Q2 2022 Comcast Corp Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the Comcast <unk> second 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 would now like to turn the call over to executive Vice President of Investor Relations Ms. Marcy <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 Shaw, and Dana strong, Brian and Mike will make formal remarks, Dave Jeff and Dana will also be available for Q&A. Let me now refer you to slide two which contains our.
Safe Harbor disclaimer and remind you that this conference call May include forward looking statements subject to certain risks and uncertainties. In addition, during this call we will refer to certain non-GAAP financial measures. 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.
First comments Brian .
Thanks, Marcy and Hello, everyone.
Our financial results were very strong across the board once again this quarter.
Second quarter consolidated revenue by 5%.
Adjusted EBITDA by 10% the adjusted EPS by 20%.
We accomplished this while continuing to invest in our businesses and returned significant capital to shareholders.
Specifically, we bought back $3 billion worth of our stock in the quarter, bringing our total to $6 billion year to date.
We continue to have a healthy dividend and one of the strongest balance sheets in the industry.
Our prudent financial management and long term innovation based strategy are paying off in cable, which posted 5% growth in EBITDA and 70 basis points of year over year margin expansion.
In fact, our EBITA margin reached a record high of nearly 45% this quarter.
While we've added nearly 800000 broadband subscribers in the past 12 months.
More recently that pace has slowed and we posted flat broadband subscriber additions in the second quarter I'd like to dig into what we are seeing in that area.
Broadband additions of course are basically a function of churn and connect activity.
While churn remains well below 2019.
<unk> activity was also lower than what we generally see in the second quarter.
We believe this is primarily the result of three factors.
The first category is move activity as we've discussed for some time now there's been a dramatic slowdown in moves across our footprint with the second quarter below 2019 by 12% and the lowest we've experienced since the pandemic began.
Our win share of new customer acquisition opportunities remains high but the slowdown in moves has resulted in fewer of these jump balls and this has had the largest impact on our gross connects.
The second category is a reversal of some pandemic trends.
During the pandemic, many customers, particularly at lower income levels sought to optimize homebase solutions by adding broadband.
This presented us with significant opportunity to take more share in residential broadband and.
In fact in the first year of the pandemic, we added nearly 50% or 600000 more customers than our prior annual average growth.
At this stage of the pandemic those opportunities have waned as consumer behavior has begun to return to pre pandemic patterns and we've also seen some give back to a normalization of mobile substitution.
In addition, during the pandemic seasonality patterns, we're very different than what we had seen historically.
And this really began to also normalize in this second quarter, causing more seasonal disconnects that did not occur at typical levels in the prior two years.
The last bucket is increased competition fixed.
Fixed wireless is a new entrant in the marketplace and while there are likely to be significant long term limitations today's excess capacity in wireless networks is creating what we believe to be a temporary opportunity targeted at value oriented customers.
We are not seeing fixed wireless have any discernible impact on our churn.
But its early growth appears to be another contributor to our lower connect activity.
In addition, we continue to compete against fiber and an increasing percentage of our footprint.
Notwithstanding these industry and mostly macro related factors, we remain extremely confident.
We have spent decades investing and innovating to build a business that is well positioned to succeed in the environment, we're seeing and.
And we certainly expect a return to residential broadband subscriber additions.
How do we plan to do that.
Well, we're working hard to expand our footprint taking advantage of growth in housing and businesses in our current markets accelerating edge outs into new areas and we were playing offense when it comes to government subsidies.
Next we will continue to aggressively compete for market share we offer a superior product focused on innovation and differentiation and.
We continue to increase the value of broadband by bundling it with mobile and flex.
And we are making great progress in our network transition to DOCSIS 4.0, which gives us a clear path to reaching multi gigabit symmetrical speeds at scale faster and at a lower cost relative to our competitors all within the Capex intensity levels, we have previously outlined.
I'm also confident and frankly more excited in our ability to drive revenue and EBITDA growth, even through our existing subscriber base alone.
We've had a history of generating strong and steady <unk> growth as we continue to add tremendous value and improvement to the customer experience.
Our margins are some of the highest in the industry, which highlights the stability and operating leverage of our business. The diversification of our revenue streams and the strength of our other important growth drivers of cable infra.
In particular business services and wireless have been too substantial contributors to cables financial strength.
And each still has lots of runway ahead.
Business services had another strong quarter of revenue growth.
And in just over a decade, we've grown this to nearly $10 billion in high margin annual revenue, including the addition of almost $1 billion in the last 12 months alone.
In wireless we added 317000 customers this quarter and similarly have added over 700 million in incremental revenue in the past 12 months and we've barely scratched the surface of the opportunity here at only 8% penetration of our residential broadband customers.
Wrapping up on cable we are in a unique environment with some headwinds, but move activity should return to some level of normalcy.
<unk> substitution will eventually stabilize and we believe fixed wireless has inherent performance and capacity limitations that sharply limit the number of people on our network using a given amount of spectrum, which should provide a natural cap on their overall industry penetration.
Moreover, we believe that our path to deliver multi gigabit speeds together with the other features and functionality we offer will make our broadband experience superior to any of our competitors over the long term.
In the meantime, we will maintain the discipline, we've always had and I am confident that we will strike the right balance between subscriber acquisition, our long term profitability and we all believe we have a very bright future of this business.
Moving to NBC Universal we had a very strong quarter with EBITDA growth of 20% year over year our.
Our parts segment continued its momentum generating record EBITDA for a second quarter and this is without much contribution from Beijing, which was closed for nearly two months.
Domestic park attendance and per caps continue to be above pre pandemic levels and we are moving full steam ahead in building epic universe.
I cannot be more excited for how this park will bring new experiences to our visitors and additional runway for growth.
N B C. You media remains a very healthy business. We just completed the highest grossing upfront in our history, a testament to our content had a superb team.
And the unique data and technology innovation, we delivered through one platform.
This year, we secured more than $7 billion in commitments, including $1 billion of Peacock double what we did in the 2021 2022 season, along with strong pricing.
And studios or success with Jurassic World minions of Black phone demonstrates it great content attracts massive audiences in.
In addition, we are very pleased with our new film windowing, including P Board and an accelerated pay one availability on peacock, which have expanded the audience for our films that made our studio business even more valuable.
For Peacock early access to premium Universal films is a proven driver of subscriber acquisition and engagement.
As we discussed during our last call Peacock had a very strong first quarter driven by a variety of extraordinary programming, including the Super Bowl and Olympics.
Given the normal ebbs and flows of our content slate. We were pleased to have stayed relatively flat for the second quarter at 27 million M E. A's and 13 million paid subscribers in the U S. In line with our expectations and we look forward to a very strong fall when next day broadcast becomes exclusive.
Lucidly ours from Hulu, and we will be able to take full advantage of our pay one window with a number of big movies like Jurassic and minions.
We will also have Sunday night Football Premier League, the World Cup and more originals.
At Sky, we are operating well in an increasingly difficult macro environment reporting our highest ever second quarter EBITDA.
We grew revenue and EBITDA in the U K, which is our largest European market and the primary driver of our future growth.
Calling out a couple of highlights we are particularly pleased with the consumer response to glass, which resulted in sky being the third largest ultra high definition TV selling brand in the second quarter and.
We also recorded our highest ever Premier League final day viewership.
Taking 30% audience share.
In addition, we're seeing the benefit of our disciplined approach to sports rights in both Italy, and Germany, where EBITDA also improved year over year.
And reflecting on the last 24 months, which has been wrought with uncertainty.
We have performed extremely well and continue to make progress against key initiatives.
Our cable business has achieved some of the highest margins in the industry, while also delivering healthy top line growth.
At NBC, Universal and Sky, they've shown resilience and continue to recover despite unique challenges from the pandemic.
Together, we've generated nearly $30 billion in free cash flow, we're returning a record amount of capital to shareholders and our balance sheet is in a great place.
We have also continued to invest in strategically important growth opportunities, including enhancing our world class broadband network scaling Xfinity mobile increasing our capabilities of business services.
Lunching Peacock completing universal Beijing, and starting construction at epic just to name a few.
With substantial cash flow generation and a strong foundation for innovation Comcast is in a wonderful position Mike over to you.
Thanks, Brian and good morning, everyone I'll begin on slide four with our second quarter consolidated 2022 financial results.
Revenue increased five 1% to $30 billion.
Adjusted EBITDA increased 10% to $9 $8 billion adjusted EPS increased 20% to a dollar one 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 3.7% to $16 $6 billion EBIT.
EBITDA increased five 3% to seven $4 billion K.
Cable EBITDA margins improved 70 basis points year over year, reaching a record high margin of 44.9% and net cash flow grew 4.4% to $5 $3 billion.
Customer relationships are up 591000, compared to last year and down 28000 and sequentially in the second quarter, reflecting lower levels of new customer connections given the current operating environment, partially offset by low levels of churn, which remains well below 2019 led.
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We are focused on delivering an excellent customer experience and monetizing our customer relationships over their lifetime and in that regard EBITDA per customer relationship grew by 3% in the quarter.
Now, let's discuss cable financials in more detail.
Cable revenue growth of three 7% was driven by broadband business services wireless and advertising revenue, partially offset by lower video and voice revenue.
Broadband revenue increased six 8%, reflecting an increase of three 6% in <unk> and growth in our residential customer base compared to last year.
Net residential and business customers increased by 775000 over the past 12 months with flat results in the second quarter.
The trends that we saw through the second quarter have largely continued into the early parts of the third quarter with connects remaining soft while churn is still near all time lows. This has resulted in a quarter to date loss of roughly 30000 customers.
July is typically the weakest month of the quarter and the vast majority of quarterly connect activity is weighted towards August and September which is helped by back to school activity.
We're optimistic that we will have a healthy back to school season short term visibility remains low and more importantly beyond this temporary period, we are confident that our broadband speeds reliability coverage and control features continue to position us as the best in class product for our customers, allowing us to protect and grow our 32 million.
Broadband customer base over time.
Business services revenue increased 10% or approximately 6%, excluding the acquisition of Mesa G, which closed at the beginning of last year's fourth quarter.
This healthy organic growth was driven by increases in average rates per customer and in our customer base, which grew by 54000 compared to last year with 10000 additions in the second quarter.
Moving to wireless revenue increased 30%, mainly driven by service revenue, which was fueled by growth in customer lives.
Overall, we added $1 2 million lines compared to last year, including 317000 lives in the quarter, which was our highest net additions for any second quarter on record.
Advertising revenue increased 10%, mainly fueled by political revenue as well as strong growth at both our advanced advertising business freewheel and at our streaming businesses Zummo, which was partially offset by a decline in our local core advertising business.
As a reminder, zummo, which contributed about 20% of our advertising growth. This quarter is now part of our charter JV and beginning of the third quarter, we will no longer be reported in our cable results.
For video revenue declined 2.4% driven by customer net losses totaling $1 8 million compared to last year, including 521000 net losses in the quarter, partially offset by 7% ARPA growth due to a residential rate increase at the beginning of this year.
Last voice revenue declined, 12%, primarily reflecting customer losses totaling 902000 compared to last year, including 286000 net losses in the quarter and reflects our shift in focus to bundling broadband with wireless.
Turning to expenses cable communications second quarter expenses increased two 5%.
Programming expenses decreased one 6%, reflecting the year over year decline in video customers, partially offset by higher contractual rates.
Non programming expenses increased five 2% driven by growth in our wireless business.
<unk> related to our recent acquisition of <unk> and an increase in bad debt as it returned to more normalized levels and compared to lower levels last year.
These higher costs were partially offset by a decline in customer service expenses, reflecting lower activity levels in the business as well as improvements in customer experience initiatives.
Wrapping up on cable we are very pleased with a five 3% increase in EBITDA and record EBITDA margins.
Even as we prioritize increasing investment in our network with the Capex intensity up nearly 11% we generated a significant level of net cash flow and we believe our ability to continue to generate strong and growing net cash flow out of the cable business is sustainable.
Now, let's turn to slide six for NBC Universal.
Starting with total NBC Universal results revenue increased 19% to $9 4 billion and EBITDA increased to 19, 5% to $1 9 billion.
Media revenue increased three 6% to $5 $3 billion, driven by Peacock with revenue of $444 million, which is more than three five times higher compared to last year.
Distribution revenue increased eight 4%, reflecting growth of peacock driven by increases in paid subscribers compared to last year and growth at our networks as higher contractual rates were only partially offset by a linear subscriber declines.
Advertising revenue decreased one 3% due to linear ratings declines and a difficult comparison to last year. When we had a higher number of sporting events, and NHL, which we no longer have rights to partially offset by a growing contribution from peacock and higher pricing.
Excluding the impact of sports timing in NHL advertising would have grown low single digits.
Immediate EBITDA decreased two 9% to $1 $3 billion in the second quarter, including a $467 million EBITDA loss at Peacock.
Excluding Peacock media EBITDA increased nearly 4% driven by a decrease in sports costs associated with a lower number of events compared to last year and the absence of the NHL.
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, we expect losses to be higher in the second half, especially in the fourth quarter.
Moving next to studios revenue increased to 33% to $3 billion, driven by higher theatrical and content licensing revenue.
<unk> revenue nearly tripled compared to last year's results driven by an increase in the number of releases as well as the success of these films, including the outstanding results of Jurassic World Dominion.
Content licensing revenue was up 19%, mainly driven by growth in TV licensing as production has returned to pre pandemic levels.
EBITDA decreased to $155 million to breakeven for the quarter driven by an increase in programming and production costs associated with the higher content licensing and theatrical revenue in the current quarter as well as an increase in marketing costs ahead of several film releases in late June and in July <unk>.
<unk> the very successful release of minions, the rise of grew Blackstone and nope.
Last at theme parks revenue increased to 65% to $1 $8 billion, and we generated EBITDA of $632 million, which was a record level for any second quarter, even though universal Beijing was closed for most of the quarter due to COVID-19 related restrictions.
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These results show strong improvement compared to last year, when Hollywood, who was operating at limited capacity and Japan was closed for part of the quarter.
We continue to see strong demand and EBITDA growth at our U S parks, where attendance and guest spending has been above 2019 levels with Orlando delivering its highest level of EBITDA for any quarter and Hollywood experiencing its best second quarter EBITDA on record.
Universal Japan has shown a nice rebound since capacity restrictions were lifted at the end of March.
With attendance, having its strongest improvement since the pandemic and we expect momentum will build over the long term.
Universal Beijing was closed for about two months and reopened at the end of June resulting in an EBITDA loss at that park. This quarter. However, this was still a financial improvement compared to the level of Preopening costs, we incurred in the same period last year.
Since reopening the park the trends have been positive despite capacity restrictions and testing requirements.
While COVID-19 remains a risk we must manage particularly in Asia, we remain bullish on the parks business, both in the near and long term.
Now, let's turn to slide seven for Sky, which will speak to on a constant currency basis.
For the second quarter Sky revenue decreased three 5% to $4 $5 billion as low single digit growth in the U K was more than offset by our results in Italy, and Germany, where we continue to transition through resets in our sports rights.
Direct to consumer revenue decreased to two 4%, reflecting consistent average revenue per customer relationship and a decline in customer relationships compared to last year, including customer losses in the quarter of 255000, which partially reflects normal customer churn associated with the end.
Of the football season, as well as an increasingly challenging macroeconomic environment for consumers across Europe .
Direct to consumer revenue in the U K increased low single digits in the quarter due to an increase in video revenue, primarily driven by higher revenue from pubs and clubs as they recover from the pandemic as well as increases in wireless and broadband revenue.
This growth in the U K was more than offset primarily by a decrease in revenue in Italy due to the reset in our ceria broadcast rights.
Rounding out the rest of revenue at Sky content revenue declined 16% driven by the reset in sports licensing agreements in Italy, and Germany and.
And advertising revenue decreased three 1% with growth in the U K in Germany, despite the difficult macro environment more than offset by a decline in Italy.
Turning to EBITDA, Sky's EBITDA increased 71% to $863 million, reflecting our strong growth in the U K and improved results in Germany, Italy, mainly driven by lower sports programming and production costs due to resets and our sports rights.
As a reminder, the upcoming World Cup will take place in the fourth quarter, which is the first time. This event has taken place during national leagues regular season schedules.
To accommodate this national soccer leagues, including the EPL will start the new season, one to two weeks earlier in the third quarter and then take a pause for a period of four game weeks in the fourth quarter. While the World Cup has played as a result compared to last year, we will incur higher sports programming amortization in the third quarter.
With lower levels in the fourth quarter and higher again in the first half of next year.
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 cash taxes of $2 $75 billion included some items that drove us above the normal run rate by roughly $600 million.
Consolidated total capital increased 12%, reflecting significant progress in building epic Universal in Orlando.
Higher capital spending a cable driven by investments in line extensions and scalable infrastructure.
Partially offset by a decrease at Sky.
For the year, we continued to expect cable capex intensity to stay around 11% as we work towards enhancing and transitioning our broadband network to DOCSIS four O in the next several years.
And NBC universal Capex to be up around $1 billion, a year over year driven by the construction of epic.
Based on what we reported in the first six months of the year that means total capital should be about $2 $5 billion higher than the second half of the year compared to the first half.
Working capital was $1 $7 billion for the first half of 2022 and is likely to be slightly below this amount in the second half of the year, reflecting the continued ramp in content creation and the timing of annual sports rights payments.
Turning to capital allocation, we repurchased $3 billion worth of our shares in the quarter.
In addition dividend payments totaled $1 $2 billion for a total return of capital in the second quarter of $4 $2 billion.
We ended the quarter with net leverage at two three times in line with our expectations for leverage to remain around two four times going forward.
So with that and thanks for joining us on the call. This morning, I'll turn it back to Marci, who will lead the question and answer portion of the call.
Thanks, Mike operator like to open the call for Q&A. Please.
Thank you we will now begin the question answer session.
Have a question. Please press star and then the number one on your Touchtone phone if you wish to remove yourself from the queue. Please press star and then the number two.
If youre using a speakerphone you may need to pick up the handset before pressing the numbers. Once again, if there are any questions Press Star then the number one on your Touchtone phone.
Our first question comes from.
Ben Swinburne from Morgan Stanley .
Okay.
Thank you good morning.
Maybe this is a strategic question for Brian and then I wanted to ask a follow up but Jeff.
Brian .
Your balance sheet and cash flow generation is a real asset in markets that are tough.
And create opportunity for the company and honestly in the backdrop of broadband slowing and concerns around the future of streaming and also some press reports about Comcast considering different.
Strategic structure, just wondering if you could talk about the portfolio and how your level of confidence that you've got growth opportunities and the opportunity to create value and if youre thinking about ways to deploy that balance sheet capacity to to change things or take advantage of opportunities in the market that may be may be there for you now that weren't there maybe over the last few years.
And then Jeff just on the parts business.
I guess with the GDP result, this morning, we are officially in a recession, but it doesn't sound like that's the case at the theme Park business. So can you talk a little bit about your visibility into the second half of the year and into next year, both in the U S and overseas.
And whether you have confidence you can continue to kind of deliver these these record results at the theme park business, Despite what seems to be a weakening macro.
You guys.
Thanks, Ben I think what I was trying to say at the end of my remarks was cutting right at your point I think we are in a fabulous place. We have you know kind of unprecedented cash flow and scale like by our what we've got as one company, we're working really well together.
We always think about you know.
It's just a competitive right set for the company and I feel it is if you look at all the broad diversified growth drivers. They came out here again in the second quarter, whether it's wireless net adds at a record near record levels or the business service growth back to high single digits that new attendance records.
To your question about theme parks domestically.
Domestically the.
The last couple of years in broadband, obviously would talk I'm sure some more here about that but.
Heading almost 3 million customers going from zero to 13 million paid subs in a couple of years at Peacock is a great achievement.
And the highest rated broadcast network I think all parts of the company are really doing a great job in some interesting times bye.
By the way are our Treasury Department went out while interest rates were low and we've basically reprice the whole balance sheet for something on the order of 18 years average maturity.
It had record low rates. So I feel we are able to return capital to shareholders. I think that's been the real focus and I think we did it again this quarter.
Our bar is therefore very high too, but as we look at things.
Internet through that strategic lens of our cash flow and scale. So.
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Feel really strong I I think we have so many diversified businesses that are each has its own game plan and we'll talk I'm sure a little bit about some of them today, but the biggest ones are really.
Well run we got some new leadership in a number of cases and.
Really pleased with the company, Okay crude posted 10% EBITDA growth.
Thanks, Brian I'll, just take the parks one really quickly. So you know obviously the parks business historically has been subject to macro trends and Theres no reason to think that that won't be the case.
In the future, but we look at our business, we're just not seeing it yet in our numbers our performance.
And if you kind of look at that we're putting up these numbers. Despite the fact that our international visitation domestically is about half of what it has historically been so we expect that to increase over time back to.
Where it should be we have a lot of attractions. We continued building attractions during the pandemic, Brian talked about epic in the opening we have those attractions doing internationally, Japan has been steadily improving quarter to quarter to quarter are still not back to where it was pre pandemic, but the trend line is really good and Beijing.
Which was closed two of the three months of this quarter opened in the in the in the third month and is doing really well much better than we expected. Despite COVID-19 constraints on capacity, so and all of that international performances subject, obviously to the strong dollar and that is a headwind for us. So I think we feel really good about the parks and feel like.
There's a lot of growth ahead of us despite what could be macro challenges that we that we could or might face. We're just not seeing it yet.
And our next question will come from Phil Cusick from J P. Morgan. Please go ahead.
Hi, guys. Thank you.
I Wonder if we can dig in to the level of of.
Your promotion and competition in the cable business, Yeah, we've anecdotally seen some pretty aggressive promotions, it's hard to tell whether those are.
Limited or widespread are you pushing harder on average that you were a year ago.
And when you compete with wireless since you expect fixed wireless to have a cap on penetration does it make sense to push back with that on price at eastern let it let it come in and take those customers. How do you address that thank you.
Hey, Bill This is Dave let me go into both of that the competitive landscape and our promotional intensity. So let me start with the drivers you very quickly because I think that sets it up and Brian mentioned since March of 'twenty, we've added the $3 million a broadband.
Broadband customers to this point and so you look at things like the move activity June being the lowest level setting.
Happened mobile substitution really driving that $3 million with the surge.
And seasonality places like Florida that in 2020, one we actually gained customers.
Customers, which we normally down and this quarter, we went negative and Florida. So you put all that together we have to I think put that in perspective in that determined a lot of the competitive planning, but we've always approached competition with a tremendous sense of urgency and we have local competition we have.
A large national scaled competition and most certainly fixed wireless is the newest one and you go through a launch phase that typically adds pressure and we are seeing that on the front end as Brian said, it's impacting the connects we do not see it in churn.
So our approach is to segment the marketplace go after each segment provide great value really lean into the network benefits that we have and and compete fiercely for each segment. We've always done that and we will continue to do that mobile is an area, where we really can continue.
To be aggressive we have been doing that I think our results were very strong in the second quarter in terms of mobile I think theres more that we can do as we integrate mobile into every single sales channel.
So look for us to continue to be aggressive in regards to how we package each segment and leverage mobile what we won't do is chase pricing down to the bottom. So we're going to have a good balanced approach towards competing fiercely for each segment, but we have a great network. We have great innovation we have.
The best Wi Fi Gateway device, that's out there we're going to leverage our strengths in every part of what we do and so.
With all of those things you manage promotional intensity for the long run.
But we continue to evolve our competitive playbook all the time.
You won't see US go down and Chase discounting mobile is a great addition, adding value and look for us to continue to do that and I think one of the unusual moments part of this is with the mobile search with wireless only coming back look for us to continue to leverage the best broadband network.
Work with the best mobile and by the way for those that are paying attention to the <unk> stuff.
We have the data from the <unk> in terms of mobile service and Xfinity mobile is the fastest overall mobile service provider. So look for us to leverage that will combine the best network with best Mobile service and we'll continue to do that but there won't be a dramatic shift in promotional intensity.
Thanks, Michele if I can spread out of Washington.
Yeah.
And our next question will come from.
Craig Moffett with mother nature Nissan Sentra. Please go ahead.
Yeah, Hi, I Wonder if you could let's stay with the topic of broadband for a minute if you could dive into the patterns that youre seeing geographically.
You you talked about fixed wireless that the companies that have that are selling at primarily T mobile and Verizon or.
Our skewing rural where are you seeing the competition from fixed wireless most strongly and where you're seeing the competition from fiber most strongly in and what is that fiber competition look like.
Well actually let me start with fiber Craig.
And there we've been at it for a long period of time, you know we've gone from zero to over 15 year period from zero to 40% to overbuild.
Overbuild and so that is where we have good visibility to where fiber is and that's all over the place.
At this point between the multiple fiber providers and important to note whether it's fiber.
Or any other form of competition, we're growing in every single geographic area.
With fixed wireless youre right in that there appears to be two things one they are adding.
Some.
Small business, new maybe even expanding the marketplace a bit with small business I'm watching that closely.
A little bit more rural which we have been watching but it's kind of across the board. When you have again. This launch phase of somebody is doing it at scale like this you see it a little bit all over but again the difference here is our churn versus fiber back in the day, where we saw churn.
Go up we're not seeing that here.
We are seeing a little bit of pressure on connect and it's kind of all over which points towards more of the main drivers being what I mentioned earlier, it's the the move activity plus the mobile search so that is that really the key thing, but we watch a dar of one of our great strengths is local competition we stay.
On it in a very granular basis, we watch this very closely so your point is a good one.
Thanks, Craig Operator next question please.
Our next question comes from Doug Mitchelson from Credit Suisse. Please go ahead.
Oh, thanks, so much I'm just curious if anyone on the team as any other thoughts on what they're seeing in terms of macro trends, whether it's advertising our days outstanding or bad debt or sort of across all the businesses, but.
Also Dave for you as we look forward in cable if youre going through a sustained period of slower broadband growth factors, you've outlined that potentially means a little bit slower revenue growth.
This business on a go forward basis are you budgeted to hit a particular margin goal. So.
Investment Opex levels would come down as revenue comes out or how do you think about managing the business on a go forward basis. If there is a little bit of a revenue slowdown given the slower broadband growth. Thank you.
Okay.
So.
It's Mike Doug I'll jump in I think across the board we're generally.
We're not seeing slowdown David can comment on or add on on payments and the consumer side and I'll, let Jeff comment on on advertising, but versus some of the commentary you've seen I think where we're able to deal with some of the macro stuff impact on consumer and impact on cost and our expense base Bryan.
I already mentioned.
The interest rate side of it and 85% fixed at the great levels. We had mentioned and then our expense space.
Small part of it is energy related through fuel rolling trucks, others other areas labor and the like we have pressures like all others, but I think we know how to manage our way through these kind of challenges. So I wouldn't I wouldn't call out as we look to the second half of the year that macros are particularly big issue. Jeff jump then, yes, I just thanks, Mike.
I would just add.
Doug that in the advertising market. The advertising market is choppy I mean, I think we said that last time. It continues to be choppy down year on year in the scatter market. It's really segment by segment basis, though some segments are doing better some segments are doing worse and we just finished the upfront as Brian said in his opening in the upfront was way better.
Than we expected so definitely some some as I said choppiness, but nothing really that dramatic.
And I'll just jump in one more time and Dave can follow up but I mean, when we when we across all the businesses.
Budgets budget exercise and the like I mean, our job and the way we think about it is to really think about optimizing for the long term. So last thing you're going to see us doing is and it goes back to the strength of balance sheet strength of cash flow, we won't be cutting muscle you know, where we're very focused on.
In tougher times trimming some fat, but it will be very very.
Long term minded and how we think about our investment priorities, which are substantial to drive future growth and so Fortunately we're in a position where we don't have to sacrifice that that doesn't mean, there won't be tactical adjustments and belt tightening, but I'll throw it over to Dave.
Thanks, Mike Hey, Doug So the on looking forward, we almost certainly where we are right now I think points towards.
The game plan, we had in broadband allow me I'd really healthy <unk> growth three 6%.
<unk> grab rate driven the other half just how we manage tier mix. So I think there as you look at the overall strength of the total relationships 32 million broadband relationships that we have and the ability to manage through that and focusing on the strengths of the network the strength of the product.
We'll continue to do that we have a lot of levers.
That will focus on and again, we talked about promotional intensity, but we're going to put customers in the right segment. We always segment. The marketplace will continue to do that and so you also look at multiple new growth areas that we have in cable.
We're a business services, Brian talked about that as a growth opportunity mobile as a growth opportunity that platform then even for video I feel is a growth opportunity. So.
We will consistently manage and be competitive with the broadband relationships, but.
I think you know well continue to focus on our network and the product advantages that we have and that will help us focus on the pricing approach that we have in the marketplace.
Thank you. Thanks, Doug Operator next question please.
Our next question comes from Jessica Reif Ehrlich from Bofa Securities. Please go ahead.
Thank you I just wanted to drill down if possible on advertising.
I'm not sure what it means can you give us any color on kind of magnitude up or down in scatter.
The outlook for political and then on cable if anyone can come out what's going on in advertising there, but more importantly, peacock came out of the gate with a differentiated strategy.
And now Youre seeing a slew of other companies following.
Obviously inventory will go up but is that positive or negative meaning more advertisers come in and if they do you are you taking share from digital or is it a share shift from linear or just any color you can give us would be great.
Yeah, Hi, Jessica Thanks, So what I mean by choppy is that there is it's not a broad decline or increase so if you look at our business first of all in the quarter as Mike said in the opening if you take out the NHL playoffs from last year, we were actually up in the quarter.
Which I think is better than some of the other companies that have reported so far so.
Our year is a pretty good thing and if you look at kind of what we're seeing in the scatter market and what we saw in the upfront you have things like auto which is down but that's related to the fact that there you know saw Gms earnings yesterday as you just don't have a lot of cars on lots. Therefore, theyre not advertising. So that's why their advertising is down there and then pharma in the upfront was up significantly.
Les as you have a backlog of drugs that warrant approved in the last couple of years by the FDA FDA are expected to be approved so what I mean by choppy as just segment by segment different things are going on both up and down and Theres no kind of macro overall.
Some downs on Peacock look we you know we had the benefit of studying the market before we came in and we think we pick the right business strategy, which is kind of a an extension of our existing business not a new business based on dual revenue stream or subscription and advertising.
And I think everybody kind of moving in that direction as a validation of that business model and as far as advertising in general our business linear and Peacock. We're one of the largest advertisers out there over $10 billion of advertising so people coming in at the levels that are coming in we don't expect it to have any material impact on.
On what we sell and how we do it if anything our scale gives us an increasing.
Advantage and then you mentioned political and then extra we do we don't want to count our chickens before they hatch, but we expect a pretty strong political on kind of season coming up and I think our company speaking now broadly the entire company not just our linear businesses, but our local television stations in Dave's business in cable.
We're kind of uniquely positioned to now with Peacock to take advantage of whatever a candidate wants to advertise on aware. So we expect some pretty strong results from.
Peacock in the coming fall in addition to the advertising across our all company, David If you want to add anything.
Totally agree with that.
Thanks, Jessica Operator next question please.
Our next question comes from Brett Feldman from Goldman Sachs. Please go ahead.
Thanks, Bob.
Follow up on one of the questions that was asked earlier, you're always kind of get these questions around capital allocation and M&A and it seems like theres discussions that we seem to focus on what you may or may not want to do in the media space, but you still generate the large majority of your earnings and cash flow out of your cable communications segment and harder backed.
Backdrop may make asset values in that sector have come down we've already seen that what is your appetite for maybe <unk>.
Increasing your discretionary capital.
Telecom, meaning would you be interested in buying more cable assets, if they were available or fiber assets. If they were available or things that would support.
Your mobile business some of the infrastructure standpoint, I just feel like it's been awhile since taking your temperature on whether that could be something.
Just didn't really Opportunistically and then just a question on the parks obviously the strength in per caps was an important part of what contributed to the outstanding.
In the quarter, but beginning of Q2 at the end of Q U I think were very different economic environment I'm, just curious whether you've seen any notable shifts in spending patterns at the parks and the more recently thanks.
Yes.
Mike you may want to jump in on those are Dave.
This is Brian .
<unk>.
Absolutely like the communications.
Communications business that we're in.
That's certainly my roots in life and the most recent acquisition. We made we called these kind of tuck in acquisitions would be made sure Chi and that's in the business services group and it's off to a really good start.
And allows us just like you said more capabilities I think that's probably more what our focus is how do we look for new revenue sources and new growth avenues and two people who've either started a company or build a company.
Something that we can then scale faster and thats been a good pattern so Dave.
Team looks at that all the time, Mike and in a business development team.
So you guys want to add to that I think it's pretty definitely not nothings nothing it's all inbounds, but I think as Brian said the bar is always high but I think we look at smaller stuff and like <unk> and even smaller and there is a steady diet of trying to add capability innovation and <unk>.
Gail it up across the whole footprint of cable and a lot of it is inclusive of remember the roadmap for.
Tak, you know video aggregation broadband and alike is shared with sky and so when we look at that question, we're really looking across both both of those businesses together.
Two things one just following on <unk>. It is a great example, it's an opportunity to grow it's one of our most important areas mid market and enterprise. Just an example of making the right kind of bet on that and it's off to a really good start the team teams are working really well together Mesa G are business services teams.
And doing exactly what we'd hoped for in the early days of integration second point is Alco and the joint venture with charter. Another Great example of an opportunity to grow and having a scaled platform like that investing in that future. I think is the right kind of bet to make we will continue to look for those opportunities.
And then just following up on the brought the last thing you said that the the per caps I think one of the surprises coming out of the pandemic for US has been the strength of per cap spending normally people, who come from international spend more on Harry Potter ones and so forth then people domestically and we've seen domestic per cap speeches tremendous coming out of the pandemic.
We've seen no weakness in that coming out of the quarter into the next quarter.
Thanks, Brad Operator next question please.
Okay.
Our next question comes from Jonathan Chaplin from New Street. Please go ahead.
Thanks for taking the questions.
The reason for not pushing leverage higher than buying back more of your install it just be the macro environment is that is that what's holding holding you back on on leverage it's macro uncertainty.
More or less yes, Jonathan it's Mike. So I mean, I think we think about the long term you know cycles that are around our businesses and the economy and I mean, it's been our view that having a strong balance sheet to find by the leverage or the ratings. We have chosen to seek is the right is the.
Right way to run.
The balance sheet, I think Brian talked about and others have observed that together with the ability to invest heavily in our businesses maintain a strong balance sheet return lots of capital to shareholders and keep driving future growth by investing back in the businesses is a formula that.
You know in times like these with uncertain markets I think theres a lot of companies out there that wish they had those characteristics. So it's not lost on us.
But nonetheless, we've been active in capital returned $6 billion of buybacks.
The year to date.
You know 14th year in a row of raising the dividend.
That's on the back of really strong financials in the first half of the year and I think hopefully the takeaway from this call as you know.
Our feeling that comes through that we feel very very good about the EBITDA strength coming in in the second half of the year. So.
But that's the that's how we think about it we wouldn't.
I wouldn't be reacting to change our leverage and balance.
Balance sheet design.
Because it's really designed to take us through many many different kinds of cycles.
Thanks, Jonathan Operator, we'll take our last question. Please.
And that last question will come from John Hodulik from UBS. Please go ahead.
Great. Thank you.
Just following up on some of the commentary on high speed data competition, maybe for Dave.
Can you give us a sense on what the fiber overlap is these days and maybe how that's changed over the last 12 months and then on the the ARP, who I thought there was some good commentary about rate in tier mix are you seeing any I mean, I know, Dave you said, you wouldn't chase chase rate too.
To reaccelerate.
Reaccelerate growth in the on the sub side, but.
Do you still think you have the same pricing power that you've had given the changes in competition. That's a and then b on the tier mix have you seen any especially given the pressure that the consumer seeing have you seen any change in trends in terms of up hearing and potential signs that consumers may look to save money on broadband and down here. Thanks.
Yeah, So hey, there John .
On the.
The overall approach towards the marketplace in pricing.
Really we've always segmented the marketplace. So we've done that over a long period of time, so there's not a dramatic shift in the current environment. There is certainly is with mobile substitution I think that skews more lower end.
And so but we've always participated and had great programs like Internet essentials, and so we do.
Don't see a real shift we've always gone in and out in terms of our approaches towards our offers and have different competitive.
Answers and when you look at the fiber.
If we'd gone we're at 40% to where we are at right now it's been the steady build date surge early on we're quite used to it and compete very aggressively against all of the fiber group and don't really see a change you look at the telco results and not in that.
It's speaks for themselves, so where is that competitive.
Thanks, John .
On our call and thank you everyone for joining us.
Thanks, everybody.
And we have no further questions at this time, there will be a replay available of today's call. Starting at 11 30, a M. Eastern time and will run through Thursday August 4th at 11, a M eastern time.
The dial in number is 790 4570820, and the conference I'd number is 1292809 <unk>.
A recording of the conference call will also be available on the company's website beginning at <unk>.
30, a M eastern time today.
Today's teleconference. Thank you for your participation you may now disconnect.
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