evolve and is there any concern debt net neutrality of will emerge as the new possible.
The first Jeff.
Hey, Greg This is Jeff.
So.
It's.
Obviously, let me start with the office. So the office, we have the office as of January one we've had it now for almost a month very pleased with how it's doing.
Our our usage among our customers are actually higher than we think the usage was amongst netflix customers and more importantly, what's happening is we're seeing that people who are watching the office on peacock are watching lots of our other comedies. So it's really driving parts of rack and really driving Brooklyn, nine nine amongst all of.
So there's kind of an ecosystem of <unk>.
We've talked in previous quarters about how EPL.
Has really worked for us.
Premier League and and how those viewers also came in and to our surprise of much greater percentage of them, then turned and watched other things like Yellowstone and our comedy. So we believe theres kind of an ecosystem here like the old world of broadcast where people will we can cross promote people into the different things and that certainly seems to be working and the.
The office was really worked.
<unk> is kind of a perfect property for us because it allows us to number one thousands of hours of programming that were behind the paywall that will now put on the free service of Peacock, which will not only enhance the brand the WWE, but we can monetize and advertising.
We get the events that were behind the paywall that used to be pay per view.
Drive our 499 premium version of Peacock and then remember we have a big investment in WWE at USA on our linear networks and so this is kind of this kind of perfectly fits into our model of of operating the business as a whole and cross promoting and selling advertising clients. One one platform one solution is Linda.
The calls it so so.
I think I think the model that we've constructed here to really kind of leverage our existing linear businesses and drive advertising is working and I think comedy sports two of the success stories certainly so far.
Okay and I know.
We will be having this conversation about the.
The New administration government. So let me just quickly say I don't think there's anything new we've managed successfully to work with different administrations with different regulatory perspectives around the broadband business.
But our view is obviously strongly felt that the.
The long standing light touch regulation has worked since the President Clinton.
<unk> created the classification in the producer.
Reduces regulatory risk for investors and allows the company to invest more in the paid dividends unbelievably well during COVID-19 and we would never rest of downgrades in the services.
The content providers and consumers really benefited and that wasn't universally the case around the globe with different broadband regime, but we do believe.
Net neutrality and have.
We're not going to discriminate block of throttle on some of the other principles that we've committed to.
And so if there's a way to find a way to quantify that and perhaps.
With this issue of permanent.
We're consistent place certainly.
Possibility.
We'd like to just end the call by.
Introducing gain of strong just for a moment who's taken over Sky just held last couple of weeks starting next call Dana will be of.
Available to talk about sky in great detail, but Dana didn't want this moment to pass without congratulating you introducing you to the group here.
The say just a few words.
Thank you so much Brian it's great to have the opportunity to say quick Hello, everyone.
Looking forward to talking with you in future quarters as Brian mentioned, maybe for now let me just briefly say.
Having spent the past few weeks in the U K and I'm extremely confident about the exciting opportunities ahead for sky when Brian called me I knew this was an opportunity I couldn't pass up because I've only had great admiration for sky, having worked in Europe as long as I have Brian mentioned that before.
Sometimes competing and partnering with sky across the many years I think I'm in the <unk>.
To truly appreciate the unique market position that sky holds and its iconic brand.
I just have to say that Jeremy has built an incredible organization and the amazing breadth of assets and a fantastic team and I couldn't be more excited about leading sky in the next chapter.
Brian It looks like you're talking more about it in future calls in the back to you.
Thank you and Jeremy Thank you will.
And I know you'll be guiding us here through the rest of this year as well but.
Both of you are going to be of great team.
That wraps it up for me more city you of anything else.
And I just want to thank everyone for joining us on our fourth quarter and full year 2020 earnings call. We hope you stay healthy and Paul Thanks, everybody.
There will be a replay available of today's call starting at 12 o'clock P. M. Eastern time, it will run through Thursday February 4th at Midnight Eastern time, the dial in number is 85859 056 and the conference I'd number is 7964 of 167.
A recording of the conference call will also be available on the company's website beginning at 12 30 P. M. Eastern time today. This concludes today's telecom, Brian and thank you for participating you may all disconnect.
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Yes.