Q1 2023 Comcast Corp Earnings Conference Call
Good morning, ladies and gentlemen, and welcome to Comcast first quarter 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 Miss Marcy Rebecca. Please go ahead Miss Rebecca.
Thank you operator, and welcome to our first quarter 2023 earnings call.
First hear from Brian Roberts, Mike Cavanaugh, and Jason Armstrong, then Dave lots of them won't join us and be available for Q&A.
As a reminder, beginning this first quarter, we have changed our presentation a segment operating results around two primary businesses.
Connectivity and platforms.
Content and experiences.
For additional details please refer to R. E K issued on March 13th which can be found on our Investor relations website at <unk>.
Www Dot C M C S E Dot com.
Now refer you to fly two of the presentation accompanying this call, which can also be found on our Investor Relations website, and which contains our safe Harbor disclaimer.
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 fronting schedule issued earlier. This morning for the reconciliation of these non-GAAP financial measures to get with that I'll turn the call over.
Brian .
Thanks, Marci and good morning, everyone.
Before we get into the quarter let.
Let me just acknowledged the news that you all sore earlier this week, obviously, a tough moment.
But we are so fortunate to have a fabulous tenured leadership team at N B C Universal.
You go down the list, you'll see many of them have been leading their divisions within the company for at least 10 years and are truly the best in the business.
We're also lucky to have my cabin I'll step in at the helm at N B C. Universal while also remaining president.
Like as a fantastic executive an operator that many of you know well and he'll call work closely with each of the management team at N B C Universal to continue.
Excellent momentum.
Mike alongside with Jason Armstrong will lead these earnings calls on a go forward basis.
Today, you'll hear from them about our strategic focus and drivers of growth.
Now and over the long term.
Jason will go into much greater detail on the first quarter results.
They watch and I are here pretty Q&A.
You'll hear a lot more about the great momentum of our connectivity and platform businesses later in the call Dave Thanks for getting off to a great start this year.
So before I headed over to Mike I, just wanted to share my quick perspective on our recent performance.
Really was a strong quarter and start to the year, especially within the context of what continues to be a choppy macro environment.
We grew adjusted EBITDA by three per cent and adjusted E. P S by 7%.
In addition, we generated 3.8 billion of free cash flow and returned $3.2 billion of capital to shareholders, all while continuing to invest importantly, and a number of major initiatives, which is a real testament to our very healthy balance sheet.
Two things of months many highlights in particular that stand out for me.
And I'm really proud of.
What is the animation business.
By strengthening and combining our capabilities across Dreamworks and illumination led by Chris Melinda Audrey we've had tremendous success, creating franchises that people know and love all over the World Despicable Me Shrek pets minions and more recently pushing boots and now Super Mario Brothers.
Just broke and number of records, including the biggest worldwide opening up any animated film all time.
These are the results of the strategic decision, we made years ago to become a leader in animation and the conviction. We've had to continue to invest in the business even during the depths of the pandemic, which are now clearly paying off.
The second is connectivity and platforms.
A significant margin expansion that we achieve this quarter, coupled with the 4.5% or poo growth in domestic residential broadband.
Yeah, I'm in straights successful discipline.
An excellent management and a challenging competitive environment.
We're focused on delivering a superior experience and profitably serving our customers and it shows.
And with that let me know hand to call over to Mike.
Thanks, Bryan we had a great start to 2023 and et cetera ourselves up for another strong ear.
We have amazing talent at all levels of our company and DNA that fosters creativity in collaboration resulting in operational excellence that is second to none couple that with our position as a scaled leader and very large and profitable markets with tens of millions of customers paying us over $100 per <unk>.
<unk> as well as hundreds of millions of T V and streaming viewers.
And we have an extremely healthy balance sheet, enabling us to invest in all of our strategic opportunities and for great returns. While also returning a healthy amount of capital to shareholders.
As pleased as we are with our results in the first quarter any company's performance and a quarter is just a milestone of progress against a longer term strategy and plan.
And so before we dive deeper into the details of the last few months I'd like to spend a few minutes talking about the drivers of our growth over the longer term and we're we're focusing most of our time and resources.
I put these in four buckets residential connectivity busy.
Business services connectivity.
Our theme parks and experiences and our premium content creation.
I'll start with residential connectivity, which is comprised of domestic broadband domestic wireless and international connectivity.
Broadband is a fantastic business.
It's a great product for the consumer and demand continues to rise.
People are connecting more and more devices to our network and they're consuming a tremendous amount of data right.
Right now the average monthly data usage for broadband customer that doesn't take video from US is nearly 700 gigabytes.
And there is a related increase and the importance of reliability and speed with roughly one third of our customers at one gigabit or higher and nearly three quarters at or above 400 megabits.
For us the consumers already high and increasing level of expectation for their broadband experience is an important trend.
And while the market places competitive such said, adding subs in the near term is likely to be a challenge I.
I fully expect we will eventually return to subscriber growth.
We have the best hand out there to win against all the competing technologies, whether it's fiber or fixed wireless.
We view fiber as our long term competitor.
We have been successfully competing against fiber for about 20 years, yet still built base of 32 million broadband customers over this time period.
Our strategy is to have the most robust network, which were making even better as we transition to DOCSIS for Dato.
And surrounding our industry, leading broadband experience with multiple services that provide additional value.
And now we have the ability to offer the consumer a converged connectivity package that includes a great wireless product based on a capital late model with favorable economics combined with excellent Wi Fi.
A more recent competitor is fixed wireless, which we view as a sub standard and temporary solution for a certain segment based on their knees at this moment in time.
[noise] approach is to compete rationally we.
No how to segment the market, we have packages that cater to customers, who want the very fastest speeds and premium features and others that are more targeted to those looking for value oriented solutions.
We tried a couple of offers targeted this lower end during the quarter.
We were pleased with the results and we will continue to remain nimble and respond competitively in each segment.
In the meantime, as the residential connectivity market and macroeconomic environment continued to evolve our focus will be on serving our existing base.
Growing broadband or poo.
Increasing our penetration in wireless and making proactive investments to expand our footprint at the fastest paced in our history.
You saw US do this all of last year and in the first quarter and I expect this trend to continue.
Our second major growth opportunity business services, which is approaching $10 billion in annual revenue is growing at mid single digits with newly reported margins just shy of 60% and.
And delivering adjusted EBITDA growth in the high single digit range.
Here too are advanced and adaptable network infrastructure is much better suited to serve in commercial and government locations compared to the legacy wireline and wireless providers.
We moved fast and are more capable of reliably and cost effectively meeting our customers needs.
We already have over two and a half million dollars domestic business customers more than any other competitor and are targeting a 15 billion dollar market opportunity within our footprint in his $70 billion to $100 billion total market opportunity that we can now go after by leveraging our technology and partners.
Outside of our footprint.
Our third major growth opportunity is in creating experiences from our own intellectual property as well as special IP that we license from others and bring to life at our theme parks like Harry Potter or Nintendo's characters like Mario.
Our parks are resonating with our customers in this segment is clearly on a roll.
Japan has come Roaring back in Beijing return to profitability following last year, when both were operating under Covid related restrictions.
And on the domestic side Orlando continues to do well in Hollywood just opened Super Nintendo World with Great success.
This outstanding performance provides us with even more confidence that the investments we are making a new lands and attractions will also generate strong returns and.
And I'm excited for what's to come Donkey Kong another Nintendo land to open in Japan in 2024.
<unk> universe in Orlando in 2025, as well as a smaller part concepts that we recently announced.
A horror themed experienced in Las Vegas.
And a new park in Texas, that's specifically designed for younger guests and their families.
Our fourth growth area is content and especially on the streaming side, we have a decades deep library of iconic films and television and we spend over $20 billion each year to produce and provide programming that spans every genre.
Sports News entertainment dramas and film.
Which has resulted in the broadest reach of any media company.
Over 100 million people engage with our content every month.
In film we were a number two in the worldwide box office last year with Jurassic minions and Halloween.
And based on the current course, we are trending to do even better in 2023.
We've started the year off with home runs and terrific momentum Kerry.
Carryover from pushing boots.
Success from Megan and now Super Mario Brothers, which is just three weekends has already crossed $875 million at the global box office.
We're really proud of our animation business.
We've been in the movie business for 100 years, and it's exciting how we've been able to create an monetize our entire movie slate and animation and beyond and in so many ways, including the innovative changes we've made in movie windowing.
We made the strategic decision to put our pay one window on Peacock, which really kicked in at the end of last year.
We now have one of the most robust movie offerings on streaming.
Hits, we have at the box office roll onto Peacock.
And this is proving to be both a successful acquisition and retention tool.
Add to that the strength of content from our television studio, which powers the content on N B C and.
And help make us number one for many years from all the <expletive> Wolf procedural and SNL, coupled with highly popular content on Bravo.
This all goes to Peacock the next day.
Add to this are originals. We're we're just getting started shows like poker face, which launched in immediately landed near the top of Nielsen's U S streaming as original list.
And we have lots more coming on top of all of this we have an incredible lineup of sports Sunday Night Football Premier League and soon Big 10.
We believe we have the right strategy for Peacock and one that suited to our strengths.
Mhm content with a dual revenue stream, both advertising and subscription fees and were encouraged by our results. So far growing paid subscribers and engagement levels to roughly 20 hours per subscriber per months fuelling strong growth and advertising revenues.
We're investing but the results we are seeing give us confidence that we're on the right path for peacock to break even and grow from there.
Looking across our entire organization I couldn't think of a more advantageous position to be in to monetize the increasing expectations and demand as well as the changing habits of the global consumer.
Where the best broadband company with the best content that can be accessed over the best distribution and aggregation platforms.
I'm excited about all of our areas of growth together they represent the majority of our revenue in our businesses with high incremental margins.
As a result these growth areas should become the dominant driver of our financial results for years to come.
With that I'll hand, it over to Jason to talk about the quarter.
Thanks, Mike and good morning, everyone in late February we announced that starting this quarter, we will be reporting our results into reportable business units.
An activity and platforms and content and experiences more closely align are like minded businesses reflect how we run our company and highlight are opportunities for growth as a globally integrated content distribution company.
We're also providing more disclosure around areas that have become increasingly important to our overall results, namely business services and Peacock.
Let's start with our consolidated first quarter results on slide four.
Total company revenue of 29.7 billion declined 4% due to the tough comparison to last year's Winter Olympics, and superbowl as well as the negative impact of foreign currency, while our total company. Adjusted EBITDA grew 3%. Thanks to continued strong operating leverage at our high margin connectivity and platforms.
Business <unk>.
Excluding the impact of the Winter Olympics in Superbowl, and adjusting for constant currency total company revenue increased 1.5%.
This is in addition to significant investments to support and grow our businesses, including our transition to DOCSIS 4.0 and footprint expansion in broadband.
The construction of ethic as well as consistent flow of new lands and attractions that are theme parks.
And content production at our studios, which feeds into Peacock, a robust third party licensing opportunity and it really successful film business.
Now, let's turn to our business results, starting on slide five with connectivity and platforms as.
As a reminder, our largest foreign exchange exposure is the British pound, which was down over 9% year over year. So in order to highlight the underlying performance of the business I'll speak to our results at connectivity and platforms on a constant currency basis.
Revenue was flat this quarter, but this is worth on packing our core connectivity revenues residential and business grew over 7% to $10 billion, while video advertising and other revenues declined 7% to $9.8 billion.
Year over year, we generated 160 basis points of margin expansion for connectivity and platforms on a total basis. This is reflective of our strategy of investing in and driving growth and high margin businesses, while protecting profitability and businesses with secular headwinds through discipline cost control.
To get into more detail residential connectivity revenue grew by 8% with 5% growth in domestic broadband 27 per cent growth in wireless and 18% growth and international.
In business services connectivity revenue continued to grow at a healthy mid single digit pace.
Our domestic residential broadband customer base this quarter remain stable over both the last year and in the quarter with turn remaining below pre pandemic levels.
While we had some success towards the end of the quarter with a couple of offers targeting the lower end of the market. The broadband environment remains highly competitive right now, particularly at the lower end and as such our view remains the 2023 will be a challenging period for us to add subs.
Our outlook for growth and our strategy has been consistent we will compete aggressively but do so in a financially disciplined way while.
While we expect to return to growth and broadband subscribers over time during this interim period as well as over the longer term, we will focus on protecting and growing broadband or poo and we're pleased with the 4.5% year over year increase in our poo in the quarter. We expect continued strong revenue growth over the course of 2023 and expect our poo.
Will be the primary driver.
Growth in domestic wireless revenue was a function of higher service revenue driven by continued strong momentum and customer lines, which are up 1.4 million or 32% year over year to $5.7 million in total, including the 355000 lines. We just added which was a record high for a first quarter.
There is clearly demand for a converged offering the delivers reliable and fast speeds, both in and out of the home.
We were extremely well positioned to take advantage of this trend and have a long runway for growth is less than 10% of our broadband accounts currently take our mobile offering.
A new disclosure category for us is international connectivity.
Two thirds of international connectivity revenue as broadband growing at mid teens levels. The remaining one third is wireless of which a big portion comes from device sales and therefore tends to fluctuate with the timing of device launches. The rest of wireless is service revenue, which is growing nicely due to additional customer lines and healthy or poo growth.
The strong revenue growth and our connectivity businesses was offset by declines in video due to customer losses relative to last year.
And other revenue, reflecting similar dynamics and wireline voice and an advertising, which was impacted by a tough macro environment. In addition to lower political revenue in our domestic markets.
On the expense side every expense line item decline in the first quarter with the exception of direct product costs, which are success based and directly associated with the significant growth in our connectivity businesses.
The strong execution by the team to deliver sustainable operating efficiencies coupled with solid growth in our high margin connectivity businesses resulted in connectivity and platforms EBITDA growth of 4% to 8.1 billion.
And as I mentioned, a moment ago, and adjusted margin expanding 160 basis points year over year.
And that is despite some temporary margin headwinds in our international business associated with some pressure on revenue due to a challenging macro environment and higher programming costs for sports channels, which were up this year given the timing of events.
Margin for our domestic legacy cable business improved 250 basis points, reaching a record high of 46.5%.
We've added disclosure this quarter and going forward to breakdown profitability between residential and business services.
Residential connectivity and platforms EBITDA grew 3% with margin improving 140 basis points to reach 37.8% highlighting favorable revenue mix shifts.
Business services connectivity EBITDA grew 8% with margin expanding 150 basis points to reach 58.3%.
Over the years, we've talked about business services as a driver of margin accretive growth and we're excited to augment our disclosure in this area for the first time our results in the quarter and our new reporting structure clearly show that this is a business that generated over 5 billion of EBITDA in 2022 with substantial growth ahead and should be a material contributor.
To our growth profile and connectivity and platforms and overall.
Wrapping up on connectivity and platforms I'm proud of the team successfully navigating a transition in which we're managing businesses that have secular headwinds with an appropriately high level of cost disciplined while investing in others. They clearly have strong revenue growth and margin characteristics.
Now, let's turn to content and experiences on slide six.
Content and experiences revenue decreased nearly 10%, reflecting the difficult comparison to last year, which included 1.5 billion of revenue from the Winter Olympics in the Superbowl reported in our media segment.
EBITDA decreased 1% as a record first quarter at parks and strong studio growth driven by a successful film slate was offset by the planned increase in our peacock investment as well as lower linear advertising sales.
Unpacking these results further.
Media revenue decreased 21% on an as reported basis and two per cent when excluding the Olympics in superbowl, primarily due to a 6% decline in domestic advertising, reflecting softness and the overall AD market, which appears to have stabilised offset somewhat by strong growth and Peacock advertising revenue when you exclude Olympics and soup.
Verbal Peacock advertising increased an impressive 90 per cent.
Domestic distribution revenue decreased 8%, but was up 4%, excluding the Olympics driven by Peacock with distribution revenue up 83 per cent.
In total Peacock revenue increased by 45% to $685 million led by strong growth and paid subscribers, which were up over 60% year over year, ending the quarter with nearly $22 million paid subs, which marked another terrific milestone on our path to scaling the service.
We're encouraged with the trends, we're seeing a peacock well, we've proven that special content and major events like the World Cup at the end of last year can be significant acquisition drivers, perhaps equally or even more important is sustaining engagement. Following this type of acquisition content and delivering on retention we.
We saw that in the first quarter and we look forward to reporting further momentum in the enhanced disclosures were now providing for peacock, including the revenue breakdown between advertising and distribution and costs separated by programming and production versus marketing promotion and other.
Another new category that we added to our media disclosure is international networks.
This is mainly distribution revenue for Sky sports.
In the low single digit revenue increase in the quarter was driven by higher distribution revenue, partially offset by the negative impact of foreign currency translation.
Other revenue decreased 21% due to lower content licensing.
Media EBITDA decreased 26%, including a 704 million EBITDA loss at Peacock we'd.
We view media as one business and while we have made cost reductions that are linear networks. We reallocated. Some of these resources to peacock with the goal of maximizing profitability over the short and long term across streaming in linear.
We continue to expect Peacock losses for the year to be around 3 billion, which we believe will be peak losses for Peacock and then begin to steadily improve.
At studios this was a great quarter for our film sleep with strong theatrical revenue growth driven by the successful carryover from Puss in boots last wish which launched at the end of the fourth quarter as well as new releases, such as Megan and cocaine bear.
While revenue growth was partially offset by lower content licensing at our television studios the momentum in our film business drove a 13% increase in studio EBITDA.
Which also included marketing and promotion expense associated with the April 5th release of Super Mario Brothers, which is fuelling a strong start to our second quarter.
At theme parks revenue grew twenty-five percent and EBITDA, 46% to $658 million. Thanks to a continued rebound following the lift of Covid restrictions and a testament to the significant investments we've made it our parks.
While demand and financial results were strong across the board or international parks drove most of the growth this quarter with Japan no longer impacted by Covid restrictions are park in Osaka continued to rebound and we were seeing significant demand for Super Nintendo World, which we opened in early 2021.
But given the COVID-19 related restrictions that were in place many people couldn't visit the park.
Park in Beijing was also impacted by Covid related restrictions last year and is now growing at a very healthy right.
<unk> showed strong year over year improvement and was profitable in the quarter, despite normal winter seasonal headwinds.
On the domestic side Hollywood enjoyed record first quarter results due to the very successful opening a super Nintendo World, While Orlando continues to trend above pre pandemic levels.
I'll know wrap up with free cash flow and capital allocation on slide seven.
As I mentioned previously we generated $3.8 billion in free cash flow this quarter and achieve this well absorbing a high level of working capital and making meaningful investments in our network and theme parks.
These investments drove a 37% increase in total capital spending primarily driven by higher capex.
Ah connectivity and platforms.
F X increased 30% with Capex intensity coming in at 9.7%, primarily driven by investments to further strengthen and extend our network.
In 2022, Capex intensity of connectivity and platforms with 10% and we expect to achieve a similar level and 2000 twenty-three which is inclusive of the prior guidance. We provided for our domestic cable business at year end as we continue to transition R. U S network to DOCSIS 4.0, as well as accelerate our growth and.
Holmes past.
Content and experiences Capex increased by 343 million driven by parks with ethic accounting for the majority of this quarter's increase in spend.
As we noted on our year end call, we expect parks Capex in 2000 twenty-three to increase by around 1.2 billion.
Remain elevated in 2024, and then decrease in 2025 the year, we open epic.
Wrapping up since this is my first quarter as CFO , Let me reiterate our capital allocation framework first is to invest for growth in our businesses. We've talked through many examples today ethic or broadband network streaming an aggregation to name a few.
Second is to protect our balance sheet position with targeted leverage of around 2.4 times.
This is an optimal level, we believe to maintain broad and deep capital markets access through a cycle balanced prudently with the opportunity for enhanced Levered equity returns.
Third to return cash to shareholders I'm proud that we bought back 12 billion of stock in the last 12 months, including 2 billion this quarter.
Drinking or share count by 7% in that time frame. In addition to a healthy and growing dividend, which we just increased by over 7% in January .
With that I'll turn the call back to Marcy for Q&A Marcy.
Thanks, Jason operating I'd like to open up the call for questions. Please.
Thank you we will now begin the question and answer session. If you have a question. Please press star and then the number one on your Touchtone phone if you wish to remove be removed from the queue. Please press star and the number two if you're using a speaker phone you may need to pick up the handset first 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 .
Thank you good morning, two questions one on N B C and went on on wireless.
This is probably from like like when you look at N B C. Universal yet probably businesses that are doing better than ever when you look at parks and in your studio and obviously, there's a lot of disruption.
In the media business and I'm, just wondering given the management change an interview a broader role is this an opportunity.
Revisit that business strategically operationally from our cost structure point of view, just with fresh eyes I realize you know you've been obviously president and watching that does this for some time, but I just wanted to hear your thoughts are just.
Given all that's going on at N B C.
And then maybe for Dave the wireless business is continuing to scale you talked about demand for curtains converge to offer as being you know clear and strong what are your ambitions here as you look through the rest of the twenty-three.
To continue to accelerate the growth and that this is how do you guys drive that penetration of your broadband base meaningfully higher thanks.
Thanks, everybody.
Hey, it's Mike So I'll jump in thanks for the questions. So appreciate the comment I had been here, it's hard to believe it's going to be in two weeks. So I've been here two or three weeks eight years as a partner to Brian and the rest of the leadership team. So it is correct that I've been close to all these things not just recently as as.
President for the last.
Half year, or so, but really since I joined so and thinking about the strategies of N. B C. I would I would think the way you should think about it is the way we operate ah across the businesses, including N. B C is that the strategies were developed by the entire leadership team Brian mentioned, how great a team we have across the diverse collection.
The business Park Studios T V streaming services news sports. So you can imagine that strategy put together by those teams of leaders obviously in conjunction with the ultimate leader and then with Brian and myself. So we've been deeply involved for a long long time and what those strategies are all about and and <unk>.
Tracking how we're doing so well that's unfortunate to have an unexpected change in leadership I would tell you. It is not there is no reason for anyone to think that we're gonna be revisiting strategy. As a result of that it's all by itself will obviously react as the environment around just changes, but as you pointed out the businesses are performing real.
[noise] well right now so job number one for me is to just settle things down and make sure the businesses in the business leaders in N B C U.
Mean focused on the job at hand, and I feel actually into the first several days. This that's well underway and I frankly don't think the business is going to Mississippi.
But that all handed over to do.
Mike and Hello been Ah So Ah on wireless wireless continues to.
B a key part of our overall strategy stepping.
[noise] stepping back for a second we really liked the start to the year and our trajectory. This quarter. We set another first quarter a record and net line editions of 355000, and so this puts us at the $5.7 million line. So good start to the year and we're still less than 10% penetrated to broadband.
So it gives us a long runway ahead and to your to your point of you know looking out to twenty-three.
But our our strategy is to focus very much on our core service offerings of by the gig, which we still have and use unlimited tears and it gives us a strong real strong value proposition to all segments that we serve so.
Poured them to know we leverage mobile.
In all aspects of how we go to market and acquisition base management and retention. So mobile does very well in all three but as connects are a little bit softer through the cycle base management has been very strong as we go to existing customers and and provide a great Ah upgrade.
<unk> for them. So our pricing focus is our core services, but we do go in and out in terms of promotions with gift cards. You know some device subsidies that we have historically done really no different there.
But we also had a 50 dollar combined broadband mobile offering that that you know all helped it was a little bit of a list there and a great value message to the existing base. So long term lessons.
10 per cent penetration lot of upside for us on wireless and a large revenue pool that we have to think a unique position given our broadband network is ubiquitous or go to a market mobile opportunity is ubiquitous within our footprint and so you look at it there's upside and red.
Ensure and commercial there's a domestic and international upside with mobile there's an opportunity for us to consider longterm class side with the Offloading.
Rafik and then we have our existing capital light M. B N O, which we think is great and helps us compete footprint wide and then on top of all of that we have wi-fi that is just a terrific offload mechanism in and of itself. So you know as our competitors face trade offs, and whether it's geographic or capacity.
Cassidy, we can go to market with one approach across our entire footprint in wireless is a big part of that strategy. So we'll go in and out with the offers but we feel good about our momentum.
Thanks, how about an operator next question planes.
We'll take our next question from Craig Moffett Nathan.
Two questions if I could first you reported really.
Exceptional margins in what would have been your your old domestic cable business I'm wondering if you could just talk about that.
The contribution to that improvement from wireless.
The extent to which.
Wireless is is.
Either offsetting the customer acquisition cost or just the <unk>.
Gross margin right and how that impacts.
Acting margins overall, and then on the N B C U side.
The N b, a playoffs and had exceptionally good ratings and there's been a lot of talk about Europe .
Your potential interest in the NBA I Wonder if you could just.
Discuss that a bit and maybe just to talk about what role sports might play as you go forward with Peacock and your your MVC business.
Hey, Thanks, Craig It's Jason Let me, let me start with the margin question turn it over to Dave after that for some some follow up and then over the mic on the N. B a question. So on margins overall pleased with the quarter. Obviously, we grew connectivity margins broadly by 160 basis points a year over year, we've said in the in the domestic cable business.
Margins up 250 basis points to a record 46.5%. So really strong margin performance I think when we look at the drivers of that you know number one mix shift a high margin businesses I either connectivity businesses broadband business services wireless sort of in that category say 10 billion dollar book of business growing at seven per.
<unk> and its margin accretive in addition to that really strong expense management by Dave and the team. If you look at every expense category outside of direct product costs, which of the cost to go into feed the connectivity business growth every single category down a year over year. So I think really strong performance on margins in general as we look at wireless in particular I put it in the broad bucket.
The connectivity category. It obviously supports and augment broadband which is one of our if not the highest margin products and so wireless is a contributor to that.
Hey, Craig gave here. So you know it does start you know if you look at the domestic margins the 250 basis points and the 46.5% you know there's a host of thing just all starts as Jason said with margin accretive connectivity businesses, both residential and commercial I think that we.
Continue to benefit there are you know transactional activity is lowered a lot of this is just constantly being focused on the customer experience and taken out unnecessary transactions that continues but we also very disciplined and stay focused on fixed costs. So that we look at every part of the business in terms of opportunities.
Do a good job be competitive be aggressive, but also take out unnecessary costs.
And then there's also one of the things I think the great things the cable does and we've been focused at Comcast is we leverage our existing network a great network in our operational capabilities to do new lines of business business services is a great example of that but wireless is another one of which are existing.
Sales channels are existing capabilities and an M. B N a light a way you know it just it is it's a big part of the connectivity story. So we I think we do well when we can leverage our strength and inner strength will continue to be our network in our go to mark that approaches.
That we've done I think a pretty good job over the years, but everything we do inbound sales digital Ah we leveraged wireless.
Oh and Craig it's Mike on M. B, a obviously a tremendous product in the playoffs are great I think the negotiations there. That's that's that's a ways out, but obviously N B C sports does a great job partnering with the leaves we partner with broadcast streaming and otherwise so time will tell but as we.
Look at things, we always look at a overall financial envelope, what's the right portfolio of overall sports rights, we want to have Ah and do that in a way that as we've said in Jason said earlier, we manage a linear broadcast in peacock as one business. So that's the way we would look at any of the rights that.
That are out there in the future.
Thanks, Craig operate our next question please.
Our next question comes from Doug Mitchelson from Credit Suisse. Please go ahead.
Oh, thanks, so much two questions for Dave actually first on broadband I'm, just curious both from a competition standpoint, and the health of the consumer viewpoint, how voluntary and involuntary churn are trending and how the base reacted to the price increase this cycle versus prior cycles, and then secondly, I know, it's relatively recent but I'm just.
Curious on the plan upgrades with 10 G launched in February and progress in 40 markets that.
That was highlighted in the slideshow, if there's any kind of practical experience in the marketplace.
Yeah, how does that work is reacting and how the consumer is reacting post op rates banks.
Well, thanks, Doug so starting with the competition and churn.
So the overall you know the environment as you know, they're still as I mentioned overall transactional activity in general is down there's two parts of that one is is you brought up there as it continues to be pretty intense competitively that's been the case for awhile, but also there's just less activity period with.
Less moves and so the thing that it really stands out continues to be the case that our turn is you know the near record lows and in terms of compared to pre pandemic period. So we're not seeing in terms of churn.
Any material spikes when it comes to competition, we are seeing an impact in terms of connects and so some of that as a transactional activity. Some of it is competitive pressure, but it's more felt on the connect side of things and you know a little bit more on video as.
We have less video attachment on that side, but broadband you look at our broadband base, we have a very stable base 32 million residential broadband customers churn very healthy and certainly lower than pre pandemic period of time, we watched the competitive landscape you know.
Every day and so wild you know certain nearest fix wireless the fiber a group, but we continue to fare well in terms of the kind of all tears.
And in terms of turn so it it's not we haven't seen a spike in voluntary or the the nonpay in regards to the economy, So yeah, but.
In terms of the network and the.
The investments that we've made real pleased with our progress we have about 20 per cent of our footprint, we've upgraded around the the multi gig capabilities that we have on track to continue that too you know over 30 per cent to come here and and setting ourselves up very nicely for doctors.
Four at the end of the year will be testing it and I think next year will be a pretty big year for that but every step of the way, we're delivering increase value and it's where the customer's going in terms of the increased focus every application of streaming of.
Gaming and you look at where the customer is today, the 700 gigabit gigabytes in terms of H S. The only consumption.
Since like the Thursday night football. They just caused a spike and then yesterday that man city against Arsenal Peacock and having a great Premier League match that see a little bit of a bump in terms of broadband usage. So.
There's going to be more of that the customer is going to be more with broadband not less and so I think that serves as well longterm competitively and will continue to be a champion every single broadband great application as they come along.
Thank you.
This is Brian I, just want to add one thought that last point, Dave made I think you did a fabulous job explaining it I just want to underscore how much I personally believe that that's what makes us in a great position.
If you think about <unk>.
Less linear and more streaming is that trend going to continue absolutely seems very very likely and who is best positioned to provide more and more capacity and this path to 10 G. We have a northstar that we that teams created we know what we want to bring to customers over the next several years.
Yours, and as more and more needs to come about we're going to be the network there to deliver so where the.
The provider of all of that connectivity is really special place to be.
Thanks Dad.
Operator next question please.
Our next question comes from Jessica refer like with.
So you have a securities. Please go ahead.
Thank you I bet.
B C. Your question in smaller cable, but might be a good president of Comcast and the head of N. B C. U two giant job is this ah.
Minutes solution.
And in the meantime.
Obviously, the media landscape has changed drastically since you guys bought N B C. You over a decade ago. So.
So can you address a cyclical and secular challenges as well as opportunities, including but I'm certainly not limiting it to Ah.
Pending W. G. A strike Disney's Battle in Florida, with the government to Santos and how that might affect universal theme parks.
Accelerating do you have a point of view.
Trying to continue or is there a level of stability that you expect.
Cause it just gets Mike So I'll I'll dive in I think the the short answer to the question is that I think what Ah the way me stepping in to oversee N. B C is is quite sustainable and why I say that is you know I I as president I was already over.
Seeing Ah all of this and close to the people that run the N B C businesses in the cable business isn't the corporate areas and I think what's really important to understand is that we've got high quality operators and leaders and all of the seats around the company Philadelphia L. A New York Orlando and so forth. So.
While I'll have to work a little harder and frankly, I'm energized to do so because I I look forward actually to spending time getting closer to the a and N. B C. Your businesses Ah and spending more time deeper in them and with the leaders there and frankly since I'm gonna be here for a long time I actually think that's good for me and good for the company over the.
Long term, so I would put no timetable at all on on we were no time pressure to do anything other than make sure the businesses Hum, which there that's what they're doing right now and that's what I see continuing and maybe some day, we'll think there's a better way to approach it but I'll never be moving far away from the businesses know Matt.
Or what and I'm gonna on the outcome anyway, there anyway. It turns out so I think think of me as being being there for awhile.
In terms of the secure a cyclical versus secular and the the laundry list there of of all the things we're dealing with I'd say all that's embedded in you know the plans that we have when you think about our content experiences businesses, you think about our parks business, which is just doing tremendously well and we've got tremendous growth invest.
<unk> behind that and it has nothing to do with the challenges for eyeballs and the movement of a traditional television to a different forums Ah Ah Ah of consumer consumption. So think of parks is put it decided was incredibly valuable and growing business and I think in the.
Traditional T V businesses, where that's why we're exactly why we're doing Peacock I remember we're at 22 million subs now we were 20. When we ended last year. We were 15. When we ended the third quarter of last year. So I think we're really pleased as were one quarter into 2023 two of <unk>.
Held level of engagement in the product hours watched and so forth and kept churned very low as we look ahead. Some really good content coming later later in the in the balance of the year. So on track and then we'll have our our role to pay and Comcast customers coming over to more of the second half of the year. So I think we've real real.
Good about the strategy of how we're managing on the media business side, and then really on studios Ah you look at Brian covered it but you look at the power of our studios, both the film and television and they're incredibly Ah strong Ah and leadership is excellent and the.
The Brian mentioned animation, but we got fast 10 coming out in a in a couple of weeks, we've had great hits on the on the television side and more to come. So I think that's that's also I think a strategy around studios that is and we've stayed as we've said Ah agnon.
Stick I guess to whether is the word to use whether things need to necessarily land on our platforms peacock or linear or someone else's. So I think there's durable value and that side of things.
No matter, how some of these trends workout and I'll leave it at that and talk more some other day about some of the details were not going to talk about Hulu and on strikes you know, we certainly hope that we you know find equitable outcome that avoids a strike and that's what our team is playing for.
What what would you do if you got it hey, Jessica Dave here so.
<unk> you know, we we continue to segment the marketplace. We have a lot of options, but you know the the main point that that is really developed is the video attachment being down and and so they're they're in our right approaches to <unk>.
Subsidized unprofitable video relationships and have shifted some time ago anticipating how things have evolved that we're focusing on the overall relationship ended conductivity opportunities so that the.
One of the key points, though.
To make sure that folks understand you know we we did see you know certainly an uptick in customers dropping video, but Wow. You've also see these customers that are retaining broadband and so our full disconnect churned video and broadband remains you know a record low levels and is down nearly.
Twenty-five percent sense of the pre pandemic period. So we're able to you know have managed to through the cycle and still there's some video packaging that we're going to be very focused on I and based on this segment and we will fight hard whether it's acquisition based management or attention. So.
It's important to us but.
We haven't figured out a way to manage it financially and.
If you look at broadband. The net result is broadband is ferring, well and holding the line in terms of the base and so is things continue to go and evolved more towards screaming I think we're in a great position there and we also have invested in our platforms.
So we and we have the the Ah the platforms of flex, we have X one and the new charter J V was zummo that we feel great about long term. So yes. The video lawsuit did a bit of an uptick, but we did offset it with some of these platform relationships that that I think law.
Long term I'm going to be very important.
Thanks, Jessica operate our next question please.
Our next question comes from Breath Feldman from Goldman Sachs. Please go ahead.
Yeah, I think so it is sort of a two part question about connectivity Capex you seem pretty comfortable that you can continue this pace a footprint expansion within that Capex profile you'd previously talked about you also seem pretty happy with attraction, you're having as you broaden the footprints I'm curious how you think about the merits of maybe building.
Even faster, whether that's organically or if you would simply be waiting to see whether it makes sense to participate in some of these government subsidy programs and then I think in the past you provide some statistics about this enormously high share of your customers true mobile traffic that happens in a very small portion of your geographic footprint in that data point alone.
Would imply that there's a very high R y associated with deploying your own mobile infrastructure and bringing that on net and you. Obviously have all the resources you need to do that including spectrum. So I'm curious why that hasn't happened, yet or or what would be the circumstances under which that could become a really attractive use of incremental capital investment and the connectivity business. Thanks.
He brought it to Jason I'll start out with the Capex question, and then tag team with Dave on mobile off loading so in Capex.
Guided for the year to 10% capital intensity, that's flat year over year last year for connectivity and platforms, we rounded out the year at 10% so flat year over year. If you think about the big categories that sort of contribute to capital intensity in that business, it's customer premise equipment scalable infrastructure in line extensions customer premise equipment is.
At an efficient level given everything that's going on surrounding the network I think to your question on doing even more as we look at you know some of the programs that are coming our way. If you look at prior programs and sort of are distinct advantages in the market you know I I I would step back and say as you look at product technology management and cost of capital those.