Q2 2021 Comcast Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to Comcast second quarter 2021earnings 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 you.
[music] Vice President Investor Relations. Mr. <unk>. Please go ahead Mr. <unk>.
Thank you operator and welcome everyone.
Joining me on this morning's call are Brian Roberts, Mike Cavanaugh.
Dave Watson, Doug Sharp and Dana strong.
Brian and Mike will make formal remarks all.
Dave Jeff and Dana will also be available for Q&A.
Let me now refer you to slide 2 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. Please see our 8-K and trending.
Schedules for the reconciliations of these non-GAAP financial measures to GAAP with that let me turn the call over to Brian Roberts for his comments Brian.
Thanks, Marcia and good morning, everyone.
I'm really excited to report these strong second quarter results, which were highlighted by exceptional performance of cable.
Abel delivering 11% revenue growth.
Nearly 15% increase in adjusted EBITDA.
This was fueled by our fantastic success in broadband.
We added 354000 broadband customers and.
An increase compared to both the same peer.
<unk> last year and to 2019.
And that drove 294000 total customer relationship additions.
These were the best broadband and customer relationship results, we've had for any second quarter on record.
Our broadband connect act.
Is healthy and churn improve for the 14th quarter in a row.
In fact, we hit the lowest second quarter churn rate in our company's history.
Based on our first half results combined with the strength, we're seeing in current trends. We now expect total broadband net additions for 2021to increase.
Activity is mid teens relative to 2019.
We also added 280000 wireless subscriber lives.
The highest of any quarter since launch.
Affinity mobile is now a standalone profitable business.
Got here on time, if not a bit earlier than.
Expected and we're experiencing the fastest sales momentum we've ever had a testament to the changes we implemented in the back half of last year, when we re prioritize wireless across our sales channels and integrated this business more fully into our core operations and this past April we introduced a fabulous unlimited family.
Family plan, which we just started offering to our small business customers as well.
I couldnt be more pleased with Dave Watson and the team. He has assembled is they have a relentless focus on connectivity, which has never been more important.
They truly put the customer first offering innovative and differentiated products.
And services I'm pretty unique to the market. We now offer 1.2 gigs of downstream to essentially all 60 million homes and businesses in our footprint.
Foundation of our success is our network, which we constantly evolve so that we can easily handle capacity growth increasing.
Scriber and the changing usage patterns of our customers who continue to take faster speeds. Currently there are typically twenty-five connected devices in the home.
With 8 active at any 1 time and this increases every year.
That drives in home Wi Fi usage.
The 15 times out of wireless there.
Delivering huge amount of data are consistent speeds and reducing latency is what's powering our growth and we're doing this in a cost efficient way.
Virtualized, our network combined with our suite of digital tools.
So.
[noise] allows us to continue to improve the customer experience, while identifying additional cost savings and the progress. We've made is evident in our results.
During the second quarter total agent calls decreased by 10% and total interactions were down by 7%. We also.
So saw a 22% reduction in truck rolls, despite an over 5% increase in our customer base.
So as I look ahead, I think about our philosophy since the early days of broadband which is been to bet on a never ending cycle of new technologies devices.
In applications that come from Silicon Valley, and new startups everywhere that need to take advantage of greater speeds and capacity over time, we see this transformation happening every day and continue to believe that this is ongoing for the foreseeable future.
So what does that mean.
<unk> in our network.
Well since October of 2020, we've been trialing gig and multi gig symmetrical speeds over our DOCSIS infrastructure to great success.
With upstream comprising today less than 10% of total broadband usage, even during a peak.
We don't really have a consumer use case for this technology capability, yet, but the strategy for our network is to plan ahead, we're investing an architecture that lets us go beyond where consumers are and we can do all of this in a way that won't affect the capital intensity ratios. We currently enjoy.
David can provide.
Provide more detail about the technological decisions, we're making during the Q&A.
With cable comprising roughly 70% of our consolidated EBITDA broadband is a top strategic priority and I could not be more pleased with the strength of this quarter and the first half of 'twenty 'twenty 1.
Looking at other parts of our business.
Business for the first time since the pandemic our theme parks returned nicely to profitability.
Was led by Orlando, where we've seen strong domestic demand and both per cap spending and in attendance, which returned to 2019 levels somewhat faster than I thought it might happen.
<unk>.
Virtually no international visitation.
And in Hollywood since restrictions have been lifted attendance is growing week after week rich.
Continue to see firsthand the pent up demand for high quality entertainment and family fun outside of the home and we remain incredibly bullish on our theme parks.
Our studio business is also coming back.
We've returned to pre pandemic television production levels, and we're really optimistic about our upcoming films, especially after the success of fast 9 which debuted at number 1 in all territories at launch and with $600 million of worldwide box office to date.
<unk> remains the biggest U S film launch since the pandemic began.
Following fast we successfully released boss baby too.
The latest installment of purge and over the July 4th weekend, we had the top 3 films at the domestic box office.
The first time, that's happened for any studio since 19.
95.
We have a great slate ahead with theory of enhancing in September followed by a new Halloween in October and we end the year with sync 2.
Next let's talk about our media and production strategy, which across the entire company is aligned around 1 purpose.
Create premium programming, which we can then scale and monetize for the very best global distribution outlets.
Peacock adds to what we already offer it as a great complement to our linear brands, which are successful in their own right.
And together these platforms provide a continuous loop of cod.
Promotion it seamlessly drive viewership across our ecosystem offering a different access point to attract new audiences, while giving existing viewers more of what they love.
We are clearly capitalizing on the strength of our media brands, having just completed the strongest advertising upfront in our history.
Tent at curing double digit increases in both volume and price across our entire portfolio.
And I'm pleased to report that as of this week Peacock has 54 million sign ups and over 20 million monthly active accounts. This is 50% higher than our last report driven by a number of factors.
The day in day release of boss Baby to debut of Doctor deaths are most successful original to date.
And the airing of the 'twenty 'twenty Tokyo Olympics.
The third quarter, thus far has been a particularly strong period, and we will work hard to manage retention and growth from here.
<unk>, we are unlikely to replicate such tremendous performance, but we remain optimistic with a lot of programming strength ahead of us such as more premium originals.
Day Night football, the Beijing Olympics, and our re imagined dynamic pay 1 window, which starting in 'twenty 'twenty 2.
<unk> shifts our film titles to Peacock exclusively for the first and last 4 months segments in the pay window with Amazon Prime and Netflix sharing rights for the 10 months in between.
By showcasing content across multiple platforms Universal films will constantly refresh.
<unk> recognized the streaming ecosystem.
Audiences will have multiple access points with which to consume our content and we will generate more third party revenue, while retaining the most valuable window for Peacock.
So as you can see we've successfully been able to pivot coming up with creative ways to keep up with.
Okay and in many cases, making even more money than we did before.
At Sky. We are pleased revenue is back to pre COVID-19 levels. Despite the lingering impact of Covid continues to have on our pubs and clubs segment.
Guys results were led by the U K with revenue and EBITDA ahead of.
2019, and we're seeing momentum across a number of areas.
Premium TV churn is at record low levels and.
And screaming, we posted <unk> growth of over 20% for the fourth consecutive quarter and broadband where we just introduced our 500 Meg offering we experienced improved.
<unk> demand relative to both 2020 and 'twenty 19, despite a 6% price increase in the quarter.
In addition, sky mobile had the strongest second quarter activations on record with churn, averaging 40% better than industry average.
And today, we're announcing the debut of our.
[noise] share Asheville streaming strategy for Peacock later this year, we will leverage Sky's significant scale and powerful brand to include Peacock at no additional cost for its 20 million customers across Europe.
The benefits of this launch are tremendous we will unlock incremental advertising revenue introduced the peacock.
Internet brand and content catalog be of Sky's established platforms in key European markets and directly.
Monetize our programming investments.
Our decision to make peacock the anchor tenant on expenses ex 1 and flex platforms for its domestic launch has been a key driver of brand awareness scale.
Sumption and promotion and we see a similar opportunity with sky.
We're utilizing all the wonderful assets of our company to create value for audiences everywhere and we look forward to finalizing agreements with other programming and distribution partners outside of our Sky markets.
So summing up this was a fabulous.
Peacock order and a great first half of the year I'm. So pleased we are now in a position to buy back stock, which we will report on and Mike section.
This is a truly very special company and I'm excited for the road ahead, Mike over to you.
Thanks, Brian and good morning, everyone I'll begin on slide.
I believe squarely with our second quarter consolidated 2021 results.
Revenue increased 20% to $28.5 billion.
Adjusted EBITDA increased 13% to $8.9 billion.
Adjusted EPS increased 22% to 84 cents per share.
And finally, we generated $4.8 billion of free cash flow.
Now, let's turn to our business segment results, starting with cable communications on slide 5.
Cable revenue increased 11% $16 billion.
EBITDA increased nearly 15%.
<unk> for $7.1 billion.
And net cash flow grew close to 15% to $5 billion.
As a reminder, last year's second quarter was most significantly impacted by COVID-19, including adjustments accrued for customer our assemblies.
Excluding the impact of these.
If it's an adjustment.
Cable communications revenue increased 9.3% with no corresponding impact to EBITDA.
We added 294000, net new customer relationships up 35% over last year's second quarter and up 93%.
Our second quarter of 2019.
This was the best second quarter on record and was driven by broadband where we added 354000, net new residential and business customers.
Up 10% over last year's second quarter, and 69% above the second quarter of 2019.
These strong results were driven by an improved churn and healthy connects relative to both 2020 and 2019.
And this was the lowest second quarter broadband churn on record.
Looking ahead as Brian mentioned earlier based on our strong results through the first half of the year as well as current trends.
We now expect total broadband net additions for 2021 day up mid teens from the $1.4 million net adds in 2019.
Broadband revenue increased 14% and grew 13%, excluding the <unk> fee adjustments and last year's second quarter.
These results.
Were driven by strong growth in volume and rate.
Wireless revenue grew 70% due to an increase in both customer lines and higher device sales.
We added 280000 net new lines in the quarter. The best result, since launching this business in 2017.
<unk>, bringing us to $3.4 million total lives as of quarter end.
We are encouraged by the initial results on our new unlimited plan, which is driving a notable increase in unlimited connects as well as the lift in overall volume.
Turning to video revenue increased $2.
<unk> percent or half a percent, excluding RSM fee adjustments and last year's second quarter, reflecting healthy growth in rates, mostly offset by net video subscriber losses totaling 399000.
While our residential rate adjustment at the beginning of the year with the primary draw.
River or the increase in rates.
We believe it was also a contributor to the video subscriber loss in the quarter.
Business services revenue increased 10%, primarily driven by higher rates.
As a comparison to last year when business services was significantly impacted by COVID-19.
Over the past year, we have bounced back rates have recovered and customer growth is strong as we added 17000 net new customers in the quarter and 70000 over the past year, primarily driven by continued improvement in small business.
Last advertising revenue increased.
Increased 59%, reflecting an overall market recovery compared to last year, when we experienced reduced spending from advertisers due to COVID-19.
As we move to the second half of the year, we will have difficult comparisons to last year, when we benefited from strong political advertising.
Turning to expenses cable communications second quarter expenses increased 8.2%.
Programming expenses increased 12% and were up 5%, excluding the impact of virus and adjustments last year, primarily due to the number of contract renewals that started to cycle through in 2020.
Combined with annual escalators and existing agreements.
Looking to the third quarter, we expect programming expense growth to increase at high single digit levels.
Due to the continued impact of contract renewals.
As well as the comparison to last year's third quarter, which was also favorably impacted by our S N.
<unk> adjustments for.
For the full year, we continue to expect programming expense to increase at high single digit levels.
Non programming expenses increased 5.7% or half a percent on a per relationship basis due to higher technical and product support and advertising marketing.
N V and promotion spend to drive growth in our core broadband and wireless businesses.
These higher expenses were partially offset by lower bad debt expense.
These trends should continue in the third quarter.
Cable communications EBITDA grew nearly 15% to $7.1 billion.
<unk>, including a contribution of $68 million from our wireless business.
The best results since launch.
Cable EBITDA margins reached 44, 2%, reflecting 140 basis points of year over year improvement.
While the RSM fee adjustments had no impact on.
EBITDA they did.
<unk> margins last year.
Including the <unk> adjustment impact margins expanded 200 basis points year over year.
Cable capital expenditures increased 17%, resulting in capex intensity of 10, 6% up 50 basis points.
To last year.
These results were driven by an increase in scalable infrastructure as we continue to enhance the capacity of our network as well as increases in broadband related CPE and line extensions.
As Brian mentioned, we have decided to move a bit faster.
<unk> can be space of DOCSIS, using very cost effective technology.
Allowing us to maintain the capex intensity level, we achieved in 2020, which was the lowest in our history and we expect to be at this level for the next few years.
Now, let's turn to slide 6 for NBC Universal.
Let's start with total NBC Universal results.
Revenue increased 39% to $8 billion in.
And EBITDA increased 13% $1.6 billion.
Media revenue increased 26% driven by higher advertising distribution and other revenue.
So the next advertising revenue increased 33%, reflecting the timing of sports and overall market recovery compared to last year and the launch of Peacock.
Had significantly more sporting events compared to last year, when sports were paused, which benefited our advertising revenue.
Excluding this benefit advertising grew at mid teens levels.
Distribution revenue increased 19% or high single digits, excluding the <unk> fee adjustments that impacted last year's results.
This growth reflects higher rates post the successful completion of several carriage.
At the end of 2020, partially offset by subscriber declines which were sequentially flat.
Media EBITDA declined, 16%, 1.4 billion, including Peacock, which generated revenue of $122 million and an EBITDA loss of 360.
Renewal $80 million.
Excluding peacock immediate EBITDA was essentially flat.
Driven by higher sports costs associated with the increase in sporting events this quarter compared to both last year in 2019.
As a reminder, our third quarter media results will be impacted by our broadcast of the Summer Olympics.
60, <unk> revenue increased 8.4% driven by higher theatrical revenue, reflecting the success of fast 9 and theaters.
And compared to last year when theaters were mainly closed due to COVID-19.
Studio EBITDA decreased 52% to $156 million.
As a result of higher expenses associated with our theatrical releases.
Compared to last year when releases were paused.
Timing of content licensing sales and the comparison to last year, which included transactions with Peacock related to our initial launch of the service.
In the second half.
EBITDA comparisons to last year will remain challenging as we continue to launch new theatrical releases and ramp our TV productions.
Theme parks revenue increased by $958 million, $1.1 billion and generated EBITDA of $221 million.
Which included about $150 million of Universal Beijing Preopening costs.
This is the first profitable quarter, we've had since the pandemic began in the first quarter of 2020.
And was driven by strong results at our Universal Orlando resort.
Orlando.
At exceptionally strong demand with June attendance exceeding 2019 levels.
As well as strong per cap growth.
Despite virtually no international guests during the quarter due to COVID-19 related travel constraints.
We opened our Jurassic world themed roller coaster the velocity.
It's a coaster on June 10th to some of the highest guest satisfaction scores we've had.
<unk> has been operating without capacity restrictions since mid June and has experienced strong demand and.
By the opening of our secret life of pets attraction in April.
We are optimistic that our domestic parks are on a path to return.
Has historic levels of profitability.
We need international visitation to resume which remains dependent on COVID-19 related travel restrictions being lifted.
At our Japan Park results continued to be challenging.
After closing in late April we reopened on June 1st with capacity restrictions that are.
Turn to remain in place through the summer.
Last as we prepare to open our newest park Universal Beijing, We expect overall results will be negatively impacted by up to $250 million in the third quarter.
Now, let's turn to slide 7 for Sky, which I'll speak to on a constant currency.
Currency basis.
For the second quarter Sky revenue increased 15% to $5.2 billion, largely reflecting strong growth in our U K business day.
Correct to consumer revenue increased 7.7%.
Primarily reflecting higher average revenue per customer relationship.
Likely results in the UK drove the bulk of the growth and benefited from the comparison to last year when sports subscriptions were paused as well as our rate increase iron mobile device sales and improving hospitality revenue as pubs and clubs reopen.
While customer relationships grew in the U K.
Overall customer relationships declined 248000, primarily driven by customer losses in Italy in Germany at the end of the football season.
As we have previously said, we've reset our football rights in Germany and Italy.
As a result, we anticipate lower programming and production expense.
<unk> shown with continued customer losses in the third and fourth quarters.
We believe this disciplined approach to sports related cost is the right long term financial decision for the business.
<unk> revenue increased 79% with results from the UK driving the growth and reflecting the overall market recovery from.
From COVID-19, as well as an increase in a number of sporting events compared to last year when sports were paused.
Guy generated $560 million and EBITDA of <unk>.
32% decline compared to last year's second quarter.
Primarily reflecting higher sports rights amortization related to more.
1 the current quarter.
These higher expenses were partially offset by lower entertainment costs due to production delays.
I'll wrap up with free cash flow and capital allocation on slide 8.
Free cash flow was $4.8 billion in the quarter, a decrease of 20% year.
Year over year.
Largely due to the timing of last year's federal tax payments, which were deferred to the third quarter, while networking capital was a positive contribution to free cash flow in the quarter. We continue to expect it will be a negative drag on our full year results and higher compared to 2019 levels due to an increase.
And content investments in our broadcast of the Olympics.
Consolidated total capital, which includes capital expenditures as well as software and intangibles increased 5.2% in second quarter. The $2.8 billion, reflecting an increase of cable which was partially offset by decline.
At NBC Hugh.
For the full year, we now expect capital to be slightly above 2020 levels, reflecting our plan as I previously mentioned to accelerate enhancements to our network.
In the second quarter, a return of capital to shareholders included dividend payments totaling $1.2 billion.
Colors of 9.5% year over year.
We also resumed our share repurchase activity late in the second quarter totaling $500 million as of June 30th.
As previously communicated we intend to stay at a historical buyback levels until we reach our intended target leverage levels.
<unk> currently expect to reach some time in 2022.
With a return to share repurchase in the quarter were happy to get back to our long standing balanced approach to capital allocation, which consist of maintaining a strong balance sheet.
Vesting organically for profitable growth and returning capital to shareholders.
Which we thanks for joining us on the call. This morning, I'll turn it back to Marci, who will lead the question and answer portion of the call.
Thanks, Mike Operator, let's open the call for questions.
Thank you we will now begin the question and answer session. If you have a question. Please press star and then the number 1 on your Touchtone phone.
If you wish to be removed from the queue. Please press the pound key.
We're using a speakerphone you may need to pick up the handset first before pressing the numbers. Once again, if there are any questions process star and the number 1 on your Touchtone phone. The first question will come from the line of Doug Mitchelson with credit Suisse.
Oh, thanks, so much a couple.
Just 2 questions from me this quarter, Jeff any discussion of the shape of parks profitability going forward, you've got Beijing shifting from Preopening losses to opening the U S is more fully opening in Japan at some point, we'll more fully opening and how do we think I know you gave the 3 Q a sort of a 1 time item from Beijing.
Cooperator for Q or the Beijing losses, Don is it an easy comp next year how.
How should we think about profitability overall, Dave could you unpack the margin expansion for us.
In the quarter, it looks like advertising and wireless probably drove all of the margin expansion. When I think about the last few years, you've had a lot of them.
Margin expansion from leveraging non programming costs was there just unusual year over year comps within with it within the cable business relative to 2 Q of last year that expires over the next couple of quarters and you get back to sort of normal margin expansion on non programming line or is there other investments you're making that we.
As we get there thanks, so much.
So I'll take the first 1 yeah, So hey, Doug how are you so on the parks.
We're very first of all I would start by saying, we're very pleased with not just the quarter, but the trajectory of our opening as Mike went through Orlando is.
Should concern attendance standpoint pretty close to back where we were in 2019, even though we don't have any international visitors and you would expect those international visitors to pick up over time and in Hollywood.
We've only been opened a couple of months and we're already approaching.
Our capacity and we're excited about the next couple of months in Halloween horror nights.
Is domestic parks you know obviously with Covid you just don't know, it's things could be lumpy things could be non linear, but so far the trajectory is really good and we would expect that to continue in and I would say that the thing. We're most pleased with is the protocols have worked and we've been able to keep people safe and keep our workers safe and keep our guests save from that I think is driving the confidence in coming to our.
So the.
Internationally, our Brian actually and I actually were in Japan and <unk>.
Even though that country is a little bit behind as far as Covid, we've been able to get on a path back open world, where open again with some capacity constraints, we have a great attraction. There that we were able to see a Nintendo which is 1 of our best attractions that we've ever.
Part on anywhere in the world It rivals Harry Potter and I'm very excited for for that not only in Japan, but for epic universe down the road and our other parks eventually so Japan is behind but but feels like it's heading in the right direction and so that's going to be that's going to be great and then lastly, with Beijing, We're ready to go in Beijing, the parts ready, it's it's awesome.
Austin is our most technologically advanced park and and we expect you know right now what we're doing is going through the final approvals of rights and the process you'd have to go through and that is somewhat indeterminate, but we expect that park to open in the next couple of months from when it does open as you as you mentioned those pre operating costs go away and we start getting attendances.
So.
Beijing should be a good contributor to us remainder of the year when it opens and then onto next year. So overall, our parks or on a a good trajectory and it's hard to.
Hard to see what happens with Covid, but we're pretty pleased.
Dave.
Yes, Hi, Doug.
So we can walk through a couple of things on margin.
And a quarter and looking forward.
It's we feel very good about our position on the progress that we continue.
To make an on margin improvement real focus around the fundamentals and so while there'll be some things within a quarter day.
Move a little bit.
The fundamentals are the things that we stay extremely focused on and starts with broadband and both residential and commercial both or just drive higher revenue both the margin accretive and just help us deploy a digital solutions and.
Particular in residential at a higher rate. So those fundamentals are continue to bring us to where we're at.
As we scale mobile as you said.
There are improvements, they're advertising as well with advanced advertising provide support.
But it's primarily.
The focus around connectivity and just driving more customer relationships. There in that space are connected with the digital customer experience improvement since it's such a win win.
For the customer and for US just to provide perspective and a quarter.
Our total agent calls decreased by 10% the total on our actions lowered 7% and we saw 22% reduction truck rolls and this is despite an overall, 5% increase in the customer base. So you go back over time. This is just a continuation over the past 5.
5 years.
Constantly made progress taken 37% are almost 100 million.
A million calls out of the run rate and reduce truck rolls by 25% So Doug it's.
It's been this is a real focus for us and while I don't think we will grow the second half of the year margins at the same rate that we did the first half we're in a really good place and we're doing it in a healthy and sustainable way.
And so I would like the roadmap that we have around digital tools and the experience I liked the run right around connectivity.
And while we will invest in areas like business services in mobile sales and marketing.
Things that are just going to help us grow.
We're going to continue to stay extremely focused on margin.
Thank you so much and I would just echo that point that in these in this great first half margin expansion, which is Dave said, well he's a little bit in the second half of the year, there's tremendous investment behind wireless behind advancing growth in broadband and business services. So it's really healthy margin expansion, because we're putting the money back into.
Drive future growth.
Thanks, so much thanks, Doug.
Operator.
Your next question will come from the line have been Swinburne with Morgan Stanley. Please go ahead.
[noise]. Thanks, Good morning, I wanted to ask actually also the cable.
And then I have a question for Brian sort of on M&A in strategic stuff.
Mike and day, we're all trying to figure out what normal looks like as we hopefully emerged from the pandemic and like.
Like you've talked about that that being down and it seems like it continues to be a tailwind year on year do you have a sense of what sort of normal looks like as you think about Opex man you just just sounded quite bullish on margins going forward, but there is some concern that is activity normalizes at some cost come back in the business I'm wondering if you could just tell.
Well that and the same thing for you day tournament churned it sounds like it keeps coming down.
Do we go back to normal churn from pre COVID-19 or or not [laughter] I don't know if you have any any sense of that when you look at different geographies and your footprint and you can glean anything there.
And then Brian I'm sure you know there's been lots of press articles on Comcast buying lots of different businesses and I'm wondering.
Now that you've laid out at least some of your Peacock International strategy. All these articles seem to <unk>.
Assume that you don't have enough scale and NBC to achieve your your strategic goals around screaming and I know you can't talk about M&A, but I'm wondering if you could just talk about whether you believe NBC has what it needs to do what what the company wants it to do on the streaming from globally. Thanks, everybody.
So maybe I'll start up and thanks for the question.
I think on non program expenses.
Opex.
Still expect low single digit increases compared to 2019 for full year 2.
<unk> 1 here.
So that's all the all the factors are embedded in there that David mentioned and you're right that that continues to run low.
I think given a feel for what the second half looks like is the <unk>.
I'll do at this stage I think we are you know.
Continue to do all of the things in.
And the underlying business move the business towards more digital sort of cleaner operations that are low cost the move to the.
The higher margin products and broadband business service all the things David.
Prescribed.
Or things will work on that will benefit us regardless I think of what the operating environment normalizes that but I think I think.
That's the best sense for the.
Second half of the year and I'll, let David comment on churn, but it's a little bit of the same message which is.
We'll see what what.
What what normal looks like but I think the investments and product investment in network, the investments and flex wireless.
Name at all of the things we're doing I think are there is at least some element of sustained.
Benefit earn versus historical levels at least in my mind, but we'll see Dave Purdue X Michael have been yeah.
Yes, we expect overtime.
Have a little bit more normalization as you go into quarters like Q too like Q3.
Student activity move activity seasonality that could impact churned, but we're reaching a level that we expected.
In terms of overall broadband churned performance and.
Says.
The redefinition of rape broadband I think that's helping.
Deliver this from a this churn improvement.
We have a fantastic network.
Talked about it Brian Mike mentioned, it continuing to invest in the network are going to stay ahead of the curve in terms of capacity and usage.
So a lot of focus around the network and then just to complement not just speed, but there are devices. The pods the ability to provide great Wi Fi coverage inside the home is just so critical and staying ahead of that curve is key and then adding value extensions to broadband.
<unk> like mobile like flex that impact churn and so these are early days for us in terms of as we.
Both of those categories are exciting for us, but they're impacting broadband in a positive way. So can't give specific guidance in terms of where Kern would go but the fundamentals of and to focus around attracting healthy and keeping healthy customer relationships and connectivity is okay.
So you're very excited about the prospects of mobile influx impact impacting that over time.
And then this is Brian.
Let me start by saying.
I really love the company we've got.
And imagine really a better quarter, it's an exceptional quarter.
And I believe we have lots of more lots more organic growth ahead.
And we have a very special unique company across distribution and content working so well together.
With.
<unk> and Skye in Bangkok, and Extensity and even in our Olympics advertising.
And we like and we are investing behind the businesses. So I don't think and I think my cabinet has been very blunt that we don't need M&A.
We have a majority broadband centric company.
And we like to mix, so what might that drive us to consider or at least which is.
Annie.
I had a partnership.
Where we have unique special capabilities that could lead.
And.
Globally internationally to enhancing our streaming position, that's something you might talk to others and consider but.
As to your scale question I really think.
We have all the parts and Jeff why don't you comment on that in just a second.
Maybe with some more specifics, but if you look at the results of Peacock this quarter.
Again, we're probably where the fastest growing.
Streaming service, 50% and 90 days.
We haven't brand, it's only a year old and it's rather the number 1 or number 2 new brand in America, it's been created so.
So I really think our corporate focus is as we've said many times was to get back in balance on capital returns.
Most please this quarter that we were able to get to that place buyback stock is Mike just talked about so I do think we have the scale I think we have an amazing company and I feel fortunate with our position Jeff why don't you talk a little more about the scale, yes, Thanks, Brian Hi, Ben when you when you talk about hill with respect to.
Streaming and Peacock just to get more granular for a second there really are there really are 3 elements of the scale..1 is the scale of the platform technologically and is Brian just mentioned, we launched on the back of of the Sky platform and we've leveraged our Xfinity and David team significantly so I think we.
We approve that we would have never launched the success technologically with a platform that looks great and works without the scale that we have already at the company.
There is hill with respect to the brand and that's why I'm thrilled with today's announcement that Peacock is going to be and 20 million sky homes, and eventually will roll it out across the globe and then the most important by far element of scales force streaming is content and.
And we are really at the beginning of our content roll out of Peacock. That's why this quarter's growth is really extraordinary because this quarter is Brian went through we had we had a pretty good movie with would possibly be too we had our first real good drama with Doctor death.
And we had and we have obviously rolled into the Olympics here, where we're halfway through the first week of the Olympics looking forward.
We as part of our plan we have another Olympics, we have lots of original programming, which Mike mentioned were wrapping our production right now on and will be rolling out over the next year. Brian mentioned are movies, we have the what I think is 1 of the top studios in Hollywood and we have lots of movies coming directly to Peacock and eventually we're going to have the Hulu content coming.
Back so we have plenty of contact coming in this quarter showed that when you put that content on the service. That's good you can actually get pretty good growth and the screaming world and so.
Personally I don't think we've ever lacked for the capital to do what we need to do and grow our business and what I'll end with us.
Perfect example that happened in the last week was we at Universal.
Acquired the rights to the next 3 Exorcist movies.
And a pretty unique deal that was done in tandem with Peacock, we wouldn't have been able to do it. If we didn't have the streaming service, where we basically got the rights on the back from the strength of our studio, where we have Jason Blom and and a horror pedigree, that's unmatched and Donald Langley enter team's ability to market movies, but because we did it with peacock we have full optionality going.
4 do we put the second and third movies direct on Picasso, swimming hybrid we can really kind of adapt and be flexible based on how the market works. So we have the scale across our company to do things like that.
And I don't think we're lacking for scale personally I think we can achieve our successes peacock.
Without anything additional and I think this quarter approved it.
Thanks, everybody operate our next question.
Your next question what would happen to mine Jessica wheat are like with bank of America.
Oh, Thanks to questions are connected to 2 people, Brian first and this is such a different call them and then a year ago, you've come out of the pandemic in a stronger position than you weren't even going in it really all other businesses cable N B C U and sky in every aspect, whether it's share gains margin growth in developing businesses et cetera.
So.
Sitting here today, what do you think the biggest ongoing benefits will be from all the changes that have been implemented.
And then what do you keep long longer term goes from here. He just talked about the near term goals and then Jeff I don't even know where to start because there's so much going on in N. B C. You, but could you give us a little more color on the upfront cost platform benefits.
And maybe 2.
Then a little bit Peacock, what do you what should we be expected in the next year or so in terms of.
Incremental costs for the.
International Rolette as well as increased content and then finally, you said in the past that you expect this olympics to be the most possible, but you didn't hit with a little bit of bad luck I mean in terms of COVID-19 getting a little bit worse.
Definitely not with the athletes do you still have that to you like how do you think about.
This Olympics in the next 1 in terms of profitability.
For the.
The observations because I would I share your view.
It's been an extraordinary year I'm really proud of the company first of all on some of our.
Initiatives, our commitment of $1 billion over 10 years to close the digital divide and have broadband be accessible and affordable for.
Many more people and.
So I guess I'll start by saying the momentum.
And so on us to keep this fabulous execution Dave.
Talked a lot about that focus.
I think what kind of gets lost perhaps a little bit and broadband is not just the consumer broadband which literally.
Record second quarter.
Now, saying again, but this year, we expect no.
Mid teens growth from 2019, I did not expect that.
6 months ago, So how do we keep that momentum and build on it that comes down to great products and a network and a team and a management team and we've made a lot of changes we've.
Had some of our retirements and other things and and the Backfilling and moving executive promoting executives all of that has put our team and an excellent place we've learned how to work in a hybrid manner.
And whatever comes next I don't think this team will Mississippi.
And so I.
Thank them for their focus.
But as I think about broadband, we really don't talk about business services.
You have a <unk>.
9 billion dollar business from.
So.
Bill.
Literally with thorough market share and growing only 1 direction and keep expanding the definition of that market Paul medium to know really enterprise and every couple of weeks I get an E mail that talks about some major account that we've just 1 for the first time and it could lead to way more volume overtime.
A bill Stemper, who has run that business really since inception.
And has done an exceptional job and we're trying to do that now at sky and expand that market and then we've talked a little bit about wireless and mobile.
And.
We've really pivoted to being a strategic opportunity with and test to customer satisfaction ratings are great Ah relationship with Verizon that enables us now to Pete.
Well and to innovate and.
And so on and on.
I think keeping our focus there.
So in the longer term.
I think we have an opportunity to see the.
It'll trend.
Of direct to consumer.
Digitization.
Computing power.
Evolving are are the way we live.
Ah relevant will our company remain M E and help lead that change.
And I.
I look at the Tech company results and you just see this this trend.
Hello waiting so what are some of the takeaways well first of all being an enabler and critical.
Opportunity to innovate our network to help be as relevant in the future as we are today is job 1.
I think digital advertising we.
We saw some of the results.
From from the Tech companies and we look at our own creating more inventory for the strategy for Peacock from me feels really smart, we're creating more digital inventory that's the Holy Grail of ads. That's why we were able to get a premium.
Jeff can talk about Olympics, a bit but in the big picture, where we're from.
Imagining how people consume and with that consumption is enabled by brought them.
And now enabled by Peacock and hope to do that in a more significant way and then retaining talent and.
Being a company where people want to work with at all levels of the company and that's being re.
Re imagined in our society and we read about it every day, how people have more choices in it.
More balance in your life.
Figuring that out we have a talented team that is leading us in.
I am really want to think here and at this quarter and his first half of the year and coming through the pandemic it feels.
Like hopefully, there's an opportunity to be a real light even if we have a few more.
Moments this.
This company is well positioned and I just.
Really feel that way so thanks for giving us a chance to ask that question first admit Jeff.
Jessica Thanks, Brian So on the upfront, let me take a kind of an order Jessica how you out and ask the questions. So on the upfront I think we've been.
I think we've we've talked about that in the past. It's it's it is Brian just mentioned B.
Strength of our platform combined with lenders at Lindsey aggravate owner teams approach 1 platform approach was the perfect.
In a way to approach. This this red hot upfront and as Brian said and like I said double digit increases in both volume and pricing and we will see those results from the years ahead, and particularly happy with both the volume on Peacock and the Cpm's on Peacock so.
So that that could could not have been more pleased with how we didn't upfront.
As far as.
Peacock I should mention that 1 of the things I didn't talk about is we concluded our Amazon and Samsung deals. This quarter to there is a lot Coronado WC. We're now fully distributed for Peacock and that's gonna have benefits as we roll out all our additional content.
I would say that that we look at where we are today and being much further ahead than we expected to be at this point, we'll probably ramp up our investment modestly over what we've done in the past, but as I mentioned with so much content coming coming to pick up that.
That it doesn't have to be significant.
I will say with peak argument and then segue to the Olympics, we were learning a lot as consumption happens on the Olympics here day 6.
And not to ruin everybody tuning in but we have big upset just happened in the last hour and then watch Tonight on NBC to see that but exciting U S team and.
And we're not we've had some bad luck, but if you look at the product it's fantastic and it's it really is impossible and so what I would say is on Peacock, what we will learn in this Olympics, we will take that Beijing.
And and change the product change the offering and each Olympics outward and we're really excited about that it's impossible to understate the importance of the Olympics too Nbcuniversal, it's not really financially it's more.
It's more operationally across the company, we have 4000 people literally working on it Brian and I were in Tokyo I came back and saw our team in Connecticut people with this is their life work you go from room to room, you have experts on surfing and volleyball and gymnastics and it's a it is an opt.
Gration that that would be very difficult to replicate the talent and the experience that our team brings to it and they show. It every night and N. B C. And then of course the Olympics for the perfect perfect property to show the strength of our platform across not only NBC, universal, but Comcast and extremity and sky.
So.
So the Olympics, obviously as you said, Jessica we had a little bit of bad luck. There was a drum beat of negativity, we got moved a year and those spectators.
And that has resulted a little bit and linear ratings being probably less than we expected.
But the flip side of that is the digital strength is kind of offset that so when you look at what's happening with Peacock that's directly related to the Olympics. So net net with all of this bad luck, we're going to be profitable on the Olympics.
Which were now very happy with and and we're very happy with the product and then if you watch every night, you'll see we use this as a fire hose to promote everything else we're doing it the company not just across obviously universal but also.
Comcast So the Olympics I think we're very pleased with the Olympics and very proud of our team.
And got a ways to go here.
Operating our next question please.
Your next question comes from the line is Peter subpoena with Bernstein.
Hi, Thanks have a question about your aggregation business.
With flexes expanding portfolio I Wonder how you could increase your momentum and aggregation in general and whether it would make sense to send flex boxes to all of your Internet only subs and maybe even video subs, who only have 1 video box at home again in order to drastically increase your.
Scale with a good product.
Well I'll jump in on now and this is Dave.
So.
We are very excited about flex.
Early still early days, but now we have.
Over 3.8 million flex boxes deployed and about half of those are being actively.
Used an engaged so.
And the reasons why that where we continue to be excited it is a terrific longterm platform, but it is helping broadband as I mentioned earlier so.
There were generating about $2 of incremental revenue just on the pay per view the Rev share side of things and advertising opportunities will be above that so today in terms of what we're doing within footprint. There are parts of what you mentioned, we absolutely included as part.
The broadband subscription.
It's a key part of now that with broadband you get this great screaming platform.
So we're doing that.
We have if your traditional video customer.
We have devices that enable for.
The X 1 experience throughout so we have that but we are not bashful about letting our customers broadband customers in particular that really important streaming segment know if this is included.
Outside a footprint.
We are we are syndication partners that we're working with Cox the Canadian companies and we continue to explore ways of doing that and we think that it's a terrific longterm platform tag to tie together uniquely the way that we do with the voice remote to get a full capable.
<unk>, we've been investing in X 1 we can leverage that platform.
No.
We do qualify we ask customers day they wanted.
And then we but we each day right on it and deliver the a great service and the feedback that we're getting an engagement is very strong. So it's a really important part of broadband growth today, and we will explore outside a footprint opportunities ways of doing even more over time.
Thank you.
Operator next question please.
Your next question comes from the line until Cusick with J P. Morgan.
Hi, guys. Thanks, a coupla on wireless first your building momentum and growth in this business should we think of it.
This is sort of a level based on essentially all stores and distribution channels open.
Or are there more things you wanted to do which is harder and then second did you Register for the next wireless option.
Hey, there felt this is day of <unk>. So.
Back on the sales momentum side of mobile.
Yeah, 1 of the things that's happened is we got through the the first pandemic phase that yes, we did shut down last year retail slowed things down and what we saw the back half of last year. Just continue through this year's every single sales channel now we've.
Focused on retails back.
And but in addition to that extremely focused on our call centres digital tools that optimize by flows for mobile.
And how we go to market.
Had that has been a huge change just the fact that we lead with mobile is so key and mobile and broadband being a package. So those fundamentals have emerged in really.
An important part of our go to market strategy, we've invested in tools not only for the customer before our agents and how they sell mobile fish to improving the experience for customers really.
So you're in a lot of marketing investment around the mobile message. If you live in our footprint and you're watching this great Olympics coverage.
Jeff and the team are doing you can't Miss the fact that we are really really focused around the mobile business. So.
But I think that natural combination.
Broadband plus mobile will continue so the other Big addition, recently is clearly the unlimited packages that we've rolled out and that is adding to it we've seen a nice shift and mix and we continue to have by the gig, but adding on unlimited really closed and fill the gap.
We had in our competitive portfolio. So now with Greg unlimited pricing from Multiline families and you can mix and match still between by the gig and unlimited we're in a unique position.
In our footprint so.
Like our momentum the 280000 lines was just terrific and set a record for us, but we are continuing to stay focused and we see that this is a a real opportunity for us going forward. So.
On the auction side I think the last part.
Mike wanted you answer that.
No no comment on on status for next option you know we take a look on occasion, we like our our spectrum portfolio. It gives us optionality for off road.
So we often take a look at the prices right, but no comment yet on where we stand with the next auction.
Hello, operator.
Okay.
Your final question comes from the line of Craig Moffett with Margaret Nathan.
Yes, hi.
Question for Brian and Mike if I could.
The.
Free cash flow profile that you guys have over the next few years that you're.
Given the EBITDA today, you're already running ahead of would suggest that if you keep your leverage target at something like 2 and a half times like you've talked about it can be buying back $20 billion a year of stock just to keep your leverage.
Content can you just talk about.
Sort of how high you are willing to go in terms of share repurchases and I know you've always talking about keeping your powder dry for for Optionality, but it would seem like there's a lot of optionality there and room, we're we're a pretty significant increase in cash returns to shareholders.
Hi, Greg It's Michael I would just say first things first we're happy with the first half of the year. We're happy that we're back imbalance starting to get the buyback going again I think the way we will look at it over time is not in terms of is there a dollar number we're going to think about it and.
Terms of want to keep a strong balance sheet. So I think think of us as wanting to be comfortably in the range of ratios that would support the single a rating.
We want to.
Make sure we're investing behind our businesses, primarily organically, but occasionally.
In acquisitions all of that you see that in the normal course, all the time in our business.
And then.
Capital return as the other leg of the stool. We've been this company has historically been very strong and important part of the priorities to return capital we've increased the dividend.
For 13.
Years, running and 1 a few companies that have had as strong a level of consistent dividend increase and you look back between the time of the NBC deal in the Sky deal the level of free cash flow that was returned to shareholders through buybacks and dividends combined was.
Incredibly strong so I think we would continue to execute against that the first half of the year I guess the remainder of this year.
Think of us as continuing to be at the historical levels for now.
We've got a a level of working capital. This year that contained we continue to expect there'll be higher than it was in 2019, that's mostly going to be heading us in the second half of this year with the Olympics and the ramping of content spend but the dynamics of EBITDA growth and future prospects as as you described so we'll tell.
At a quarter at a time is and we will talk more at the end of the year.
Thanks for.
For joining us.
Great.
And a day.
There will be a replay available at today's call starting at 12 o'clock P. M. Eastern time, Alright, 3 Thursday August 18th at Midnight Eastern time, the dial in number is 8.8.
8592056, and the conference I D number is.
88336.
A recording at 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 teleconference. Thank you for participating it you may all disconnect.
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