Q1 2022 Comcast Corp Earnings Call
Good morning, ladies and gentlemen, and welcome to Comcast first quarter 2022 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 executive Vice President Investor Relations. Mrs. Martie <unk>. Please go ahead Mr. <unk>.
Thank you operator and welcome everyone. Joining me on this morning's call are Brian Roberts, Mike Cavanagh, Dave Watson, Jeff Shell and Dana strong.
And Mike will make formal remarks, Dave Jeff and Dana will also be available for Q&A.
I refer you to slide two which contains our safe Harbor disclaimer.
Mind 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.
Let me turn the call over to Brian Roberts for his comments Brian .
Thanks, Marty and good morning, everyone.
2022 is off to a great start each of our businesses posted healthy growth in adjusted EBITDA contributing to a double digit increase in adjusted EPS.
Well as significant free cash flow generation in the quarter.
And we achieved all of this while continuing to invest in our businesses for the long term.
While also increasing our return of capital to shareholders.
Our company has been at the forefront of innovation in connectivity and also in content we.
We have built a leading global technology platform, which today delivers 5 billion entertainment streams a week.
40 million voice commands a day across Comcast Sky and our current syndication partners.
Yesterday's announcement.
The value of what we've created.
You probably are aware, we formed a joint venture with charter to offer our award winning voice controlled.
Streaming platform across the United States, starting with Flex the next class T V.
Further develop this technology.
Not only will we bring these products to millions of more customers.
I will open the door to brand new revenue opportunities.
And when you combine charter's footprint with our current syndication partners in both the U S and Canada.
Our retail distribution through Walmart and Sky, which essentially runs off the same technology.
We now have a truly global platform.
This joint venture is a win win.
Tumors will get our proven world class user and search experiences simple content navigation and.
More choice in the streaming marketplace.
App developers retailers and hardware manufacturers will have access to one platform and one set of standards to quickly deploy their offerings across the U S.
And we will be able to share in the investment and innovate alongside a partner we know well Tom.
Comcast and charter have a track record of coming together to bring new products and technologies to consumers.
Most notably our mobile operating partnership from 2018.
Both companies to bring greater value and a better experience that people love.
The result is a more competitive wireless marketplace.
And the service that we provide has been rated number one in customer satisfaction against all other mobile providers.
He talk also benefits from this joint venture is it will be deeply integrated into the platform. The way. It is on X, one and flex today, which will help expand peacocks customer base more quickly and drive higher engagement, resulting in greater monetization for NBC universal.
And we're doing all of this in the context of the investments we've already made in our technology and within the guidelines. We provided on our last earnings call with respect to our plans for programming investment.
So let's come back to our achievements in the first quarter.
Starting with broadband.
We measure our success based on customer and financial metrics.
And while we continue to compete aggressively in the current environment. We are striking what I believe to be the right balance between customer acquisition.
And long term profitable growth.
You can see with our first quarter results, where we added 194000 customer relationships and 262000 broadband subscribers, while on the financial side table generated 5% revenue.
Six 5% adjusted EBITDA growth with 44% adjusted EBITDA margins.
Our distinct competitive advantage stems from our network, which has a level of flexibility that enables fast innovation.
Will be further enhanced through virtualization and important stepping stone and our ultimate evolution to DOCSIS 4.0.
Our path to ubiquitous multi gig symmetrical speed is well underway.
And in the next several years when you collectively include charter and Cox the cable industry will be positioned to offer multi gig symmetrical speeds to over 100 million homes throughout the United States over essentially the same DOCSIS 4.0 infrastructure.
None of our competitors can say the same thing.
For years, we focused on not only having a modern high capacity network, but importantly, we are also focused on providing our customers with cutting edge technology in their homes to ensure that they have the best experience, which is a combination of fast speeds whole home coverage cyber security and control.
Together with fantastic streaming capabilities.
During the quarter, we performed a number of successful tests on 10 G equipment, when we launched our newest and most powerful XY gateway, which increases bandwidth in the home by three times and it's the only modem that can support multi gig symmetrical speeds to date.
We're also enhancing the value of Xfinity broadband by bundling with mobile offering our customers the convenience of one relationship for older connectivity at a tremendous value.
This contributed to even further improvement in broadband retention.
Our best quarter ever for Xfinity mobile in terms of line net additions.
We have a great wireless business and M. B N O partner in Verizon and have opportunities to further improve our economics at Xfinity mobile longer term.
For example, our testing of deploying spectrum to potentially offload wireless traffic is progressing nicely.
During the quarter, we turned up our first five chi radios will be launching an employee field test in June .
Stepping back the underlying theme in all of this and the core of our strategy is that we put the customer first which drives our strong financial results. The investments. We have made and continue to make are expressly meant to enhance the experience of every person is connected to our products and services.
And we just had the highest level of customer satisfaction, we have ever seen for our first quarter and we maintained our positive trend in reducing both agent handle the interactions and truck rolls, which declined 19% and 17% respectively.
So let's switch to NBC universal.
We had a lot of exciting things happened during the first quarter for.
For the first time in our history, we are both the Super Bowl and the Olympics in the same week affirming our expertise in production.
During that period I went to our facility in Stanford, Connecticut have to say I was so impressed by the hard work and the entire team working 24 seven.
The clock working with Beijing, while being in Connecticut.
Riding a seamless broadcast for the Olympics.
We sent some of our equipment to China, when we thought our broadcast operations would be there and on the fly we have to figure out new ways to air This special event.
How the consumer know that was happening.
Amazing how well the team manage the complexity delivered an unbelievably high quality product to hundreds of millions of viewers and I think this will help innovate sports productions for years to come.
We learned a lot about streaming from the last Olympics.
So when it came to Beijing, we provided a much improved experience on Peacock, which aired every single event for the first time driving significant engagement.
Really was an exceptional quarter overall for peacock with other big sporting events and content launches, including the Super Bowl the debut of Bel Air Our most successful original to date in a day and date release of marry me.
Importantly retention on our service after airing all of this special content in such a concentrated period of time.
Well above our expectation.
We added 4 million paid subscribers to end the first quarter with over 13 million paid subscribers and 28 million monthly active accounts in the U S. We've seen a 25% increase in hours of engagement year over year.
Given the natural ebbs and flows of our content slate, we do not anticipate seeing this type of growth every quarter. We just expanded our total paid subscribers by over 40%. So.
So we expect more modest subscriber gains until we get to the back half of this year, our fourth quarter should be fantastic with sporting events, such as Sunday Night Football Premier League in the World Cup. The pay one availability of top universal titles like minions rise of Peru, and Jurassic World Dominion original series such as Vampire.
<unk> and for the first time, starting this fall Peacock will be the exclusive home of the next day NBC broadcast.
Our streaming strategy is differentiated unique because peacock is a natural extension of our existing video businesses with two revenue streams and full integration across every aspect whether its programming cross promotion we're advertising.
He cocked builds audiences extends our reach and creates new consumer experiences within our ecosystem, which should enable video to be a major long term growth driver for NBC Universal.
Finally.
The business, we haven't talked enough about this theme parks, where the recovery continues to be fantastic.
I'm, particularly excited about the new attractions that we opened during the pandemic that many of our guests are now able to experience for the first time.
Super Nintendo World in Japan.
Amazing velocity coaster in Orlando.
That's in Hollywood and of course Universal Beijing.
Our investments are significantly expanding the potential of our theme parks business, which will remain an important and exciting growth engine for years to come.
So Comcast is truly in a unique position of growing EBITDA generating a robust level of free cash flow, while making important organic investments in long term growth initiatives and also increasing our return of capital to shareholders, which totaled $4 2 billion this quarter through a <unk>.
Combination of $3 billion in buybacks and $1 2 billion of dividends the largest return of capital for any quarter in our history.
So off to a great start in the first quarter and I'd like to now hand, it over to Mike.
Thanks, Brian and good morning, everyone I'll begin on slide four with our first quarter consolidated 2022 financial results.
Revenue increased 14% to $31 billion, adjusted EBITDA increased 9% to $9 $2 billion.
Adjusted EPS increased 13% to 86 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 five.
Cable revenue increased four 7% to $16 $5 billion.
Adjusted EBITDA increased six 5% to $7 $3 billion in net cash flow grew eight 3% to $5 $6 billion.
We grew customer relationships by 913000 over the past 12 months with 194000 net additions in the first quarter.
Overall customer growth was driven by broadband, where we added $1 1 million net new residential and business customers over the past 12 months and 262000 in the first quarter.
This quarter's results reflect continued low move related activity compared to historical levels as.
As well as an uptick in the level of competitive activity, resulting in lower connect volumes at.
At the same time, we continue to experience very high levels of customer retention with this quarter's results, yielding the lowest churn rate for any quarter on record.
In fact, we had fewer customers disconnect this quarter than the first quarter of 2019, despite a customer base that is almost 17% larger.
Throughout the pandemic, we have offered a variety of programs to help our customers stay connected.
Some of our customers that participated received our services for free and therefore were not included in our subscriber totals.
At year end, we ended these COVID-19 related programs triggering a benefit in the first quarter.
We estimate this change accounted for about one third of our first quarter net additions with such benefit contained to the first quarter.
Moving to the financials cables revenue growth of four 7% was driven by broadband business services wireless and advertising revenue, partially offset by lower video and voice revenue.
<unk> revenue increased 8% driven by strong customer additions over the past 12 months and nearly 4% growth in average revenue per customer in the quarter.
Business services revenue increased 10, 6% or approximately 6%, excluding the acquisition of <unk>, which closed at the beginning of last year's fourth quarter.
This healthy organic growth was driven by increases in both average rates per customer and in our customer base, which grew by 61000 over the past 12 months with 9000 additions in the first quarter.
Moving to wireless revenue increased 32%, mainly driven by service revenue, which was fueled by growth in customer lines.
Overall, we added one 2 million lives over the past 12 months, including 318000 lines in the quarter, which for the fifth consecutive quarter was our best result, since launching this business in 2017.
Advertising revenue increased eight 6%, reflecting higher political and double digit growth in zummo and advanced advertising.
For video revenue declined one 5% driven by customer net losses totaling $1 7 million over the past 12 months, including 512000 in the quarter, partially offset by higher average revenue per customer due to a residential rate increase at the beginning of this year.
Last voice revenue declined nine, 8%, primarily reflecting customer losses totaling 725000 over the past 12 months, including 282000 net losses in the quarter and reflects our shift to more converged broadband mobile offers.
Turning to expenses cable communications first quarter expenses increased three 3%.
Programming expenses decreased one 1%, reflecting a decline in video customers, partially offset by higher rates.
Non programming expenses increased six 3%, reflecting investments in our growth businesses, including broadband wireless and business services.
Expenses related to our recent acquisition of <unk> as well as an increase in other expenses, primarily due to bad debt returning to more normalized levels.
These higher costs were partially offset by a decline in customer service expenses, reflecting lower activity levels in the business as well as improvement in customer experience initiatives.
Cable communications EBITDA increased six 5% to seven $3 billion for the quarter and cable EBITDA margin reached 44%, reflecting 80 basis points of year over year improvement.
We believe we are striking the right balance by continuing to invest in our growth businesses, which are driving the top line and proving to be a great return for us while at the same time continuing to increase our operating efficiency and remove unnecessary costs.
Now, let's turn to slide six for NBC Universal.
Starting with total NBC Universal results revenue increased 47% to $10 $3 billion and EBITDA increased seven 4% to $1 6 billion.
Media revenue increased 36% to $6 $9 billion, including Peacock revenue, which grew more than five times year over year to $472 million in the quarter.
As Brian noted earlier, we are both the Olympics and Super Bowl, which together contributed an incremental $1 $5 billion to media revenue.
Excluding these events media revenue increased six 9% driven by both higher distribution and advertising revenue.
Distribution revenue, excluding the contribution from the Olympics increased eight 5% reflecting growth at Peacock driven by increases in paid subscribers as well as our networks, reflecting higher contractual rates, partially offset by linear subscriber declines.
Advertising revenue, excluding contributions from the Olympics, and Super Bowl increased 4%, reflecting higher pricing and a growing contribution from Peacock, which was partially offset by linear ratings declines.
Media EBITDA decreased 21% to $1 $2 billion in the first quarter, including a $456 million EBITDA lawsuit Peacock.
Excluding peacocks media EBITDA decreased seven 7%, reflecting higher programming and production costs associated with our broadcast of the Beijing Olympics, and Super Bowl as well as higher costs driven by the return of our full prime time schedule.
Compared to last year, when our schedule is impacted by COVID-19.
We continue to expect peacocks EBITDA loss will be roughly $2 $5 billion for the year. However, taking into consideration the timing of content launches consistent with what Brian mentioned, we would expect losses to be higher in the second half of the year.
Moving next to studios revenues increased 15% to $2 $8 billion, driven by higher content licensing and theatrical revenue, but EBITDA declined 51% to $245 million.
The decline in EBITDA, primarily reflects a difficult comparison to last year's first quarter, which benefited from a licensing deal with Peacock.
<unk> exclusive streaming rights for the office with an offsetting adjustment reflected in NBC Universal's eliminations.
The remainder of the EBITDA decline reflects higher marketing costs ahead of numerous film releases planned for the second quarter, including Jurassic World Dominion ambulance and bad guys.
Last theme parks revenue increased by $941 million to $1 $6 billion, and we generated EBITDA of $451 million, reflecting improved results at each of our parks compared to last year when Orlando in Japan are operating at limited capacity and Hollywood was closed due to <unk>.
COVID-19.
We continue to see exceptional demand at our domestic parks attendance was back to pre pandemic levels and we had strong growth in per caps with Orlando generating its highest EBITDA on record for a first quarter.
Covid impacts in the quarter were more pronounced internationally.
Universal Studios, Japan results were impacted by capacity restrictions, which are in place for most of the first quarter.
These restrictions were lifted at the end of March and over the last month, we've seen a very strong rebound with attendance currently above pre pandemic levels.
At Universal Beijing, which opened in September of last year demand from our guests was high but overall attendance was impacted by COVID-19 and related travel restrictions.
Despite that Beijing, only contributed a slight EBITDA loss in the quarter.
Now, let's turn to slide seven for Sky, which I'll speak to on a constant currency basis.
For the first quarter Sky revenue of $4 $8 billion was consistent with the same period last year as solid growth in the U K was offset by our results in Italy, where we continue to transition through the reset in our series broadcast rights, which we won't begin to lap until the back half of this year.
Direct to consumer revenue was also consistent year over year, reflecting growth in the UK, where we continue to have healthy customer additions and grew direct to consumer revenue by mid single digits, driven by an increase in video revenue, including higher revenue from pubs and clubs streaming and premium.
<unk> TV as well as healthy increases in broadband and wireless revenue.
This growth in the U K was mainly offset by lower revenue in Italy, where we continued to experience both customer losses and lower direct to consumer revenue, primarily due to the reset in our series broadcast rights.
Rounding out the rest of revenue at Sky content revenue declined 14% driven by the reset in sports licensing agreements in Italy and Germany.
And advertising revenue increased seven 9% with healthy growth in the U K, partially offset by a decline in Italy.
Turning to EBITDA, guys, EBITDA increased 71% to $622 million driven by our strong performance in the UK and improved results in Italy, and Germany, where we benefited from lower sports programming costs due to resets and our sports rights.
Next I'll discuss free cash flow and capital allocation on slide eight.
As I mentioned earlier, we generated $4 $8 billion in free cash flow this quarter.
Consolidated total capital increased one 1%, reflecting increases at NBC, you due to ramping construction at epic universe.
A decrease at Sky and a relatively flat capital spending a cable due to timing.
For the year, we continue to expect cable capex intensity to stay around 11% as we increased investment in our broadband network.
And then BC Universal Capex related to the construction of epic universe to be up around $1 billion year over year.
Turning to capital allocation as of today, we have repurchased $4 billion worth of our shares year to date, including $3 billion in the first quarter.
In addition dividend payments totaling $1 $2 billion for a total return of capital in the first quarter of $4 2 billion.
And before I wrap up I also want to spend a minute on the macro environment since inflation and interest rates are topical right now.
There are certain areas of expense across each of our businesses that are impacted by inflation like other companies in our space, we're not entirely insulated from that.
However, the overall impact to our financials has been limited.
Overall energy costs make up about 1% of our total company's operating expenses.
So we are more than offsetting any pressure on wages and other areas of expense through the continuing efforts to implement operational efficiencies, helping us protect the healthy margins across our businesses.
Lastly, our balance sheet is very well positioned with about 95% of our debt based on fixed rates.
That portfolio with a weighted average time to maturity of approximately 18 years and a weighted average interest rate of 347%.
We ended the quarter with net leverage at two three times and still expect to remain around two four times leveraged going forward.
So with that 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.
Great I'd like to open the call for questions. Please.
Thank you.
We'll now begin the question and answer session. If you have a question. Please press Star then the number one on your Touchtone phone if you wish to be removed from the queue. Please press the pound key.
Using a speakerphone you may need to pick up the handset first before pressing the numbers once again, if there any questions Press Star then the number one on your Touchtone phone.
Our first question comes from Ben Swinburne from Morgan Stanley .
Thank you good morning.
Brian could you talk a little bit about your decision to create this joint venture with charter.
Sort of going at it just Comcast alone it.
It seems like aggregations of huge opportunity, but jv's can be tricky to operate how do you set it up for success and is there a way to frame that.
The benefits of Comcast over the next couple of years is this JV sort of goes to market more aggressively.
Next year and then Dave on broadband I think this is the first quarter you sort of highlighted incremental competitive pressure on gross adds was there a change in the quarter and can you just talk about sort of how youre thinking about.
Customer segmentation, if there's any change to your appetite to take rate.
In order to sort of manage through the competitive environment. Thank you both.
So let me start and thanks Ben.
Look I think that.
Working with charter for us.
Are all they're bringing terrific markets that we don't operate in.
And so taking.
From the perspective of people, who might want to take advantage of our platform that we will together have created will create and rollout.
Whether that's a hardware company a software company or some new creation.
They're gonna want national scale, and frankly, an international platform that that's who the competitive set is and being able to enable people's businesses to ride on those platforms and create value for our shareholders and charter shareholders. I think is the big picture.
We've done this work with charter before.
Can you go to your question about joint ventures versus doing it alone.
Obviously, there's pros and cons, but when another party brings something you don't have that makes it a pro.
We've done this successfully maybe highlight the mobile business that we both have now jumpstarted very successfully and was a real standout this quarter with our best.
Net add quarter.
Business services as we go up market to ultimately to the enterprise market and to a large organizations. It was important that we.
Find ways.
One stop shopping for those companies that we've successfully done that with charter and others.
Advertising same thing with local Jv's and national Jv's to be able to deliver to advertisers. So we have a long history.
Successfully finding ways to to be catalysts for growth and then finally, a point that's a little longer than two years, but one of the great things about our industry over the last.
Several decades is how we keep reinventing the businesses, we're in and it's pretty important I think to continue to find new growth avenues.
Avenues.
And so I look at our innovation that we've been doing at Comcast and now with Sky on a global basis.
To being able to continue to invest to have.
The reach and to have a continued hope for new revenue sources in the years ahead. These are the kind of steps you have to make now to make though to see those.
Dividends down the road Dave.
Just a quick comment on that I think we are as Brian said, we're really excited about.
This partnership and being able to leverage a decade plus of innovation.
Round a tech platform.
<unk>.
Already performing very well just to put things in perspective, we do with you combine everything that we do with sky across our entire portfolio. We do 5 billion streams, a week of the streaming content.
And voice remote commands, we do $40 million voice commands a day. So it's just we have a wonderful platform now we have a wonderful partner.
As Brian said being able to pull things off with.
And now I think the scale matters. So excited about the future of that so to your.
Question on competition and just a couple of things we have been in a competitive environment going up against a variety of different service providers for quite a while.
<unk> seen it anticipate.
This when they launch you have good visibility towards new footprint and launches. So theres been multiple cycles that we have competed and gone everywhere from low end pricing with DSL or DSL light competitors to fiber.
Launch is in over 15 years now of fiber activity. So.
We think that the main thing that we're dealing with right now in this cycle, while there has definitely been an uptick in competitive activity.
With launches that have happened over you know throughout the last couple of years.
New footprint, new launches between fiber and fixed wireless.
The main thing in this case is our churn is at record lows.
And it has been decreasing churn activity for over a long period of time and it has continued so this last quarter.
Record low quarter for any quarter so.
But having said that we take it seriously.
The competition when you look at the amount of footprint that has continued over the last year plus.
And with fixed wireless and fiber.
Yes.
We have a real game plan that we've had and added to over time.
Where we segment the marketplace.
We compete at a very granular basis, where there is new launches.
And focus on leveraging every product that we have and most certainly we're playing offense with mobile so we have great broadband and it kind of goes towards pricing.
We when we segment the marketplace, we have grant granular approaches towards competing.
And then being able to have multiple tiers of great broadband and really focus on the strength of our network that is ubiquitous we compete everywhere and have a multiple over a variety of broadband packages and we're not going to have tradeoffs in the marketplace, where its time.
De tradeoffs geographic tradeoffs.
They're at or not app or perhaps even peak moment tradeoffs. So we have a ubiquitous consistent great network that will go to a halt.
With that we have and so yeah, yes.
And most certainly an uptick in competitive performance.
And we see that we've anticipated it.
The main issues. We believe are the macro issues that are move activities down that has continued.
And we havent seen actually in our footprint to move activity in March was actually less.
<unk> to be less move activity change of address in March than it was in February . So we think those are the macro issues are the primary things and in this cycle, we're well positioned to compete and we're going to compete aggressively.
Thank you and spend operator next question. Please.
The next question comes from Doug Mitchelson with Credit Suisse. Please go ahead.
So much of I've got one for Dave one for Jeff, Dave How do you see wireless pricing and execution of all the and you're offering a pretty good deal for customers, even though your phone subsidies arent as great as as the big three but as you scale. The business as you start to offload traffic, you're going to have more room, which you either drop to the bottom.
Line or invest in scaling wireless more quickly given the broadband pressures.
You all discussed on the call I'm, just curious whether you think you get more aggressive investing in customer growth and is there more ways for you to ramp customer growth even from these high levels.
Or should we think about it more as a driving profitability for the division and then Jeff sort of the obvious question just any streaming strategy rethink pulse Netflix. Thank you.
Let me start Doug on mobile so it start with <unk>.
It was a great quarter set another record in terms of mobile lines.
So we absolutely believe our strategy and focus on accelerating growth in wireless is indeed working.
And so over the last couple of years.
We have evolved our approach including.
Banding, the ANV and Oak agreement worked on that and that's been I think a boost and we're fully integrating mobile and one of the most important things into everything we do at cable we're leaning in on marketing.
Playing offense with mobile in terms of how we talk about it attracting new.
New customers in consideration with our customer base.
So every single sales channel has been activated at this point so yes.
And this year, we're going to continue to make adjustments with mobile we're leveraging.
Still the new unlimited pricing, we have a great mix between that and by the gig and were converging broadband with mobile and when you take both there's just more value for the customer and we think that this converged packaging approach really putting the emphasis in terms of service value.
<unk> is the key we come in and out of of offers and there will be in any given moment, where the new product introduction.
They offer a promotional offer around gift cards and different things that we do on handsets, but the main point for us and I think it's proven with our results having good success that this works is not to put the emphasis necessarily on the handset so leaning and see it in the results.
And.
We also do a nice job with bring your own device and Jim just have launched small business and business services. So a lot of runway left I think in mobile.
And in your your point on the offload opportunity down the road.
We already have a great network and a great network.
Combined with the M. P N O with Verizon I think is working and for the majority of our footprint. This capital light approach to wireless is the right approach, we continue to be opportunistic, though and we're prepared we're doing technical trials and leveraging our spectrum in the offload traffic in high dense areas.
Where that makes financial sense. So we're running trials optimizing the approach and turned up our first does Brian said first five G radios at the beginning of February or your trials are underway. So we will be ready.
When and if this makes sense, but we are in a good position and we will just be opportunistic as we look at that.
Down the road so.
Like our position like the runway plenty of upside.
Thanks, Dave Hey, Doug So we've said from the beginning since we launched <unk> got that were taking a different approach than most of the other people in the streaming business. We don't view Peacock really as a separate distinct business. We think it's an extension of our existing television business and we manage it that way that's how we set up our business that's how we.
Program. It that's how we sell advertising across both linear and Peacock and I think that that strategy is working we had an exceptional quarter. This quarter. We're very pleased with how we're ramping we're pleased to have a ramping revenue. We're pleased with how we're wrapping paid subs. We're very pleased with the engagement, which was up this quarter, it's going to be.
Obviously choppy depending on what programming comes and what time, but I think our business model is clearly the right business model.
We are approached by the way internationally, we're taking a different approach to much more measured approach, we're focusing on sky markets and in non Sky markets. We're looking for partnerships in unique ways to enter the market. So our business strategy is great for us it's working.
We're happy with the quarter, we're happy with how the business is scaling and I think the noise and the rest of the streaming business really if anything just validates where we're going I would also say that we've shown as well.
As we wrap the business that we're willing to be flexible and changed our business model as we see.
Things evolve we shifted more towards a payday dog model. When we saw that success early on so obviously as things change and the streaming market will continue to evaluate and ship, but right now we're really happy with both of our business model and how we're performing.
Thanks, Doug Operator next question please.
Our next question comes from Phil Cusick with JP Morgan. Please go ahead.
Hi, guys. Thanks, a follow up on a question if I can so first can you talk about anything to help us with with recent trends in broadband and your thoughts on seasonality going forward into what used to be a weaker second quarter I'm curious how many re customers didn't convert at the end of 'twenty, one and could that be.
Part of what's been seeding the fixed wireless ecosystem.
And then second on leverage.
Not to be nitpicky, but leverages.
Continued down now at two three times you said you did a $1 billion in April but at this level on the stock does it makes sense to really accelerate that thank you.
Maybe I'll jump in and just Dave just commented on competition and our approach to the market in terms of the backward looking stuff I think we called out that the you should think about the normalized level of net adds in the first quarter at about a healthy 180000, we had.
A transition impact in the net subs added in the first quarter just as we ended the COVID-19 programs, where people would come on that in some cases free.
You recall, what we did during Covid, we wanted to be conservative, but appropriate in how we accounted subs. So we're wherever we brought in a sub under some some form of Covid relief program with the goal of keeping you know the population connected to the <unk>.
And it was free we were clear we were not going to count them until they ended up being on a free program and then started paying so consistently throughout COVID-19 . That's the way we did it and that's the way we ended it so as the quarter last year ended.
Put a stop to those programs. So the only the third that came in in this quarter folks that were.
<unk> in the last quarter came on as as free but began paying us. So I don't think we have any any negative impact going forward. It's simply that there won't be any ongoing roll forward into the second quarter. It's all kind of cleans itself out in this first quarter and the point I'd like to make just on that the quality of.
The approach that we took is that you can sort of see that in the.
The conservative way, we counted subs throughout.
Allow the evidence of that quality as both the record low churn you know that that you know we've demonstrated that Dave already commented on together with the growth in <unk> throughout the period pre during and post Covid. So I think really the point was just to make it clear that the the COVID-19 promotions came to an end.
And it just had a positive onetime impact in this quarter as you transition back to pre COVID-19 normal ways of counting subs.
Mike.
Mike said it perfectly I think that.
One other point.
Phil to your.
The thing is that we have consistently.
Consistently segmented the marketplace.
And that we have had great offers and multiple segments and low income constrained segments. We've done it for a long period of time so.
Everything that Mike said that we're comfortable in terms of working with customers always we always do that so if they are roll offs and things like that we've been doing this for a long period of time so.
And the only other thing and seasonality.
There will be ongoing normalization around things like example is Florida.
We'll leave Jim what we're saying is leaving a little bit early and so that that is going to happen over time, it wont be at southern onetime moment in seasonality.
But it will just continue we believe to get back to some normal trending.
And that.
Student activity as well so.
Mike.
Back on the buybacks so I think.
We're pleased as we said.
Almost a year ago now are coming up on a year ago. This quarter, when we got our leverage back where we wanted to.
For our commitments to the rating, we like and strength of balance sheet that we're glad to be back and so this quarter between you know.
<unk> of 3 billion in dividends of a $1 billion to you know we were had a record quarter in the company's history in terms of dollars of capital returns. So I think.
We're certainly informed as we go forward by where Leverages and the fact that we ticked down a touch I wouldn't put anything into that it's a it's a big.
There's a lot of moving parts as we forecast and so we're going to stay around 2.4, but around 2.4. It could be two three could be $2. Five I would say, we're sticking with we like leverage around that 2.4 times level.
And obviously were partially informed as well by where the stock is and you know.
So that that gives us capacity, we stepped it up a little bit in the tail end of last quarter and as I said on the remarks, we continued at that pace you know doing another $1 billion so far in the second quarter.
So the one thing I would just add as Brian is something that I'm proud of it I think we if you look for.
One of our goals is to grow your businesses every one of our businesses just reported at <unk>.
Think about the future by investing and so we are whether it's the JV or the broadband investments the peacock investments things we're doing at Sky.
Buying back stock increasing the dividend.
We are doing all those things simultaneously and I think that is something that differentiates us.
Thanks, Phil operator, we're ready for the next question.
Our next question is from Jessica Reif Ehrlich with BFA Securities. Please go ahead.
Thank you Brian you just said the company.
It needs to reinvent yourself or you do bring invent yourself, but you have done consistently over the years and so going back to video and how do you see video evolving for the company. If you take a holistic view the legacy business is shrinking faster than than they believe it ever has in the competitive landscape obviously is changing.
A lot.
How do you think about repositioning your assets, whether it's from cable to content.
Or do you need to increase your presence in news sports International et cetera.
And then Jeff International Visitation, I think is still pretty low what what is it normally and what is it now.
Well, let me start Jessica nice to hear your voice.
Uh huh.
I think we have a.
We've anticipated the changes in video pretty well and.
On the one side I think part of Nbc's media results are that the decline is actually less.
Because there are new ways.
Ways for people to get video.
And from the cable side, we have our highest margins our best quarter in EBITDA and revenues are the companies continue to grow because we've pivoted the strategy. So.
And our satisfaction scores are at all time highs. So we're giving customers choices and we found a way to get ourselves to a place of <unk>.
Unique and different.
So that we're not trying to push something onto a customer that perhaps.
As a rock up a hill that we don't want to have to do so that strategy has worked for us so as I think forward.
You know I think we believe aggregation.
Is a real opportunity.
And to see customers, who have now so many more choices Anders they just want to get to the content. They want really fast and in a seamless way and somebody who makes it work for them.
And we're seeing viewing patterns change. So we were just talking before the call.
One of our shows are on NBC Peacock something about Pam.
Not only that come out of the Dateline franchise inside the NBC IP kind of redefined video if you will out of the news business.
And the Dateline franchise.
First airing if you just went off of traditional TV rating you might have one conclusion and as you've watched the show grow now with on demand.
With Peacock.
And with.
NBC Dateline special when you put all that together.
Jos.
Really successful.
So having a company that can do all those things.
Both on the.
All the platforms that NBC Universal has.
Has positioned us so I think we now take that those kind of examples and figure out how.
In this new partnership with charter.
And across.
The MPC portfolio.
We find a way to continue to innovate.
And the relevant to the next generation and the existing generation of.
TV viewers so I'm.
And then you've put in place with Sky is doing with Sky glass and you see how it can be integrated into without any box right into your TV and that's what X class can be so I don't know I think it's a pretty exciting roadmap ahead definitely some change and that's what I think our company has been pretty good at Nab.
Forgetting yeah.
Yes, Hi, Jessica So our theme park business as you can see in the numbers is absolutely performing great and and with that as your question is the international visitation at our domestic parks is less than half of what it would normally be this time of the year for Orlando, and California, and even given that our bookings going for.
Forward looking at the summer are at historic high levels and then one thing I would also add is while Japan doesn't have the same international visitation as Orlando does have international visitation and it is also seeing almost no international visitation and it is returning to pre pandemic levels without that international visitation to in Osaka.
So we're very excited about our theme parks going forward and one of the things to note is we've invested in our attractions all during the pandemic. So international visitors, who have delayed coming to our parks have a lot to experience.
When they when travel starts picking up so it could be more confident about it.
Thanks, Jessica Operator next question please.
Our next question comes from Craig Moffett with Moffett Nathanson. Please go ahead.
Once again, Craig Moffett.
Life.
Hi, sorry about that.
Sorry, I want to stay with the broadband theme for a moment.
You talked about the the runway run rate absent the the.
Free customers converting would've been around 180.
Can you talk about the market growth Asps.
Aspect of that new household formation and in particular sort of what youre seeing in your edge outs and the pace at which you can extend your edge outs.
To try to expand the footprint, a little faster and how much sort of.
How much of a floor or you think that can put on your broadband growth rate going forward.
Yeah, Hey, Craig This is Dave so yes on the front end in terms of the real trending of household formations. The thing that we're looking at is literally the change of address data.
That we stay focused on and that's what has continued to tick down.
And even went further down in our footprint in March so and we think there is an impact of household formation as well.
It is a good point in terms of footprint, we're very focused on.
Our opportunities and I think we've been pretty consistent with one new component to it.
Three main areas of opportunity one is just expanding footprint within our traditional cable areas that we serve and Thats you know high amounts of residential single family and to use and some commercial within our footprint.
Theres been some starts in.
Some pauses it within that in terms of new construction, but in general we think over time that works its way out.
We'll continue to pick back up and the second thing our proactive builds as we call. It hyper builds which is mostly commercial but will drag and.
Some opportunities in terms of N to use and some <unk> and the third one is rural.
Edge outs and those are the things that we've been focused on now there are opportunities to really play offense and with their great programs that are available federal and state.
The subsidies that are available and we're actively evaluating.
Various potential.
<unk> opportunities and submitted a lot of applications, where we've determined that this is going to provide a reasonable.
<unk>.
An economical way for us to serve these new areas and so it's early way early on these things, but we're having success and we're getting some wins on these these programs. So I think this is going to be a constant focus for us to look for opportunities we want to be the trusted partner for <unk>.
The entities to and I think it'll be competitive a lot of people will be looking to you know to.
For these subsidies, but we're going to edge out our properties and look to build out when you look at a number yeah. We did last year in 'twenty one.
Approximately a little over 800000, new.
New passing that we built I think a safe way to look at it is we're at a minimum we're going to shoot for that again and hopefully we will have upside on that.
Thanks, Craig Operator next question please.
Our next question comes from Brett Feldman with Goldman Sachs. Please go ahead.
Thanks, and I'm actually going to follow up on the comments that Jeff was making earlier on the parks you'd noted that youre seeing great performance in Orlando in per caps are up considerably first I was wondering if you might be willing to quantify that the extent to which your per caps are stronger now relative to where they had been prior to the pandemic and then bigger picture Disney is.
Spent a lot of time talking about steps they've taken over the last two years to position their parks business to have a higher yield as we fully emerged in the pandemic I was hoping maybe you could just elaborate a bit on some of the things you've done you mentioned you've invested in new attractions, but are there other steps you've taken over the last two years or so.
That would lead you to believe that this improvement in per caps has a degree of durability to it such that you will indeed be operating a higher yielding business yourself whenever we're fully out of this.
Yeah. Thanks, Brett So I don't think I mentioned per caps our per caps. They actually are up there from before the pandemic, but but I was talking about and tendons and mix of attendance, but.
The main thing we've done during the pandemic and our theme parks as we've continued to invest in them. So we added a major attractions and all of our parks, we didn't really slowed down much during the pandemic. So philosophy coaster, our new roller coaster in Orlando.
Ben just phenomenally successful we added Nintendo in Japan, which is showing real strength and we're really excited that we're gonna be bringing that to Hollywood next year, and then ultimately to Orlando, We added a pet's attraction in Hollywood and of course, the biggest thing. We're doing is we're building a new park.
Big Universe down in Orlando.
Which is going to continue to add to our length of stay and is going to be anchored by that Nintendo land that I mentioned before but also some of our other key attractions. So yes. Our per caps are up yes, we cut costs in the business, which we've been pretty open about but the main thing. We did was continuing to invest because we see we really are optimistic about that growth.
In that business going forward.
Thanks, Brad operator, we have time for one last question.
And our last question is from John Hodulik with UBS. Please go ahead.
Great. Thank you.
Maybe.
Two quick ones first for Brian .
We see a lot of dislocation in the market.
A lot of media stocks have been under pressure, especially in the last two last couple of weeks.
Can you give us a sense of how you're viewing sort of the M&A opportunities.
As we've said in a previous question you guys have always taken the opportunities to reposition the company as necessary.
Accretive value, creating opportunities in the market sort of more so now than maybe six months ago. That's number one and then.
On for Jeff.
Peacock I guess is the slowdown in net adds you guys are calling out just a function of coming off the Super Bowl The Olympics, and then any impact from the strike.
A strategy that you've heard before about putting the NBC broadcast on Peacock next David any impact to your to your retransmission agreements as a result of that mill.
Thank you John .
Think theres any new things to report today I think we're where we are to really focus on a great quarter and a great start to the year.
You know obviously.
The strategy I think Jeff said, it well that we employed it goes back a number of years that we just.
We have a company that has.
A lot of opportunities around the world and I think we are pretty focused on those opportunities you're always going to look at new things and changes in the situation just as Jeff also said.
But.
The main focus and it takes something like your last point on the Olympics.
I used the one example on a television show.
I just can't emphasize even though the Olympics were really challenged and maybe werent the.
What we all had hoped for when we bought years ago with all the political.
Activity around the world.
The team the storytelling the heroes athletes. This company can do things no. Other company can do to present that using new technologies.
And I think that's what puts us in a very special place Jeff Yeah, just just adding more to color to peacock. So so our four big programming areas and we've said this before our sports movies.
Movies, leveraging the strength of our movie studio, which is really strong.
Linear programming as Bryan talked about with the thing about Pam leveraging our linear programming.
On a non linear basis, and then originals and so the first quarter was really the first time, we employed some of those so we had the Super Bowl and Olympics and the same week as Brian mentioned at the top and we also took advantage of that that audience by putting a movie marry me on Valentine's day right in the middle of that so we had three segments what was really encouraging about that.
<unk> is not only did we obviously add the subs we've talked about the 4 million paid subs, but we two things number one we didn't churn out of those subs, we maintain those subs as you saw on the quarter end numbers and the second thing is we used all of that audience to promote the first original that we really were high on which was Bel air.
And we had our first real hit from original perspective, so the last piece of our programming strategy, which we really haven't employed yet is the next day.
Cramming from MPC, not just NBC by the way with Bravo and our cable networks as well that programming you know to your question is currently exists, but it's on Hulu as part of our Hulu deal and as our as part of our termination at the end of last year, we're bringing all of that programming from Hulu back to Peacock starting in September . So there is no impact on Retrans.
Because it's the same programming that's already out there, but instead of going to Hulu and seeing the voice. The next day, a real housewives. The next day now you'll be able to see it exclusively.
On Peacock starting of September and we're pretty excited about it.
Thanks, John and that will end, our first quarter 2022 earnings call I want to thank everyone for joining us.
Thank you we have no further questions at this time, there will be a replay available of today's call starting at 12 PM Eastern It will run through Thursday may five at midnight Eastern time, the dial in number is 855859.
2056, and the conference I'd number is.
5688.
<unk> 86, a recording of the conference call will also be available on the Companys website, beginning at 12 30 P M eastern today.
This concludes today's teleconference. Thank you for participating you may all disconnect.
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