Q3 2021 Comcast Corp Earnings Call

Good morning, ladies and gentlemen, and welcome to the Comcast third quarter 2021 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 of Investor Relations Ms. Marci right. Victor. Please go ahead.

Ms probably bigger.

Thank you operator and welcome everyone. Joining me on this morning's call are Brian Roberts, Mike Cavanagh, Dave Watson, Jeff Shell and Dana strong.

Brian and Mike will make formal remarks, Dave and Geoff and Dana will also be available for Q&A.

I 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. 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, Marcy and good morning, everyone.

We had a wonderful third quarter across the entire company with 18% growth in adjusted EBITDA of 34% growth in adjusted EPS.

We generated $3 $2 billion of free cash flow.

One of our goals the past several years has been to return to a position.

Sensibly investing in our existing businesses.

Paying a growing dividend.

And also buying back meaningful amounts of stock.

So I'm pleased to report that we have now achieved all of that in this quarter and we are back to our desired leverage ratios.

Our cable division continues to be a standout.

Delivering over 7% revenue growth and the fifth consecutive quarter of double digit EBITA growth of 10%.

Probably our broadband business, which generated 300000 net additions.

Contributed to a very healthy 255000, net new customer relationships.

Business services has emerged from the pandemic and was also a key driver of our results.

And we believe this momentum will continue.

Our success comes from our network advantage innovative products and world class operational capabilities, which enable us to provide an unparalleled experience.

Just like in residential we are proactively responding to the needs of our commercial customers and offering personalized solutions.

With small business has led to our growth for the last decade, we're still significantly underpenetrated in the mid market and enterprise segments.

We see a lot of potential to take share in our large addressable market, which just got even bigger post to our recent acquisition of <unk>, which builds on our strong offering of technology solutions.

<unk> has become a leading provider to companies worldwide and unlocks a customer segment that we don't have today, particularly U S based organizations with multi site global operations.

Xfinity mobile exceeded its prior record, adding 285000 lines. The most in any quarter since launch and we continue to evaluate ways. We can accelerate this business even further.

Wireline and wireless connectivity services continue to converge.

We were looking at new exciting products and packaging that highlight how we are able to provide our customers with the best and most reliable broadband wherever they are wherever they go and help them save money at the same time.

And with only 6% penetration of our 32 million broadband customers.

We have a long runway.

Taking all of this together, we have an incredibly robust broadband business and we've been adding over 1 million broadband customers each year for the past 20, plus years and we continue to deepen these relationships by offering a fantastic and differentiated in home experience with the fastest.

And gateway and the greatest Wi Fi coverage.

We plan to continue our relentless focus on aggressively developing and improving our suite of products around connectivity.

The foundation of all of this is our network and we are currently in the process of deploying new technology updating key infrastructure and accelerating virtualization across our footprint. So that we can deliver even further enhancement fast and at scale to millions of customers.

And we will continue to evaluate every opportunity we have to expand our past things, which will bring our amazing suite of products and services to many new homes and businesses.

All of Dave Watson and his team's superb execution.

Is around decades of investment that has led to constant new product innovation, including this month's launch of X class T V and extension of our leadership in video aggregation.

Classes, an innovative smart TV powered by our global technology platform that brings the best of our companies' entertainment operating system to consumers nationwide together with the option to use either Xfinity charter or other entertainment apps.

At NBC Universal we continue to see great progress in each of our businesses, but I'd like to highlight our theme parks, especially Orlando, which just reported the most profitable quarter in its history, despite having virtually no international guests due to COVID-19 related travel restraints.

In Hollywood, we continue to see recovery and we had a very successful and exciting opening up Universal Beijing resort on September 20th.

I also look forward to COVID-19 related restrictions easing in Osaka, which could happen soon.

Our media business is also doing very well and we're benefiting from the many changes Jeff shell and his team implemented starting in 2020 with new hires different roles fresh content and a more efficient operating structure.

We're seeing the financial success in both our linear networks as well as Peacock, which has maintained its momentum.

We have a new breakout hit with La Brea, which has been a contributor to nbc's overall audience lead this primetime season as well as the best performing new show on Peacock.

Sunday Night football has returned with great momentum, which we're seeing across our platforms and we're thrilled with the performance of our second Halloween installment, which generated more revenue in its opening weekend at the domestic box office than any other film this year with a day and date streaming release and as the number one.

Non live event Premier and Peacocks history.

We're also looking forward to extending our streaming platforms outside of the U S with Peacock launching on Sky next month and Sky Showtime in the works for mid 2022.

At Sky I want to reemphasize, how well we're performing in the U K, which continues its growth trajectory and customer relationships led by record low churn.

We're also seeing great momentum in our broadband and mobile businesses.

Earlier this month, Dana strong and her team introduced Sky glass in London, a premium all in one streaming TV and multichannel subscription package that is so much more than just a stunning T V with amazing sound.

It's an innovation platform that opens up a whole new world of entertainment for our customers and simplifies the experience. So they can stream every channel every show in every app in one easy to use interface and.

And already the customer response has very much exceeded our initial expectations.

We're also incredibly proud that sky glass is the first television to be certified carbon neutral.

Sky has been leading all of Comcast with its sustainability goals and it's the first media company in the U K to commit to being net carbon zero by 2030.

While glass and X class are distinct products with different monetization and distribution strategies to extend our customer base beyond our previous capabilities and they run off the same global technology platform.

This allows us to quickly bring the best features to consumers across territories segments and brands and on Comcast hardware and through our syndication partners.

I'm pleased to also announce today that Apple will bring Apple TV, plus and the Apple TV App to our Xfinity Sky customers on tax one flex X class Sky glass and Sky Q devices, and Comcast is bringing the Xfinity stream and Sky go apps.

To Apple TV devices.

We're working together with our partners to deliver the best apps and experiences on our platforms and our teams are sharing capabilities and collaborating across the company collectively drawing on our scale and leadership in broadband aggregation and streaming to innovate and profitably serve.

<unk>, new and existing customers.

Looking ahead I am excited about the opportunities we have to both invest in our business and return capital through buybacks and dividends all while maintaining leverage around current levels and I believe we are extremely well positioned to continue our track record of building long term shareholder value.

So I'm pleased to now hand, it over to Mike for more detail on the strong quarter.

Thanks, Brian and good morning, everyone I'll begin on slide four with our third quarter consolidated 2021 results.

Revenue increased 19% to $33 billion adjust.

Adjusted EBITDA increased 18% to $9 billion adjust.

Adjusted EPS increased 34% to 87 per share.

And finally, we generated $3 2 billion of free cash flow.

Now, let's turn to our business segment results, starting with cable communications on slide five.

Cable revenue increased seven 4% to $16 $1 billion.

EBITDA increased 10% to $7 $1 billion.

Net cash flow grew 16% to $5 billion.

As a reminder, comparisons to last year were impacted by adjustments accrued for customer RSA in fees.

Excluding these adjustments cable communications revenue increased six 3% with no corresponding impact to EBITDA.

We added 255000, net new customer relationships in the quarter once again, driven by broadband where we added 300000, new residential and business customers.

We continue to benefit from high levels of customer retention with broadband churn improving to the lowest rate for any third quarter on record.

The strong level of net customer additions over the past year, including this third quarter, coupled with higher average revenue per customer drove broadband revenue growth of 12%.

This growth was about a point lower excluding the RSM fee adjustments and last year's results.

Wireless and business services also drove our strong cable revenue growth.

Wireless revenue grew 51% driven by growth in customer lines and higher device sales.

Overall, we added 285000 lines in the quarter. The best result, since launching this business in 2017, bringing total mobile lines to $3 7 million.

Business services revenue increased eight 7%, reflecting an increase in rates and customer is primarily driven by the continued improvement in small businesses.

We added 18000, net new customers in the quarter and 72000 over the past year.

We recently closed on our acquisition of <unk>, which enables us to offer a broader range of products and solutions to mid market and enterprise customers and expands our market opportunity to customers with a global presence.

Moving to video revenue increased one 4% and was flat excluding the RSM fee adjustments in last year's third quarter, driven by our residential rate increase at the beginning of the year, mostly offset by video subscriber net losses totaling 408000 this quarter.

Last advertising revenue increased four 6%, reflecting a strong overall market recovery compared to last year's third quarter, which was impacted by COVID-19, partially offset by lower political advertising.

As a reminder, the fourth quarter year over year comparison will be impacted by record levels of political advertising last year.

Turning to expenses cable communications third quarter expenses increased five 3%.

Programming expenses increased seven 6%, mainly reflecting the comparison to last year, which benefited from our ISN adjustments.

Excluding these programming expenses were up two 8% as we begin to lap the large number of contract renewals that started this cycle through in 2020.

Non programming expenses increased three 9% and decreased <unk>, 8% on a per relationship basis, reflecting our investment to drive growth in our core businesses broadband wireless and business services.

This resulted in higher technical and product support in advertising marketing and promotion expenses, which were partially offset by lower bad debt and customer service expense.

Cable communications, EBITDA increased 10% to $7 $1 billion, including a contribution of $51 million from our wireless business.

Cable EBITDA margin reached 43, 9%, reflecting 120 basis points of year over year improvement.

While the RSA and fee adjustments had no impact on EBITDA, They did impact margins last year.

Excluding the <unk> adjustment impact our margin expanded 160 basis points year over year.

Cable capital expenditures decreased five 4%, resulting in capex intensity of 10, 4%, whereas there is typically some choppiness in cable capex from quarter to quarter, mainly due to timing.

Now, let's turn to slide six for NBC Universal.

Starting with total NBC Universal results revenue increased 58% to $10 billion and EBITDA increased 48% to $135 billion.

Media revenue increased 48% to $6 8 billion, including $1 $8 billion associated with the Tokyo Olympics.

Excluding the Olympics revenue increased nine 2% driven by higher distribution and advertising revenue.

Distribution revenue increased over 12%.

Selecting higher rates post the successful completion of several carriage renewals at the end of 2020 and a growing contribution from peacock, partially offset by subscriber declines which have been stable for the past few quarters.

Advertising revenue increased seven 2%, reflecting an overall market recovery compared to last year.

Very strong demand and pricing for our AD inventory.

Contribution from Peacock and a solid start to the new fall season, including strong NFL ratings, partially offset by the timing of sporting events compared to last year when several events that shifted from the second quarter to the third quarter.

Media EBITDA increased one 2% to $997 million, including results of Tokyo Olympics, the favorable comparison on the timing of other sporting events and Peacock losses that were impacted by higher costs associated with the day and date release of the boss Baby family business.

As a reminder, our fourth quarter results, we will face a difficult comparison to last year due to higher costs associated with the timing of more sporting events at a regional sports network.

An increase in our original entertainment as we continue to launch our fall season, and the inclusion of our latest studio release Halloween kills on Peacock.

Studios revenue increased 27% driven fairly equally by growth in theatrical and content licensing revenue.

The increase in theatrical revenue reflected the continued success of F nine as well as several new releases, including the boss Baby family business, which was in theaters and on Peacock.

In addition content licensing revenue growth benefited from the delivery of content to our networks Peacock and third parties.

Studio EBITDA declined 47% to $179 million driven by higher amortization of television and film production costs as we return to pre COVID-19 levels of production and investment in marketing and promotion to launch our new films.

Looking to the fourth quarter EBITDA comparisons to last year will remain challenging in the short term as we launched new theatrical releases and ramp our television productions, which had been impacted by the pandemic.

Moving to theme parks revenue increased by $1 $1 billion to $1 $4 billion, and we generated EBITDA of $434 million, which included about $130 million of Universal Beijing Preopening costs.

This was our most profitable quarter since the pandemic began in the first quarter of 2020, driven by improved operating results at our U S parks, including strong domestic attendance and per caps that we're above pre pandemic levels.

In fact, as Brian noted Universal Orlando delivered its highest EBITDA for any quarter in its history.

At Universal Studios, Japan results were challenging as we continue to operate under government capacity restrictions keeping attendance below 2019 levels.

Last we opened universal Beijing on September 20th where the initial demand has been positive while our parks offer a great experience year round, we expect some seasonality given Beijing as weather conditions with lower attendance in the fall and winter and more in spring and summer.

So overall I'm parks, we are encouraged by the continued recovery, but getting back to and then exceeding pre pandemic levels of EBITDA will likely require an improvement in international visitation.

Now, let's turn to slide seven for Sky, which I'll speak to on a constant currency basis.

For the third quarter Sky revenue was $5 billion and relatively consistent compared to last year.

Direct to consumer revenue was also consistent with last year's results, primarily reflecting strong growth in the U K driven by continued growth in customer relationships and higher ARPA due to the positive impact of a rate increase earlier this year.

Higher mobile device sales and the continued turnaround in hospitality revenue as pubs and clubs come back.

This was offset by a decrease in customer relationships and <unk> in Italy, mainly due to a negative impact from the reduction in broadcast rights to Syria.

Sky is overall customer relationships declined 233000 entirely driven by customer losses in Italy.

Advertising revenue increased 16% with the results in the UK driving the bulk of the growth and are reflecting the overall market recovery from COVID-19.

This increase was offset by a 26% decline in content revenue driven by the change in sports licensing agreements in Italy, and Germany, as well as the timing of sports events compared to last year. When several events had shifted from the second quarter to the third quarter due to COVID-19.

Turning to our EBITDA results during the quarter there was a change in the way we amortize sports rights. This cost is now aligned more directly to win games are played including when seasons begin and end. This resulted in a $130 million benefit in the third quarter, which will reverse in the <unk>.

<unk> fourth quarter.

Going forward. This change will continue to impact the quarterly pattern of recognizing sports rights amortization costs with expense higher in the first and fourth quarters and lower in the second and third quarters, but it should not impact our full year results.

Overall, Sky's EBITDA increased 76%, reflecting this benefit as well as lower sports programming costs due to resets and our sports rights and the favorable comparison on the timing of sporting events.

Before I comment on capital returns and balance sheet, let me make a comment on our corporate and other segment as we've done in the past with other startup activities launch costs related to Sky glass and X class were reported in our corporate segment, which could become more meaningful beginning with this fourth quarter.

Now I'll wrap up with free cash flow and capital allocation on slide eight.

We generated $3 $2 billion of free cash flow this quarter, including a $670 million benefit related to the tax impact of the bond exchange we completed in August.

Consolidated total capital was $2 9 billion for the quarter and as expected net working capital increased reflecting our broadcast of the Olympics as well as the continued post COVID-19 ramp of investment in studio content.

Return of capital totaled $2, 7 billion, including $1 $2 billion of dividend payments and $1 $5 billion of share repurchase activity.

Our net leverage at quarter end was two four times, which means we are now back at a level that is consistent with our existing ratings and reflects substantial progress in both debt reduction and a strong rebound in our businesses post the pandemic.

From here my expectation is that we keep our leverage ratio around where we currently are and continue to execute on our capital allocation priorities, which consists of maintaining a strong balance sheet investing organically for profitable growth and returning capital to shareholders.

Looking ahead, our buyback will be a function of that balance in excess free cash flow available for capital returns.

With that I'll turn it back to Marci, who will lead the question and answer portion of the call.

Thanks, Mike Operator can open up 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 press the pound key.

Youre using a speakerphone you may need to pick up your handset first before pressing the numbers. Once again, if there are any questions. Please press star then the number one on your Touchtone phone.

Our first question comes from Benjamin Swinburne with Morgan Stanley.

Please go ahead. Thank you.

Thank you good morning.

<unk>.

Maybe Brian starting with you the the Sky class the move towards the Smart TV seems like a really interesting evolution of your product set.

Taking the business beyond your footprint as you noted.

And in multiple markets could you just talk about kind of a long term vision of what that <unk>.

Turns into for the company.

Because it seems like it's a pretty significant opportunity as you you've been limited essentially geographically in the past.

And then I.

I guess I have to come back Mike to your last comment there about leverage.

Just doing some quick math I mean, you guys are run rating I guess, one 5 billion of buybacks a year looking at the second half.

<unk> got a $4 billion or so dividend you generate a lot more free cash flow than those two numbers so to stay.

And pay for it.

But mostly it's a.

Embodiment of what we do well, which is aggregation and we're going to find a way for consumers to get to what they want faster personalize it and have fun along the way and then it's a platform for innovation on go forward basis for where we think TV may evolve and whether it's.

Gaming.

Whether it's fitness health care education.

And so having that be.

Part of your relationship with our company I think is novel territory for us too.

Do R&D off of.

In the U S and finally, it allows us to take it all over Europe.

Potentially as you say in an out of footprint. So we're starting in the U K, but we have ambitions to expand quickly to other countries.

And it's great for streamers.

Gaming services, so our importance to.

The streaming universe will continue to grow in our relationship and certainly the Apple announcement today is that the latest iteration of that in the U S.

Much locked in sync with with our Sky team is the X class and Dave can talk a little bit about that but we look at the markets there is different opportunities different realities.

With our partnership with <unk> and with Walmart.

Many Americans get their televisions.

And so we're excited to begin and then I think.

So different ends of the market perhaps.

We'll look at this as learnings across the globe.

And it's <unk> right on the heels of X one Q flex.

And and the progress we've made on innovation, so I'm really excited by it and I think it.

It also shows the one company working well together, let me start with Dino why don't you add a few thoughts on Sky class and then Dave over to you and then we'll get to the question on leverage with Mike.

Thanks, So much Ryan I appreciate it.

Sky class is our latest innovation for a new training team.

And as we've touched on this eliminates the need for a dish set top box, which is really really important.

And we believe it's the smartest in the market.

Based on our experience of product launches that consumer reaction here has been fantastic and I think that really starts with the product itself, which is quite innovative and we've changed the commercial model of the product to follow the approach on a mobile handset sales. So we've converted a large upfront payment to an affordable.

The monthly payment with ownership of course.

This is a long term relationship with the customer as a result.

And it really improves the products really improves our acquisition economics, because it allows for self installation and there is no longer any tradition of set top box.

Other big part of the product innovation has been reducing the complexity of the purchase decision itself. So everything as an aside all of the highest FX and the customer really only need to choose that.

Five inclusive of the audio which is truly fantastic all built in.

And the breakthrough in the experience and that's where sky really does shine as in a fully integrated product so that interplay between linear on demand in app content rich can really enhance people's time spent viewing senior note coming in and out of apps, but the content is lifted up enabled it to other crop content more easily.

This is what kind of mix the products such a standout and I think it's driving some of the consumer reaction that we've seen.

Ryan touched on we think Sky class gives us some interesting headroom.

It opens up customers, we haven't been able to reach before if they've been prohibited from having satellite dishes or didn't want them opens up customers who are more interested in streaming content.

Syndication opportunities for us and importantly, as Brian touched on it opens up a lot of opportunity for both stickiness and potentially.

New revenue areas, when we think about things like watch together or fitness and health long long term. We think that this is a platform for innovation and really really just at the beginning.

And I think the compelling part about this is that all of that got set this are exactly the same as all of the Comcast technology. So this is all built through the collaboration and enablement of Comcast and so the synergies between this and some of the smart TV developments in the U S are huge.

Synergy is where the hardware the software the cloud services are almost entirely the same.

This is Dave then so.

Dana hit it Brian hit it I'd say.

It really is.

For X class.

We're not starting from scratch because of this constant focus around innovation and working with the Sky team working together the cable groups. So we're excited about X class it's early days.

But it is clearly there.

<unk> TV is a really important device to get to so.

We were able to take our software stack working across the board and focus on the right segment that once very little friction, but just once the smart TV to work and we're able to do two things one deliver the world class UI.

Great voice great.

Data integration.

Able to add things like the charter App, our app on top of it. So we can there's a lot of flexibility that we have in the business model that we have we can go to market with the TV manufacturers the retailers in mind.

And pull it all together in a unique way it because we're coming in a little bit later, so it's a great product, we're very excited about it within our footprint outside and we're able to position Peacock.

Part of the offering and a great way and within the UI.

So.

Overall very excited early but.

This is clearly a focus of ours.

Thanks, guys. So Ben it's Mike so on capital allocation and leverage so just to recap things. We ended at two four times leverage so like I said earlier I think we intend to stay around this level from here, So you know plus or.

As you know a tick or so.

We're not trying to stick to landing each and every quarter on a.

Specific number by any stretch.

But that's right I think the you know we've said all along that our businesses are healthy as youre going to hear from all the operating executives here. They are all going to grow free cash flow over the long term.

And that does create a big long term picture for us that will put us in a great position to continue to make the strong balance sheet. We have continue to invest organically in the businesses and then return ample capital back to shareholders and the.

So the business and the patterning of those investments are what will dictate the outcome, but it's but we feel very good about being back at this place where that's what the.

Picture looks like.

Thank you everyone.

Operator next question please.

Our next question comes from Doug Mitchelson.

From credit Suisse.

Thanks, so much so I guess that leaves broadband for me and so I think you know.

In particular, Brian I'm not sure if you have thoughts as well, there's just a lot of concerns in the marketplace by investors on fiber build outs and fixed wireless and then of course <unk> came in below three to 19 and I think a couple of questions. One is what is the right baseline for growth in broadband net additions that investors should think of.

Got it I think during the pandemic as we moved through a lot of us.

Look at 2019 as a normal year pre pandemic. It was a good year for you and the industry for broadband growth. So one thing when you look forward like what's the right baseline for growth that you measure.

<unk> business is on and then secondarily any thoughts on how momentum looks in <unk> and how you feel about competitive threats.

Would be helpful. Thank you.

You got it Doug So first off as you said you know we're still you know.

Clearly in a fluid environment.

To be clear, though.

Fundamentals of the business are very strong and there's a really long runway of growth in broadband. So we haven't changed our feeling on that at all we have a terrific network at scale, it's ubiquitous and it continues to perform exceptionally well and we're in a good position for the future. So we haven't changed.

As to our view on the long term trajectory.

Activity business, I'm, just as confident and optimistic and the prospects for this business as I've ever been.

So when you look at the whole year I think it underscores the strength of broadband year to date, we've added over $1 1 million net additions and we've been adding over 1 million broadband subscribers each year for the past 20 years.

As you said, while the pace.

Q3 was slower than we saw earlier in the year during the height of the pandemic. Our broadband net adds are still very healthy and our churn remains at record lows certainly for Q3.

I think it's important to look at the current environment and I think that points to a little bit Doug to what youre talking about and kind of just a couple of drivers to call out.

One when you look at the slowdown and Mike talked about this earlier.

There have been a slowdown in connects across our footprint and we look very closely at the move activity.

There is more activity earlier in the year around moves slower now.

And certainly the last couple of months below 2019 levels in terms of moves so little bit less college student activity not alarmingly, so, but just a little bit less and just a little bit less switching activity. Overall I think if you look at other operators everyone's churn is down.

That means just some.

Let's jump balls, where we do well I think the other thing to call out in terms of drivers, we're seeing less growth from the lower income segment, we're still adding customers in this segment, but not at the same rate as earlier.

There are new government programs like ABB, and we are seeing traditional wireless not fixed wireless, but traditional wireless participate and be very active in this program.

And last point on competition look we take it all very seriously and we've been in a very competitive situation for some time, our focus has not wavered, we innovate we deliver the best product for each segment, we break the market down in terms second in terms of segments and we compete in a very local level.

<unk>, we have a granular view literally at the block level geographically and by each segment for me just the only it's the multiple product households, so.

You add it all up our churn remains at record lows, whether it's fiber whether or not and we look at our competitors performance overall tours, historically and now and I think that says it all.

As for expectations for full year results, while current visibility and overall activity creates little bit of modest risk. We still believe full year net adds will be around 2019 levels. So overall when you look at this year.

And you go back to 2019 2019 was the second best year that we've had.

Well over a decade, it's just a terrific year and so for us to be at that level and the consistency that we've had has been so strong and you point to the fundamentals. There are some things that were on but like always you attack them and you break them down, but I really like the fundamentals and the momentum.

That we have.

So I think the runway is absolutely still there and the last point is business services.

A very important part of the connectivity story and in their love their momentum as well. So you add it all up I like where we're at with connectivity.

Thank you very much.

Thanks, Doug Operator next question please.

Our next question comes from Jonathan Chaplin with New Street.

Thanks, Dave I'm wondering if I can follow up on that last question.

The full year is around 2019 levels that suggest that for Q.

It is a bit below where you were in 2019.

Is it your sense that we sort of pulled growth from the fourth quarter into the.

Earlier into the.

And 2022 will be sort of back to that normal trend.

Or.

Do you think the slowdown that we're seeing in <unk> might continue into 2022 and I recognize that it's difficult to have visibility given all of the sort of the puts and takes coming out of the pandemic, but any color around the progression of the trend would be I think it would be really helpful to investors.

No understood.

As I mentioned around the visibility so.

I wouldn't comment yet at this point on 22 other to say.

What I've already said around 19, being very strong and point back towards the fundamentals in terms of the trending around churn.

Activity that we have and so I think.

More to come later, but I think there as you know we have just consistent momentum going back pointing back to over 1 million broadband net adds over a 20 year period.

Just speaks to the strength of the category. So overall views long runway for growth, where we're at with penetration we haven't changed our longer term view of that.

Okay.

Just following on from that is presumably the low churn that you are seeing is feeding into the tremendous EBITDA growth at your.

That you're seeing in the in the cable segment as well.

John has to.

Churn for the industry has to recover.

Our growth in broadband to recover.

Sure.

Is there sort of an offset to growth in EBITDA and as we think as we look ahead as well.

I think the main point churn is already did a very good place I think overall at record lows. So I think what we're dealing with those transactional activity so little bit lighter on the connect side.

So we're already in a good position I think we have a balanced approach towards <unk>.

Growth and we have a balanced approach towards customer share growth. So those fundamentals I think are consistent that's the one point I. Just this is Bryan just want to add to Dave I think gave a very comprehensive and totally agree with that.

Two questions that got asked.

His answer.

That last point I, just want to underscore which is.

The record low churn suggests to me anyway.

You know a very stable business, that's what's so great about the 32 million broadband customers that we have will be recurring business.

So while maybe there was a pull forward maybe there's a slowdown time will tell as your question suggests where we're looking at how do we grow EBITDA, how do we grow margins, how do we maintain and offer more product connectivity, but kind of the very first thing we talked about what else can you do.

With broadband what will broadband evolve to over the next 510 years. So we're super focused on minute to minute, but we're also I think they put in context, just how good we feel and it's certainly business services. The same kind of innovation that we've been doing in residential we're doing in business services.

And so it's not some change in market conditions that really.

We've all been reading about while there may be coming and maybe theres. Some of that I actually think it's personally the disruption from the pandemic coupled with you know.

A large percentage of Americans have broadband so the question for US go forward is how do we continue to grow the value of that broadband and obviously, therefore grow the value to our shareholders.

Great. Thanks, guys I really appreciate it.

Thanks, Jonathan Operator next question please.

Our next question is from Jessica Reif from Bofa Securities.

Thank you I guess.

A bigger picture question isn't it something really short.

Look out towards next year I mean.

You clearly have a record year, but the Olympics Super Bowl.

Our record upfront political it looks like there's a lot of money being raised them.

Hopefully, we'll see a return of international theme park visitors and movies seem to be stabilizing sky.

Obviously, you know you you've got this rollout of Sky class of Peacock and hopefully benefit from some of the past investments.

As you guys have just discussed.

Going out of footprint with X class T V.

Okay.

But it seems like it would benefit broadband peacock and advertising mobile more aggressive so.

That long winded introduction.

Could you just talk about your priorities for 2022 and beyond how differently. The business look over the next three to five years and then that kind of quick short question is just on Peacock you you didn't mention anything about usage or monthly active accounts. So if you could give some color there.

Well, let me start.

But thanks for.

Youre all over the kind of sense of optimism at least I think we all feel for the company.

I think we're one of the fortunate companies we during the pandemic we've talked in the past about how well I think we transitioned to work from home customer care.

Continued productions, so as we come hopefully out of this.

In the U S and globally.

Are we driving our company and I think we ultimately go where the consumer wants to be and we have products in different prices.

That allow customers to.

Come to our company, we are getting close to nearly 60 million customer relationships, I think 57 or 58 million global relationships and these are.

100 dollar a month plus type relationships.

And so we want to be the best leader and Thats why we are continuing the innovation and then you add in theme parks and you've talked about and the big events that people come to our company whether their advertisers.

Or.

Business partners. So I think that's all driven off of global technology platform, and that's where I think we have the real leadership.

So and then I want to Echo what Mike has said a couple of times, we feel like we're back in balance.

Our priorities and that really puts us in a position go forward too to be disciplined.

And what we're doing be a leader and that's going to produce after all the many years that our company has been building these relationships around the world to produce a lot of free cash that will be returned to shareholders, but Jeff why don't you go specifically to the Peacock and other NBC, we haven't heard from you yet so maybe talk about the company in general yes.

Thanks, Brian and thanks, Jessica so.

Everything on Peacock is heading in the right direction and Theres really nothing from a trajectory perspective, that's any different than it was last quarter or the quarter before all metrics are pointed up our usage continues to be great. Our mix of users continues to be great.

We added a few million dollars more subs more MAA is.

Everything advertising we in this quarter, we just at the tail end of the quarter, we started selling.

Advertising beyond sponsorship of which in the fourth quarter, it's all beyond sponsorship and and that is going spectacularly well. So we're really pleased with Peacock. It's way ahead of where we expect it to be at this point.

Every month every quarter. It gets further ahead and.

And as you were talking about the business overall for next year.

I was getting excited because we're very excited about next year with everything that we've got coming across let me see universal from the Olympics and the Super Bowl too spectacular movie slate to a very strong advertising business ratings at our linear networks, improving and I think peacock.

I would add to that that Peacock is doing really well right now without most of its programming strength. So if you look at the future and you look at where we're headed with Peacock.

We have because of the pandemic we were behind on our original production. So we're going to start to see a ramp up in original is on Peacock, which is very necessary to continue to grow to have successful and robust original programming and we're excited about a lot of the things.

That that we're making for the service.

We decided to buy our first window as we talked about last call of our movies.

So our pay one rights so to speak and the first movie in our pay one rights will hit Peacock in the first quarter and then we'll have a steady.

Supply of movies, we've seen across all streaming platforms that movies moved the dial they moved the dial for Peacock and this quarter with boss Baby.

Recently, with Halloween kills which which by the way was a huge hit on Peacock and a huge hit at the box office. So it shows that you can kind of.

Play in two different markets. So we have all of our movies coming to Peacock and we couldnt be more excited about where peacock is and will continue to invest.

Invest.

Behind that success I think it's important to remember too that we launched just over a year ago. We launched in July of last year. So we've been we've been up business for just over a year and we're already more than a third of where of where who is now which is a service has been more than decades in the making so.

Cited about the year overall in the company and really excited about where pickups going.

Thank you.

Thanks, Jessica Operator next question please.

Our next question comes from Craig Moffett with Moffett Nathanson.

Hi.

Thanks, So I guess, having talked about broadband and some of the growth initiatives across the company, let's talk about wireless is the other big growth initiative I guess first the way I would.

Question is sort of we've seen some data that suggests that that your Wifi is offloading a lot more traffic than we would've expected from the contracts so that.

The gross margins of that business may be much more much higher than than we had previously believed.

It makes me wonder what's the strategic goal for that business is it really to drive the business into being the largest most profitable business it can be or is it.

Still largely to reduce churn on broadband and think of it as as.

More of a defensive product for protecting your existing business and then if I could just squeeze in a second unrelated question can you just update us on your thoughts of Hulu, which I guess it doesn't necessarily come up until 2024, but is there any opportunity that you might do something with Hulu sooner.

Hey, Craig Dave here, So let me start with the with wireless so I don't think.

We really haven't changed our.

Strategic imperative behind mobile.

But most certainly.

Things have accelerated and that we are very focused on how we leverage mobile to support broadband.

We were.

<unk> successfully.

<unk> worked on the Verizon relationship and.

Improve the <unk> relationship, we're able to go to market with and launching the new unlimited plans combining that with by the gig just puts us in a unique position.

So I think our goal as we said earlier is to go faster and leverage mobile completely and everything that we do and how we surround broadband with a terrific product I think it is profitable you will continue to be.

Do you feel confident of that but.

But the main focus is to drive broadband and there are a couple of key things one.

It is continues to support the broadband churn gun pointing towards the record low broadband overall churns mobile is just one piece of that.

But it also drives consideration on the front end so.

Things some the activity overall begins to tick back up I think retail and mobile play a huge role as you pointed out I think the other key point is how do we leverage product integration with Wi Fi, we already do a great job thus the.

Every mobile device.

Contribute.

A ton of broadband traffic through these mobile devices over our Wi Fi network and it's part of our network. So over time, we want to work hard on how do we integrate the experience and just do more.

So I think in the home and we'll be opportunistic outside the home. So I think it's we're accelerating mobile every single sales channel every marketing plan and we will continue to package mobile with broadband in unique ways going forward.

Hey, Craig it's Mike so on Hulu.

Just tremendous increase in value there, obviously, a great business.

Participating in you know one of the hottest areas of value increased streaming so we're happy to be.

Along for that ride, obviously, why we set up our own you know thing in Peacock.

In terms of the deal it is a couple of years out.

Remember, we kind of put this together a couple of years ago and I'm certainly glad we didn't exit at the time three or so years ago. So like the deal we have and I think we're always open for business, but it'll be fine if we stay to the end because I expect value to keep increasing.

Thank you. Thanks, Craig operator, we have time for one last question.

Our last question comes from Phil Cusick with J P. Morgan.

Hi, guys. Thanks for squeezing me in.

I wanted to ask a couple of follow ups first on the broadband trends the last few quarters and in September you've been pretty specific on how you thought the year would come in is there just less visibility today compared to where we were in September and it sounds like this isn't a competition issue. It's just more of the underlying demand.

I'll also does that make you think about price increases this year for broadband and video with the.

The pandemic still going on and the new FCC.

And as well on the buyback in the last cycle, you weren't really willing to borrow money to buy back stock.

Preferring to use cash flow and leverage this lower it sounds like its different this time.

And is that driven by the stock price being really attractive where you really wanted to keep that leverage in that sort of mid twos range. Thank you.

Yeah.

Well so let me start it's Dave let me start with broadband. So you know as I said, yes, there is some.

Due to limited visibility on.

What we've seen and obviously an acceleration of activity earlier in the year that was more like 20, and the first part of 'twenty one.

But primarily really on the connect side and I think I walked through some of the drivers behind that but again.

Hunting towards the whole year gives perspective on Q4 the.

Around the 2019 levels still I think the key is the overall churn levels, just being where they're at and I've talked about that your point yeah. Our approach is to consistently focus on value and the weather.

Whether it's fiber or not you know our goal is to constantly innovate positioning the greatest network I think for today and tomorrow.

And we're constantly adding speeds, we've improved coverage great devices.

Gateways the pods control improvements that we've had streaming with flex now ex glass and mobile were surrounding broadband with products.

As some of the pressure around pricing when you can package with so many alternatives. The other thing that we do is we provide multiple tiers of broadband and we market we breakdown the broadband marketplace into segments. So we have a lot of choice out there and so it is we go in we consult with the <unk>.

Specs upfront and customers all the time, what's best for them and we put them in packages that work and that gives an opportunity to drive our pool. When you do it that way so overall the fundamentals again.

Talked about and you look at the long term runway of broadband and the consistency of how we performed to me that's a I think points towards the future. So Brian Okay, well I think it's a perfect way to end the call Phil with your your your question. Let me again state that I think it was a great quarter and one.

The highlights for the quarter was returning.

After several years to what we have our target leverage ratio, which Mike talked about and so we sort of separate or at least I do in my mind to borrowing from the buyback that they're not linked to the way you described it may appear that way.

And I just wanted to give a compliment to our treasury team.

Jason.

Armstrong and the team during the last 18 months, our balance sheets now never been in a stronger position we've done some long term.

Rollovers and extensions at the historically low rates and so you put all that together with this operating performance and it does get us back to where we wanted to be which will then allow us to more aggressively take advantage of what a number of US believe is a great company and therefore, you know you can put your own value on it.

Shareholders, but we certainly are looking forward to buying back stock.

And.

And I think Mike described the logic well in the ratios and.

All in all a really great quarter. So thank you team and thanks for your support on the call to the shareholders Marci over to you.

And thank you everyone for joining us on our third credit Com have a great day.

Yeah.

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