Q2 2023 Comcast Corp Earnings Call

July 27, 2023

Good morning, ladies and gentlemen, and welcome to Comcast second 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'll now turn the call over to executive Vice President of Investor Relations Ms. Marci right Becker. Please go ahead Ms Wright vigor.

Thank you operator, and welcome to our second quarter 2023 earnings call, you'll first hear from Mike <unk>, and Jason Armstrong, and Brian Roberts, and Dave Watson will join us and be available for Q&A.

I'll refer you to slide two of the presentation accompanying this call, which can also be found on our Investor Relations website, 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 trending schedule issued earlier. This morning for the reconciliations of these non-GAAP financial measures to GAAP with that I'll turn the call over to Mike.

Thanks, Marcy and good morning, everyone.

I'm very pleased with our second quarter results, which again demonstrate that our focused efforts to invest and innovate in businesses that offer significant revenue growth, while we carefully manage the contiguous areas with structurally lower growth is paying off total revenue grew 2% and the sixth growth priority areas.

We have outlined.

<unk> broadband wireless business services theme parks streaming and premium content creation in our studios grew nearly 10% year over year and now represent 55% of total revenue.

This revenue growth combined with careful management of margins across all businesses generated mid single digit EBITDA growth and double digit earnings per share growth.

Looking farther into the future we expect to continue to drive significant growth in these areas and to continue to identify and invest in organic growth opportunities across our strong portfolio of businesses. We are also very clear eyed about the challenges that we and our competitors face in other business lines and have established.

Thoughtful plans, which will enable these businesses to continue to meaningfully contribute both financially and strategically importantly, the net effect of this approach is a path to sustained future revenue growth for the company in total driving strong earnings and free cash flow growth for what I expect to be more.

Many years to come significantly we have by far the strongest balance sheet, among our core competitors, which allows us to continue to invest for growth, while returning substantial capital to shareholders through both dividends and buybacks, which will drive excellent free cash flow and earnings per share growth.

Now, let me call out a few highlights from the quarter for the first time in the company's history, we generated over $10 billion in quarterly EBITDA and while the diversification of our businesses means there were several significant contributors I would highlight three that stand out to me in the quarter and reflect the consistency of our investments.

The resulting durability of our growth profile. The first is broadband <unk> growth of four 5% stepping back I am confident we have a winning hand and convergence, where the largest broadband provider with a high quality ubiquitous network and the most cost efficient upgrade path to higher speeds.

In addition, we can compete effectively in wireless with a capital light approach and a very strong value proposition for our customers.

We also have a long history of consistently surrounding our products with industry, leading features and capabilities ranging from the coverage and control aspects of our Wi Fi experience to content aggregation through our X. One in flex platforms, which is how we have been able to achieve near record low levels of churn and grow ARPA.

Insistently quarter after quarter.

This second quarter was four 5% growth was no exception and as a testament to our ability to appropriately balanced rate and volume to effectively segment, the market and surround our broadband product with industry, leading products and capabilities. The broadband market remains highly competitive, but we have and will continue to invest to sustain.

Our position as a market leader.

Second is our parks, which continues to be such a great story for us our teams have consistently introduced new and innovative attractions leveraging both our owned or licensed IP, We opened Super Nintendo World at both Universal Hollywood in Japan, which helped drive the record results in the quarter later.

This summer we will be opening a new minion land in Orlando and we look forward to Donkey Kong in Japan next year as well as starting the previously announced kids theme Park in Texas, and the Halloween horror experienced in Las Vegas, and I Couldnt be more excited about the opening of epic universe in Orlando in 2025.

Third is the strength of our film studios and in particular, our animation business Super Mario brothers crossed over $1 $3 billion in worldwide box office to date, making it the second highest grossing animated film ever. This is another incredible achievement by illumination and Chris Melinda Andre.

We also invest in successful franchises like fast highlighted by the successful launch of the latest installment with vast 10 during the quarter of course, we just released Oppenheimer, which grows to about $180 million. This past weekend to tremendous a claim from critics and moviegoers alike Oppenheimer is such a powerful and important.

Tactful movie and we have Comcast couldnt be more proud to work with Christopher Nolan to bring such an important movie audiences globally. We have the very best roster of creative partners and these innovative filmmakers enable us to invest in our strategic slate, which is one of the keys to our continued box office success, where we remain.

Number two in box office year to date.

All of these results and accomplishments from broadband differentiation to studio leadership to our part success are a function of our focused leadership team commitment to innovation strong balance sheet and disciplined approach to capital allocation as I look at our company I'm extremely bullish on the durability.

We have growth drivers, we've invested in so consistently and in our continued ability to invest and deliver through a variety of businesses and economic cycles.

This was also my first quarter with direct responsibility for NBC Universal as I observed in a note announcing some organizational changes a few weeks ago NBC you as a very special place with tremendous opportunities ahead, I could not be more impressed with the depth of talent and particularly with our leadership team and I'm very.

Confident that the new streamlined organization, we've just put in place and which has been very well received will help us move even faster and make even better decisions.

As you know NBC you operates a diverse array of businesses each with leading market positions. In addition to film and parks, which I referenced earlier, we have the number one TV portfolio by total audience and our television studio is award winning and prolific we're the number one most watched news organization in the U S.

And sports continues to be a huge driver with the NFL NASCAR Golf Premier League The World Cup on Telemundo, including the Women's World Cup going on right now Big 10, starting this fall and the Paris Olympics coming up next year.

I am also confident that we have the right strategy for the future we produce premium content through our studios distributed through our television networks Peacock and third parties and further monetize this content with our theme parks and consumer products in streaming we launched Peacock as an AD supported model that is.

An extension of our existing business, we set out a plan, which we have adapted as needed and Peacock is strong and growing we gained 2 million paid subscribers in the second quarter going from 22 million to 24 million paid subscribers. This growth was largely driven by conversion of Comcast subs to paying really.

<unk> chips, which started in June and we're very pleased with the results so far.

Without a doubt consumer trends, such as cord cutting and new competitors, particularly from the technology sector present challenges for us and we are facing an uncertain macro environment, which continues to pressure linear advertising, but I firmly believe that we have the business strategy management depth and financial strength to emerge.

<unk> as long term winners and value creators as the landscape evolves at NBC Universal and across the company. Another challenge in the near term are the writers and actors strikes we remain committed to reaching a fair deal as soon as possible. So we can get back to doing what we do best which is making great content together.

With that let me turn it over to Jason.

Thanks, Mike and good morning, everyone. We had a really strong second quarter and it would take you through it I'll start with our consolidated results on slide four.

Revenue increased 2% to 35 billion, while adjusted EBITDA grew 4% to $10 2 billion a record level driven by continued operating leverage at our high margin connectivity and platforms business as well as strong growth at studios in theme parks. We grew adjusted earnings per share by 12% to $1 13.

And generated $3 4 billion of free cash flow, while returning $3 2 billion of capital to shareholders, our healthy level of free cash flow in the quarter includes the significant investments, we're making to support and grow our businesses in six key growth areas, our connectivity businesses, including residential broadband wireless.

Lists and business services connectivity theme parks streaming and premium content in our studios.

Taken together these areas generated more than half of our total company revenue in the quarter and grew nearly 10% year over year consistent with the first quarter.

Now, let's turn to our individual business results, starting on slide five with connectivity and platforms.

As I get into these results I will refer to year over year growth on a constant currency basis.

Revenue for total connectivity and platforms was flat at $20 4 billion, our core connectivity businesses domestic broadband domestic wireless international connectivity in business services connectivity increased 7% to over $10 billion in revenue, while video advertising and other revenue declined 7%.

Sent to $9 8 billion our strategy continues to incorporate a strong focus on investing in and driving growth in high margin businesses, while protecting profitability in businesses with secular headwinds through disciplined cost management. This resulted in 170 basis points of margin expansion for connectivity and plaque.

Forms in the second quarter, while margins for our domestic legacy cable business improved 240 basis points, reaching a record high of 47, 3% died.

Diving deeper into the details first I'll unpack connectivity revenue growth residential connectivity revenue grew by 8%, reflecting 4% growth in domestic broadband 20% growth in wireless and 26% growth in international while revenue for business services connectivity grew 4%.

Domestic broadband continued to be led by very strong ARPA growth, which increased four 5% for the second consecutive quarter.

As we have said before our goal is to protect our pool by retaining the appropriate balance between rate and volume and to serve our customers constant demand for more from our network. We continue to see the use cases for better and faster Internet increase demand for higher speeds is increasing as is average network consumption and our customers are hanging more device.

<unk> off our network in their homes. The average monthly data usage for our broadband customer that doesn't take video from US is nearly 700 gigabytes and continues to grow and in fact this is nearly 70% more than the average usage from the comparable quarter in 2019 pre pandemic.

Additionally, nearly three quarters of our broadband customers are now on speed plans are 400, megs and above that's up from less than 50% last year and less than 20% in 2020.

We plan for our network and product capabilities to stay far ahead of demand. So that we maintain our position as a market leader delivering the best broadband possible to that end our transition to DOCSIS 4.0 is progressing well, we're more than halfway through the year and have implemented our mid split technology at 25% of our footprint and are on target to.

One third of this build by year end with the first commercial launch of DOCSIS 4.0 in just a few short months.

We're also hard at work when it comes to expanding our footprint, we've grown our homes and businesses passed by one 5% year over year to $61 8 million and were on pace to meet or exceed our goal of 1 million new homes and businesses passed for 2023 with future footprint expansion remaining a high priority.

Growth in domestic wireless revenue was due to higher service revenue driven by continued strong momentum in customer lines, which were up $1 4 million or 30% year over year to $6 million in total, including the 316000 lines. We just added in the quarter.

This marked the seventh consecutive quarter of more than 300000 line additions.

We continued testing some new converged offers in the quarter and we're encouraged by an increasing mix of new customers to Comcast and we'll continue to experiment with different offers over time with just 10% of our domestic residential broadband customers, taking our mobile offering we have a big opportunity and long runway ahead for growth in wireless <unk>.

National connectivity revenue grew to 1 billion a record high and demonstrates the strength of the Sky brand and the ability to leverage a leadership position in video and extend that to connectivity with significant success.

<unk>, which accounts for two thirds of international connectivity revenue continued to grow at a mid teens level benefiting from both an increase in customers and <unk> compared to a year ago. The remainder is wireless revenue, which tends to have more variable growth due to handsets, which contributed to the higher growth rate this quarter.

The strong revenue growth overall in our connectivity businesses was offset by declines in video due to customer losses since last year as well as declines in other revenue, reflecting similar dynamics in wireline voice and finally in advertising, which was impacted by lower political revenue in our domestic markets and the macro environment.

Connectivity and platforms total EBITDA increased 4% to $8 3 billion and as I mentioned, a moment ago and adjusted margin that expanded 170 basis points.

This is driven by the mix shift to our high margin connectivity businesses, coupled with very strong expense management. In fact every line of expense was down year over year, except direct product costs, which are success based and directly associated with the significant growth in our connectivity businesses.

Further on packing, our connectivity and platforms EBITDA results between residential and business residential EBITDA grew 4% with margin improving 180 basis points to reach 38, 9% again, highlighting our favorable mix shift while business EBITDA grew 5% with margin improving 40 basis points to reach 57, 7%.

Now, let's turn to content and experiences on slide six content and experiences revenue increased 4% to $10 9 billion and EBITDA increased seven 5% to $2 2 billion driven by record results at parks and strong growth at studios fueled by the success of Super Mario Brothers, taking a closer.

Look at the results our media segment combines our television networks and Peacock matching our holistic approach to managing these businesses.

As viewership shifts to streaming our dual revenue strategy at Peacock, where we're growing advertising and distribution revenue is offsetting declines in linear revenue at the same time, we are managing costs at our linear networks and reallocating. Some of these resources to peacock with the goal of maximizing profitability over the long term across our <unk>.

Our portfolio you see that in our media results this quarter with stable revenue as strong growth in Peacock offset the performance at our linear networks media EBITDA decreased 18%, which included a $651 million EBITDA loss at Peacock.

To get a little further into the details domestic advertising declined 5% with underlying trends consistent to prior quarters, reflecting continued softness in the overall market, partially offset by strong growth in advertising and peacock, which increased over 75% driven by strong demand.

We expect these overall results in advertising to continue in the third quarter.

Domestic distribution increased 2% driven by Peacock distribution revenue growth of nearly 70% Peacock paid subscribers landed at $24 million compared to $13 million, a year ago and $22 million at the end of the first quarter as.

As Mike mentioned in June we began an effort to transition Comcast bundled subscribers, who receive peacock for free to a paid relationship. We've made some nice progress to date as the conversion activity drove peacock second quarter subscriber growth and we're bullish on further increasing our <unk> subscriber base through the balance of 2023.

By both our continued conversion efforts as well as strong programming in the second half.

Some highlights include a strong lineup of movies exclusively on Peacock and our pay one window, including Super Mario Brothers coming August 3rd a day and date movie Bluhm House five nights at Freddy's coming at the end of October and continued benefits from our next day broadcast and Bravo content, along with a strong sports lineup, including Sunday Night football.

Paul and for the first time Big 10, turning to studios, we had a great quarter driven by our film business, including the latest installment of the fast franchise and the tremendous success of Super Mario Brothers, while theatrical revenue growth was offset by lower content licensing at our television studios due to the timing of when we deliver content the momentum in our fee.

<unk> business led by the success of Mario fueled nearly $260 million in year over year growth in studio EBITDA.

At theme parks revenue increased 22% and EBITDA increased 32% to $833 million a record level, Our park and Hollywood continued its momentum from opening Super Nintendo World last quarter. The positive consumer reaction drove strong attendance and per cap growth, helping Hollywood to deliver its best quarterly EBITDA.

Its history, our international parks are both experiencing nice rebound post Covid our park in Osaka delivered a record level of EBITDA for our second quarter as it continues to benefit from strong demand from Super Nintendo World and our park in Beijing enjoyed its most profitable quarter to date, resulting in strong improvement compared to last year Park was largely closed.

Due to Covid in Orlando, our comparisons were impacted by unprecedented levels of visitation last year, but underlying momentum remains healthy as attendance was relatively in line with 2019 pre pandemic levels. While revenue was substantially ahead of 2019 levels I'll.

Now wrap up with free cash flow and capital allocation on slide seven as I mentioned previously we generated $3 4 billion in free cash flow this quarter and achieved this while absorbing meaningful investments in our network and theme parks. These investments drove a 20% increase in total capital spending primarily driven by higher Capex, which was consistent with the.

The outlook that we provided on our last quarter call at connectivity and platforms Capex increased 11% with Capex intensity coming in at 10, 4%, primarily driven by investments to accelerate our growth in homes passed as well as transitioning our U S network to DOCSIS four point out <unk>.

Content and experiences Capex increased by $344 million driven by parks with ethic accounting for the majority of this quarter's increase in spend turning to return of capital and our balance sheet, we repurchased 2 billion worth of shares in the quarter. In addition dividend payments totaled $1 2 billion for a total return of capital in.

Second quarter of $3 2 billion, we ended the quarter with net leverage of two four times in line with our target leverage with that let me turn it over to Brian for a few words before we turn the call back to Marty.

Thanks, Jason I'm really pleased with our team and this outstanding performance for the first half of the year.

It was a terrific quarter on all the great metrics, you've just articulated.

So I'd like to just zoom out a bit and probably what's most exciting is the hopefully recurring and sustainable model that we're able to leverage our faster growing businesses, which you laid out to generate revenue growth for the entire company and then we convert that all the way to free cash flow per share.

That accelerates with the strength of our company and our balance sheet.

I really couldnt be more proud of the team excited about the future. So marci, let's turn it over to you for Q&A. Thanks, Brian Operator, let's open up the call. Please.

Thank you we will now begin the question and answer session. If you have a question. Please press star and then the number one on your Touchtone phone.

If you wish to be removed from the queue. Please press star and the number two.

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Once again, if there are any questions. Please press star and the number one on your Touchtone phone.

Our first question comes from Ben Swinburne from Morgan Stanley . Please go ahead.

Thank you. Good morning question on broadband and then one on on NBC, maybe for Mike and Dave.

And when you think about the converged offers you have in the market I know you've been testing more of the investments in the network.

<unk> against sort of the headwinds around competition housing fixed wireless when you put that altogether, how you're feeling about the ability for the company to return to consistent broadband customer growth, particularly when you look into maybe the seasonally stronger back half or or into next year.

And then Mike you mentioned the strikes.

There's a lot of different ways that those could impact your business, depending on how long it lasts but I'm, particularly interested in free cash flow for the company and also peacock, but there's a lot of expectations around peacock profitability, improving or losses coming down and continued growth. When you put the strike into context for us how should we be thinking about the impact.

Should this last longer than than expected. Thank you.

Hey, Ben This is Dave let me start with broadband.

Hand, it over to Mike.

Thank you.

I'm talking about this environment, you've got to start with where the market is and where the customer is going and the customers continue to be highly engaged in multiple broadband applications streaming gaming all trending up and you look at the other thing that is happening just an increasing number of simultaneous device.

Usage, that's happening in peak moments and now we have over 1 billion connected devices Wifi connected devices to our network. So that's the from a overall perspective, that's just very encouraging and you look at the results non video broadband customers are doing more than 700 gigabytes per month.

And you take one key area one major streaming.

Part of the business and that sports.

And it starts with just making it really easy to find the sporting events. So great voice search that we have on our platform multiple ways to consume sports and linear DVR streaming all seamlessly connected and then of course comes with Big sports moments happen you want reliability fast speeds great coverage in <unk>.

Capacity.

And you look at just what happened Thursday night football.

I see and MLS Peacock has a fantastic sports slate that will be streamed and consumed that way. So you need great broadband to be able to back all of that up and so I think that's a great driver over time.

But in this environment.

We are seeing continued lower move activity.

Competition is still increased.

Wireless as you brought out there they are still pressing however, we are seeing some rational promotional activity. It's early no changes to any trending but when you see that in the competitive environment.

That is encouraging.

Both voluntary and non pay churn remained below pre pandemic levels and that has continued so our game plan. In this environment is that we're going to invest in our network and our focus on upgrading and the mid split all of that activity is on track leading to afford auto beginning their.

The deployments and Trialing activity starting at the end of the year no change to our game plan and we're going to segment the base.

And we've consistently focused on the starting point high end broadband activity in tears, a third of our customers are plus our one gig and we've launched over our new two gig service to 25% of our footprint.

And overall, 75% of our customers or for 100, megabits or more so we're going to continue to leverage mobile will get a press aggressively with mobile and even new broadband partners like now TV, which is great streaming streaming video tier.

It showcases peacock.

And the net of this is a stable base $32 million residential broadband customers and while protecting resi broadband <unk> growth you saw us do that in Q2 at four 5% ARPA growth but.

In this environment, we're still competitive and lower activity, it's a period of flux and in some quarters. We may report customer losses that being said to your question. We believe over time, we will return to subscriber growth and certainly we're seeing more normalization back to school is going to happen in Q.

Three and most certainly theres, some seasonal normalization, but over time.

Didn't that we will be able to balance that this formula of <unk> focus and over time getting back to the subscriber growth.

Thanks, Dave.

Hey, good morning, Ben So I think I'd just add.

If you look back at the first half of the year with Dave and his team have been doing and continue to do in terms of setting the broadband business, which is obviously extremely important to the future of the company up for long term success by continuing to improve our product.

AD innovation around its segment the base.

And the footprint all of the things that you want to see happen and while protecting.

Pricing.

Our all outstanding work in a competitive moment in time, but I think.

You know, we hear and Dave and his team in particular are thinking what are the implications for the long term as we.

Think about how to compete in the short term.

Going to your question on the NBC side on strikes I'll, just repeat what I said earlier, which is that we are committed to reaching a fair deal with the guild's as soon as possible beyond that.

Say, it's really for all involved in the industry broadly a prolonged work stop.

Stoppage and the longer it goes the worst it'll be it's obviously going to have a negative impact all around.

To your question about free cash flow nothing to quantify in the context of our company I mean, it's all manageable, but it will shift studio working capital out of the near term and into the future. So probably for 2023, a little bit of lower lower working capital higher free cash flow in the flip.

Side of that in 2024.

As you look at Peacock I Wouldnt point out anything in particular related to <unk>.

Strikes and its effect in 2023 or second half of the year, obviously the longer the strike the more that.

That could have an effect as you look into 2024 and beyond and that would be for ourselves and others. Obviously.

So it's a level playing field, but to comment on Peacock and particularly in the second half we've got a lot of strong content coming so we've got NFL coming back. Obviously, then on top of that we have an exclusive NFL wild card game, we're going to have big 10 for the first time, which is fantastic on Saturday nights and a move.

Slates, we've got Super Mario brothers coming to Peacock. Shortly we've got exorcists five nights at Freddie is as Jason pointed out coming from Bluhm House, and then on TV side, some some original including Continental which is related to the John Wick franchise. So we feel very good about the strength of what we have.

Coming in the second half of the year content wise and then beyond that on Peacock I think there'll be a continuation of the good work that we've done inside the company to convert Comcast subscribers over to a paying subscriber status, which we're not quite halfway.

Through that as we only got started in June on that score so over the remainder of the year that will also be happening. So when you look at the doubling of Peacock subs year over year and I'm optimistic about what the second half of the year brings feel pretty good about peacock.

Thanks, so much.

Operator next question please.

Thank you. Our next question today is coming from Craig Moffett from Moffett Nathan. Please go ahead.

Hi, two questions if I could regarding your wireless business.

One there's been some talk in the market and there was there was some discussion on the Verizon call yesterday sort of calling.

Not fully into question at least kind of raising some eyebrows with respect to the permanence of that contract. So I'm. Just wondering if there is anything that you can say about the durability of that relationship and your confidence that that is in fact a.

Irrevocable contract.

And then second you.

You've obviously now started to subsidized handsets more frequently in line with the way the whole market really operates I wonder if you could just talk about that a bit and talk about your views on customer lifetime value that youre seeing with new customer acquisitions, given the handset subsidies and expected chart.

Thanks, Craig This is Dave So let me start with the wireless and D&O.

Question and so let me start with we have a great <unk>.

I really like our approach towards the business from day, one and continue to feel that way.

Definitely think the cable is a material and really strong.

<unk> to our partner and so you have a good relationship with Verizon.

Continues.

Really key is we have a perpetual access to all the services that we need from Verizon's network. So it's just straightforward that's that's the way it is.

So let me start with then we go into the handset subsidy point, we go in and we go out in terms of different offer. So we've always consistently had promotions and they come in different forms can be in the form of gift cards can be outright.

Promotions that our discounts and in some cases.

Free device, but it's not every day, that's not part of our everyday game plan, we will go in and out with that.

And we increasingly focus on higher end mobile tiers, and we have a great slate there between by the gig unlimited in premium Unlimited limited. So we stay very focused on the core service offering and been very strong in terms of the <unk>.

Really good consistent performance in terms of wireless growth, we really like the long runway ahead.

That we have and things that we're just getting going in small business.

And wireless, but I think our core wireless pricing provides customers with the savings that help us compete against the telephone companies like between 30% and 50% savings versus the telcos and so we've got a strong position.

Partnering mobile with broadband got great Wi Fi overlay and a strong <unk> as I've said, so we like our capital light approach, we like our core service offering approach and it's been effective.

Thanks, Craig.

Operator next question please.

The next question is coming from Brett Feldman from Goldman Sachs. Please go ahead.

Yes, thanks for taking the question.

Disney has said that they're looking for potentially a partner to help them transition ESPN to a more direct to consumer model you have a really big sports franchise as well how are you thinking about further transitioning NBC sports to a business that is most <unk> streaming is it something you think you would need a partner for and maybe broadly.

Speaking do you think as sports businesses become more streaming centric theres, an opportunity or a need for consolidation among those as platforms. Thank you.

Thanks, Brett it's Mike so.

The <unk>.

<unk> been asked about and read the speculation that in some way we might be interested in swapping businesses as part of what's going on.

In the sports space and I would just say that that's very improbable given the.

You could imagine there is tremendous issues around tax and minority shareholders structuring generally so I would put aside the idea that there is any.

Any anything inorganic.

Is likely to happen around.

<unk> in particular, which is what we've been asked about.

When I think about our own sports business I think we've got one of the best portfolios in Sports Sunday Night Football Big 10, EPL NASCAR WWE Olympics next year PGA, So and we've got.

Very acclaimed group of people in terms of producing.

Excellent.

Content around those sports. So obviously it makes us a really strong partner to leagues and around the world. We're in.

Known for that and I think we bring a lot to the table whenever there is a time and that includes sky sports as well, obviously, so that brings us.

To the table with more than money when it comes time for discussions around how rights owners want to create value for their participants and I think.

We are doing a very good job in my mind of continuing to do that in a way that has tremendous reach obviously through NBC and the broadcast side, we can leverage our cable and that says we've done through in various sporting events using our cable nets, but really importantly is peacock and we looked at one of the.

Great drivers of Peacock subscriber growth has been sports and I think it adds to the value of.

The Peacock subscription the fact that when we looked at the.

Value of rights that are streamed inside Peacock, where it is and where it goes when you include the value of Olympics next year. It is very substantial and wood alone represent a really good deal for the consumer.

Just sports within Peacock, So I think thats, how we see.

Our evolution, we're in sports, we're going to continue to be in sports and that's the game.

Thank you. Thank you. Thanks, Matt Operator next question please.

Our next question is coming from Phil Cusick from Jpmorgan. Please go ahead.

Lots of talk about one follow up on Brad do you think that you have the right sports rights mix or could you stretch your lead and Peacock fleet by taking more overtime and then and then second could you dig into the strong Hollywood and the weaker Orlando numbers it looks like Orlando just in general.

A little bit softer year over year, but we ended thank you had been taking share do you agree with that and how do you see that going forward. Thanks very much.

So sports rights going back to that last question for all the reasons I said and I'll keep it short at this time, we should we're always looking to see if there's ways to add more value to our business and likewise work with our partners. So obviously mbas coming up that's a fantastic property.

We don't necessarily need it given the portfolio, we have but given given its strength and our historical involvement in the sport something I'd like to see us take a look at as a for instance, but we'll see where that goes.

<unk>.

I think one of the best quarters, we've seen tremendous momentum in the overall portfolio feel very very good about the parks business overall Hollywood was record on the back of Nintendo opening up.

Japan doing well and.

A record as well there for a second quarter and Beijing highest ranked highest level of profitability in Orlando.

<unk> is very well to pre pandemic pre pandemic were obviously down on attendance, which was kind of unprecedented in the back of.

Coming off Covid, so not surprised by that softening that said, we're at levels of attendance and per caps being better. So that overall, we feel good about what we're seeing in Orlando.

Have had even with a stronger dollar you still are seeing softness of international attendance, which continues to be about 30% lower than pre pandemic levels, we expect that to sort of continue and on the domestic side. It's just been a rebalancing with cruise lines back and people the flip side of the dollar doing some international travel.

The dynamics that you see in Orlando, but feel really good about what's going on there and Brian .

Jump in here just wanted to add that.

Really bullish on the parks, it's one of the six areas, Jason mentioned that we feel that the growth driver of the company in the years ahead, we were just down in Orlando recently looking at Epic Universe progress and it's spectacular.

It's coming in 2025, we have the two parks.

Smaller parks in Vegas and outside Dallas.

So we're looking for growth in this area, we're pretty excited.

Excited about the results that Mike talked about and I'd just draw your attention that the <unk>.

Opportunity in Orlando with epic is pretty massive we believe.

Thanks, Phil Thanks, guys. Operator next question please.

Question is coming from Jessica Reif Ehrlich from Bofa Securities. Please go ahead.

Alright, thanks, everyone, maybe longer term and one near term.

First on content, you just announced a restructuring.

And your content area.

And with the current strike, which is kind of reminiscent of the pandemic where oil production is shut down at least in the U S. It seems like an opportune time to where you think your entire content strategy.

Are you thinking differently at all about how you produce what you produce what your costs are.

And just anything you can say about how NBC you may change its approach to content in coming years.

And then on advertising and the upfront I guess is it still dragging on can you talk about.

What youre seeing with their strength and weakness and where the dollars are being allocated to what platforms.

Thank you, Jason just said that Q3 advertising will be similar to Q2.

Okay. So in terms of content I'm really pleased with Jessica.

Jessica with the.

Elevation of a couple of my partners at NBC, one of them being Donna Langley Who's one of the most respected people in Hollywood along with the <unk>.

We've got a great leader Clinic Parkway, who runs our television studios, so I think giving them.

A sort of content vertical that's going to work closely with Mark Lazarus on the TV side and platform side.

And Cesar Conde Ao news and Telemundo I think is going to.

Really make take advantage of the company that we have.

Going to obviously be very much focused on.

Great content.

We already do create great content think when you look at the movie Slates, we've had and the television that we produce for ourselves and others and I think that strategy is going to continue we're not going to be creating content exclusively for ourselves, but I think it's a great advantage for our studios to actually have platforms that can take a substantial amount.

Though not all of the content that we can create which puts us in a great position to work with all sorts of talent and creators in Hollywood and elsewhere can come work with our great leadership in our studios and we help bring their ideas to life in terms of.

Cost and strategy and so forth.

We will work in the context of the industry and the buyers and what theyre looking for and be responsive to that but I feel very very good about the way our studio businesses.

Set up.

In terms of advertising the market AD market soft inverse softened versus last year, it's stabilized as it came into this year and has stayed stable and I think that would be.

On the back of just uncertainty economic uncertainty about economic outlook looking forward and I think Jason's comments, sorry, we don't see that condition changing as we're looking into the third quarter and second half of the year.

As you know I think we feel good about R.

Our upfronts.

Upfronts.

Despite those headwinds our total cash and pricing levels were roughly in line with last year and really strong related to peacock in particular, but a lot of that comes from the strength of our portfolio as I've kind of mentioned earlier.

Where we see strength around Big 10 Sunday night football Peacock, one platform and like all things that are helping us out quite a bit.

Thanks Jessica.

Operator next question please.

Our next question comes from Steven Cahall from Wells Fargo. Your line is now live.

Thank you.

Just two on the connectivity side of the business, maybe first on the broadband <unk> really strong at four 5% I was wondering if you could help us unpack that a little bit maybe what in there is price increase how much do you think youre getting from customers up tearing to faster speeds.

And maybe what might be coming from cord cutting or some of your double play video subs go to single play Internet or Internet plus mobile bundles and then on the international side, where revenue growth is really strong can you just help us think through what kind of margin contribution you get on international you talked about more handsets in the quarter I'm guessing those are a little lower.

Arjun as if some of the UK connectivity stuff, but if we just think about that as a growth driver how should we think about the margin or EBITDA contribution from international. Thank you.

Got it so let me start with <unk> and <unk>.

You hit on a couple of key points first off pretty strong performance in the quarter as we've said we've seen four 5% and there are multiple drivers.

There was a little bit more rate that we took.

Early on.

Not wildly different but a little bit more that we did in the beginning of the year I think a critical one for us is tier mix.

And we have the <unk>.

Third of our base.

Gigabit plus in that 75% 400, megabits or higher that definitely impacts.

The overall <unk> I think one that maybe not as understood as much as maybe as it should be but we have a wonderful product called X five complete 25% of our base has that and let me take one second describe what's in it it's a gateway it's a great gateway that's included in the tier.

With a path to upgrading the gateway over time, you have an opportunity to do that in advanced Securities included in that unlimited is included in that and then it coverage plan, making sure. Your whole house is covered so that's why I completed a great tier good value to customers and 25% of the base.

And then there's the bundled discount that you mentioned in the when customers go to HST only you lose the bundled discount and so all of those things factor in so I think it's a positive that there are multiple drivers that are helping and the thing Stephen that that starts with it's just where the market is going and I.

Mentioned that before and you have this.

Very stable group of customers and that are just using more and over time that continues to trend up.

And we have this balance of a stable base and healthy <unk> growth on international connectivity.

And our margin side. So it's this is a great growth area for US and you look at the from a revenue perspective, just starting with that because that impacts margin.

The revenue increased 20, 26% this quarter.

As Jason said in the call and the two thirds of that revenue comes from broadband.

Which continues to grow at mid teens mid teen level and was driven by higher level of customers and <unk> compared to a year ago remaining third is wireless.

Tends to have more variable growth quarter to quarter due to handsets.

And so.

This is a solid quarter growth rate.

And it will impact margins, so, but normalizing for the mobile side of things revenue growth I think maybe at the right level to focus on is more closer to the 20% level.

For international connectivity so.

I think this is a strong part of the portfolio and in a definitely a contributor towards as Jason has said one of the main pillars of.

Not only just domestic broadband and mobile but.

Also the international broadband and mobile Josef I think Steven and important for US as we came into this year with the re segmentation and how we sort of presented out to the world. This was an important category. So international connectivity as we think about sky.

And taking the brand name and reputation that they've sort of earned in video and taking that into other products like broadband and wireless the way. They have this quarter a $1 billion in revenue coming from connectivity internationally. So kudos to the team and I think it's important that we have been able to highlight that the street.

Thanks, Steve Operator next question please.

Our next question is coming from Jon <unk> from UBS. Please go ahead.

Great. Thanks, guys, maybe a couple of questions on profitability I think maybe for Jason.

Really impressive performance on the cable side 240 bps, 47%.

How is the visibility into further margin expansion from here, especially given you've got a couple of mixed shift issues obviously more.

More broadband and less video, but also more wireless so anything you can tell us about that sort of outlook. There and then on the <unk> side doing better in terms of losses there.

Is 3 billion losses for this year still the right number for Peacock anything you'd say about sort of path to profitability.

23% would be great. Thanks.

Yeah. Thanks, John good questions, so on mix and margins in the connectivity business I think we've had a fairly consistent track record. If you look at the last several years of margin expansion.

If you look at the core sort of legacy cable business as we mentioned this quarter record margin over 47% and the factors that have contributed to that historically are in place as we look forward.

Mike's comments upfront about being able to grow revenue being able to grow margins. That's a key part of it. So to your question specifically on connectivity. There is a mix shift going on when we talk about sort of the six key growth drivers across the company three years sort of core connectivity growth drivers, whether it's broadband residential broadband business services our wireless this.

As an accretive mix shift for us as we think about the way the categories are sort of shifting and what's growing versus what's not growing so I would look for more of the same I think also importantly for the team for the second consecutive quarter every expense line in connectivity and platforms was down year over year, except for direct product costs and those are the costs that directly support the connect.

<unk> and platforms revenue growth in the categories, we talked about so.

Outlook for more of the same and continued margin expansion out of the business I think on Peacock Youre right. We came into the year gave guidance for <unk> roughly.

Roughly $3 billion in losses, no change to that as you see we're pacing to that over the first couple of quarters. We've got a lot of incremental content as we think in the back half of the year as Mike said, so no change to that guidance.

Thanks, John Great. Thanks, Operator next question please.

Our next question is coming from Vijay Jayant from Evercore ISI. Your line is now live.

Good morning, So I think Keith talked about.

The footprint being a high priority.

The bead.

By state of gains that are allocated can you just talk about is that really going to be a big opportunity in terms of participating in that and driving that footprint.

Yeah.

Hey, This is Dave let me, let me jump in to that so.

We operate in 39 states where there.

<unk> is expected be subsidy money and we're actively engaged both at the federal and state government levels. So.

As the framework rules of bead participation are being developed.

We're actively.

Looking at it and working I think.

Good way at all levels, so assuming satisfactory.

Outcomes on the framework rules will going to be full participants and bidding where it is consistent with our business goals, but it's too early in the process for us to comment on where we'll bid or the potential win rate, but we're we're active right now building out edge outs as Jason has talked about.

We're going to build out even before any bid activity in the bid activity by the way, there's really going to be more rules will come out and be clarified as this is a $25 26 kind of an impact once it.

Clears up but in the meantime, we're actively edging out and looking at opportunities where its a profitable return and aggressively pursuing it. So 1 million homes passed we expect to build this year alone. So we're going to be aggressive in the meantime, but considering where we will stare closely at it and assuming the SaaS back.

The outcome will be a participant.

Thanks, Vijay operator, we'll take our last question.

Our last question today is coming from Jonathan Chaplin from New Street. Please go ahead.

Thanks, guys just to drill into broadband.

In a little bit more detail.

Shift from <unk>.

Was it was quite different from what it has been historically in terms of broadband net adds I'm wondering if you can give us just a little bit more color on how much of that was muted seasonality versus some of the <unk>.

David you guys have been pushing on the competitive front.

Low end broadband offer.

The wireless bundles and in that context, you mentioned that wireless is starting to have a bigger pull through impact.

On on your broadband subs, so that they're more Comcast subs, taking wireless I'm wondering if you can give us a little bit more context around that and then sorry to pile on but one last one on wireless.

Jason when we look at Verizon.

Wholesale revenue seems to have flattened over the course of the last three quarters.

Which suggests that maybe youre getting some gross margin expansion in the wireless business I am wondering if thats accurate. Thank you.

This is Dave let me start on the broadband part a little bit on wireless.

So.

As we saw the base is stable at 32 million.

And this is sequentially and year over year for this quarter. We also flagged we've talked about this last quarter, we expected more normal seasonal activity.

So that net adds would be lower than Q1, but we also expected a more muted step down in net adds from Q1 to Q2. This is a combination.

Lower.

Overall move activity the overall macro issues that we've experienced over the past year in the market at the same time, we did as you brought up we go in and out in terms of offers we had some offers.

Really targeted in the multiple segments that we served more than the lower end and we had some traction on some of that so that did help and so we will continue to be opportunistic.

Out the year.

And.

We as I mentioned before to your point on wireless we're absolutely aggressively package mobile with broadband and this is for new and existing customers. So it's a mobile is a great.

Ascension of the relationship and a really profitable way to existing customers.

Our HST only so it's one of the key things that we do and I think over time, we're going to continue to stay focused on that I think is as much of an opportunity to grow.

The mobile business and really help broadband.

Is going to the base as well as attracting new customers. So it's a double win from our perspective Jason.

Just Jonathan Thanks for the question on wireless can't speak to Verizon and their revenue trajectory I know they've got a few different things in the wholesale revenue category.

Just cable, but I can't speak to obviously, the economics of our business. We're happy with it we think it's good business for Verizon that's sort of what they said yesterday as they think about traffic and ways to fill up their network, but for US specifically, we've got a revenue stream coming in for customers from customers. We have a wholesale deal with horizon to accommodate that traffic where theres outflow.

But then we're also trying to off load as much traffic because we have as we can on our own network. We've got a fairly efficient acquisition vehicle and that a lot of this is just marketed to our own broadband subscribers. So in terms of acquisition costs I think we're fairly efficient in the market and then all the way down sort of closer to cash flow. This is a capital light model, which we like so I'll leave it there.

Thank you Jonathan and thank you everyone for joining us on our second quarter call.

That concludes our question and answer session and today's conference call. A replay of the call will be available starting at 11 30, a M. Eastern time today on Comcast Investor Relations website. Thank you for participating you may all disconnect.

Okay.

[music].

I'll now turn the call over to executive Vice President Investor Relations Ms. Marci Rebecca. Please go ahead Ms Wright vigor.

Thank you operator, and welcome to our second quarter 2023 earnings call, you'll first hear from Mike Cavanaugh, and Jason Armstrong and Brian Roberts, and Dave Watson will join us and be available for Q&A I'll now refer you to slide two of the presentation accompanying this call, which can also be found on our Investor Relations website.

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 trending schedule issued earlier. This morning for the reconciliations of these non-GAAP financial measures to GAAP.

With that I'll turn the call over to Mike.

Thanks, Marcy and good morning, everyone.

We have outlined.

<unk> broadband wireless business services theme parks streaming and premium content creation in our studios grew nearly 10% year over year and now represent 55% of total revenue.

This revenue growth combined with careful management of margins across all businesses generated mid single digit EBITDA growth and double digit earnings per share growth.

In addition, we can compete effectively in wireless with a capital light approach and a very strong value proposition for our customers.

We also have a long history of consistently surrounding our products with industry, leading features and capabilities ranging from the coverage and control aspects of our Wi Fi experience to content aggregation through our X. One flex platforms, which is how we have been able to achieve near record low levels of churn and grow ARPA.

<unk> quarter after quarter.

This second quarter is four 5% growth was no exception and as a testament to our ability to appropriately balanced rate and volume to effectively segment, the market and surround our broadband product with industry, leading products and capabilities. The broadband market remains highly competitive, but we have and will continue to invest to sustain.

Our position as a market leader.

Number two in box office year to date.

We have growth drivers, we've invested in so consistently and in our continued ability to invest and deliver through a variety of businesses and economic cycles.

Confident that the new streamlined organization, we've just put in place and which has been very well received will help us move even faster and make even better decisions.

As you know NBC you operate a diverse array of businesses each with leading market positions. In addition to film and parks, which I referenced earlier, we have the number one TV portfolio by total audience and our television studio is award winning and prolific we're the number one most watched news organization in the U S.

Asian ships, which started in June and we're very pleased with the results so far.

<unk> as long term winners and value creators as the landscape evolves at NBC universal and across the company.

Another challenge in the near term are the writers and actors strikes we remain committed to reaching a fair deal as soon as possible. So we can get back to doing what we do best which is making great content together with that let me turn it over to Jason.

Thanks, Mike and good morning, everyone. We had a really strong second quarter and it would take you through it I'll start with our consolidated results on slide four.

Lists and business services connectivity theme parks streaming and premium content in our studios.

Taken together these areas generated more than half of our total company revenue in the quarter and grew nearly 10% year over year consistent with the first quarter.

Now, let's turn to our individual business results, starting on slide five with connectivity and platforms as.

As I get into these results I will refer to year over year growth on a constant currency basis.

<unk> to $9 8 billion our strategy continues to incorporate a strong focus on investing in and driving growth in high margin businesses, while protecting profitability in businesses with secular headwinds through disciplined cost management. This resulted in 170 basis points of margin expansion for connectivity in platts.

Forms in the second quarter, while margins for our domestic legacy cable business improved 240 basis points, reaching a record high of 47, 3%.

Domestic broadband continued to be led by very strong ARPA growth, which increased four 5% for the second consecutive quarter.

<unk> off our network in their homes. The average monthly data usage for our broadband customer that doesn't take video from US is nearly 700 gigabytes and continues to grow in fact, this is nearly 70% more than the average usage from the comparable quarter in 2019 pre pandemic.

Additionally, nearly three quarters of our broadband customers are now on speed plans are 400, megs and above that's up from less than 50% last year and less than 20% in 2020.

One third of this build by year end with the first commercial launch of DOCSIS 4.0 in just a few short months.

This marked the seventh consecutive quarter of more than 300000 line additions.

<unk>, which accounts for two thirds of international connectivity revenue continued to grow at a mid teens level benefiting from both an increase in customers and <unk> compared to a year ago.

The remainder is wireless revenue, which tends to have more variable growth due to handsets, which contributed to the higher growth rate this quarter.

Finally on business services connectivity revenue increased 4%, reflecting stronger growth in enterprise and mid market and a slight deceleration in growth from small business, where we are seeing a bit of macroeconomic pressure. The strong revenue growth overall in our connectivity businesses was offset by declines in video due to customer losses since last year.

Air as well as declines in other revenue, reflecting similar dynamics in wireline voice and finally in advertising, which was impacted by lower political revenue in our domestic markets and the macro environment.

Connectivity and platforms total EBITDA increased 4% to $8 3 billion and as I mentioned, a moment ago and adjusted margin that expanded 170 basis points.

Further unpacking, our connectivity and platforms EBITDA results between residential and business residential EBITDA grew 4% with margin improving 180 basis points to reach 38, 9% again, highlighting our favorable mix shift while business EBITDA grew 5% with margin improving 40 basis points to reach 57, 7%.

Taking a closer look at the results our media segment combines our television networks and Peacock matching our holistic approach to managing these businesses as.

<unk> portfolio.

See that in our media results this quarter with stable revenue as strong growth in Peacock offset the performance at our linear networks.

Media EBITDA decreased 18%, which included a $651 million EBITDA loss at Peacock.

We expect these overall results in advertising to continue in the third quarter.

By both our continued conversion efforts as well as strong programming in the second half.

Improvement compared to last year when the park was largely closed due to COVID-19 in Orlando or comparisons were impacted by unprecedented levels of visitation last year, but underlying momentum remains healthy as attendance was relatively in line with 2019 pre pandemic levels. While revenue was substantially ahead of 2019 levels.

Now wrap up with free cash flow and capital allocation on slide seven as I mentioned previously we generated $3.4 billion in free cash flow this quarter and achieve this while absorbing meaningful investments in our network and theme parks. These investments drove a 20% increase in total capital spending primarily driven by higher Capex, which was consistent with.

The outlook that we provided on our last call recall.

Connectivity and platforms Capex increased 11% with Capex intensity coming in at 10.4%, primarily driven by investments to accelerate our growth in homes past as well as transition R. U S network to Dax is four point out.

Content and experiences Capex increased by 344 million driven by parks with ethic accounting for the majority of this quarter's increase in spend.

Turning to return of capital and our balance sheet, we repurchased 2 billion worth of shares in the quarter. In addition dividend payments totalled $1.2 billion for a total return of capital in the second quarter of 3.2 billion. We ended the quarter with net leverage at 2.4 times in line with our target leverage with that let me turn it over to Brian for a few words before we.

Return the call back to Marcy.

Thanks, Jason I'm really pleased with our team and this outstanding performance for the first half of the year.

It was a terrific quarter on all the great metrics, you've just articulated.

So I'd like to just zoom out a bit and probably what's most exciting as the hopefully recurring and sustainable model that we are able to leverage our faster growing businesses, which you laid out to generate revenue growth for the entire company and then we convert out all the way to free cash flow per share.

That accelerates with the strength of our company and our balance sheet.

I really couldn't be more proud of the team excited about the future. So marcy, let's turn it over to you for Q&A. Thanks, Bryan operator, I'd like to open up the copies.

Thank you we will now begin the question and answer session. If you have a question. Please press star and then the number one on your Touchtone phone.

If you wish to be removed from the queue. 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. Please press star and the number one under Touchtone phone.

Our first question comes from Ben Swinburne for Morgan Stanley . Please go ahead.

Thank you and good morning question on broadband and then one on on N B C. Maybe for from Mike and Dave.

When you think about the converged offers you have in the market I know you've been testing more of the investments in the network.

Those tailwinds against the headwinds around competition housing fixed wireless when you put that altogether, yeah, how're you feeling about the ability for the company to return to to certain consistent broadband customer growth, particularly when you look into maybe the seasonally stronger back have or or into next year.

And then like you mentioned the strikes there's a lot of different ways that those could impact your business, depending on how long it lasts but I'm, particularly interested in free cash flow for the company and also peacock, but there's a lot of expectations around peacock profitability, improving or losses coming down and continued growth when when you put.

The strike into contacts for us how shall we say be thinking about the impact should this last.

Longer than than expected. Thank you.

Hey been Ah. This is Dave let me start with broadband Ah Ah Ah hand, it over to Mike.

Yeah I think.

Talking about this environment Ya Gotta start where the market is and where the customer's going and the customers continue to be highly engaged in multiple broadband applications screaming gaming all trending up and you look at the other thing that is happening just an increasing number of simultaneous device.

Usage you know the the.

It's happening in peak moments and now we have over 1 billion connected devices Wifi connected devices to our network. So that's the from Ah overall perspective, that's just very encouraging and you look at the results non video broadband customers are doing more than 700 gigabytes per month and you take one key.

Area, one major streaming yeah, and part of the business and that sports and it starts with you know just making it really easy to find the sporting events. So great voice search that we have on our platform multiple ways to consume sports and linear DVR streaming all seamlessly connected.

And then of course comes with a big sports moments happened you want reliability fast speeds, Greg coverage and capacity and you look at just what happened Thursday night football.

Messi in MLS Peacock hasn't fantastic sports slate that will be streamed and consumed that way so unique great broadband to be able to back all of that up and so I think that's a great driver in overtime.

But in this environment.

We are seeing continued lower move activity.

Competition is still increased in its wireless you brought out there still pressing however, we are seeing some rational promotional activity. It's early no changes to any trending but when you see that in a competitive environment.

That is encouraging.

Both voluntary and Nonpaid turn remain below pre pandemic levels and that has continued so our game plan in this environment is that we're going to invest in our network and focus on upgrading and the mid split all of that activity is on track leading to afford auto beginning.

The deployments and Trialling activity starting at the end of the year no change to our game plan and we're going to segment the base.

We have consistently focused on the starting point high end broadband activity in tears, a third of our customers are plus or one gig and we've launched over our new two gig service to 25% of our footprint.

Showcases peacock.

And the net of this is a stable base $32 million residential broadband customers and while protecting razee broadband or poo growth and sauce do that in Q2 at 4.5% <unk> growth.

But in this environment, where still competitive and lower activity to period of flux in some quarters. We may report customer losses that being said to your question. We believe over time, we will return to subscriber growth and certainly we're seeing more normalization back to school is going.

Happened in Q3, and most certainly there are some seasonal normalization, but over time.

Confident that we will be able to balance that this formula of our Pooh focus and over time getting back to the subscriber growth Mike.

Thanks, Dave So.

Good morning, <unk>, So I think I would just.

Point, you look back at the first half of the year with Dave and his team have been doing and continue to do in terms of setting the broadband business, which is obviously extremely important to the future of the company up for long term success by continuing to improve our product.

Add innovation around his segment debase.

Extend the footprint all the things that you want us to happen while protecting.

Pricing.

Are all outstanding work in a in a competitive moment in time, but I think.

You know we hear in Dave and his team in particular are thinking what are the implications for the long term as we.

Think about how to compete in the short term.

Go into your question on the NBC side on strikes I'll, just repeat what I said earlier, which is that we are committed to reaching a fair deal with the guild's.

As soon as possible beyond that.

It's really for all involved in the industry broadly prolonged work stoppage stoppage in the longer it goes the worst it'll be as obvious.

Negative impact all around.

Side of that in 2024.

As you look at Peacock I wouldn't point out anything in particular related to.

Strikes in its effect in 2023 or second half of the year, obviously the longer strike the more.

That could have an effect as you look into 2024 and beyond and that would be for ourselves and others. Obviously.

So it's a level playing field, but to comment on Peacock and particularly in the second half we've got a lot of strong content coming so we've got NFL coming back.

Basely then on top of that we have an exclusive NFL wildcard game, we're going to a big 10 for the first time, which is fantastic on Saturday nights in a movie slaves, who got Super Mario brothers coming to Peacock. Shortly we've got Exorcist, five nights would Freddy as as Jason pointed out coming from Bluhm House.

And then on television side, some some original including Continental which is related to the John Wick franchise. So we feel very good about the strength of what we have coming in the second half of the your content wise and then beyond that on Peacock I think there'll be a continuation of the good work that we've done inside the company.

Convert Comcast subscribers over to a paying subscribers status, which we're not quite halfway.

Through that as we only got started in June on that score so over the remainder of the year that will also be happening. So when you look at the doubling of Peacock subs year over year and <unk>.

Optimistic about what the second half of the year brings feel pretty good about peacock.

Thanks, so much.

Operator next question please.

Next question today is coming from Craig Moffett.

Please go ahead.

By two questions if I could regarding your wireless business.

There's been some talk.

Market and there was there was some discussion on the horizon call yesterday.

Calling.

Not fully into question at least at raising some eyebrows with respect to the permanence of that contract. So I'm. Just wondering if there is anything that you can say about the durability of that relationship and your confidence that that is in fact a.

Irrevocable contract.

And then second.

You've obviously now started to subsidize handsets more frequently in line with the way the whole market really operates I wonder if you could just talk about that a bit and talk about your views on customer lifetime value that.

You are seeing with new customer acquisition, given the headset subsidies and expected church.

Thanks, Craig either Dave So let me start with the the wireless <unk>.

Question. So let me start with we have a great <unk>.

Really like our approach towards the business from day, one and continue to feel that way and definitely think cable is a material and really strong.

Benefit to our partner and so you have a good relationship with Verizon.

And so that continues.

Really key is we have a perpetual access to all the services that we need from Verizon network. So it's just straightforward that's that's the way it is.

So let me start with then when you go into the handset subsidy point, we go in and we go out in terms of different offer. So we've always consistently had promotions and they come in different forms can be in the form of gift cards can be outright.

Promotions that are discounts and in some cases.

A free device, but it's not every day, that's not part of our everyday game plan, we will go in and out with that.

And we increasingly focus on higher and mobile tears and we have a great slate there with between by the gig unlimited and premium Unlimited limited. So we stay very focused on the core service offering and been very strong in terms of the.

Really.

Assistant performance in terms of wireless growth, we really like the long runway ahead.

That we have and things that were just getting going in small business.

And wireless, but I think our core wireless pricing provides customers with the savings that help us compete against the telephone companies like between 30, and 50% savings versus the telcos and so we've got a strong position.

Partnering mobile with broadband got great Wifi overlay and a strong <unk> as I've said, so we like our capital light approach, we like our core service offering approach and it's been effective.

Thanks, Craig.

Update our next question please.

Certainly the next question is coming from.

Goldman Sachs. Please go ahead.

Yeah. Thanks for taking the question Disney.

Disney has said that they are looking for potentially a partner to help them transition ESPN to a more direct consumer model you have a really big sports franchise as well how are you thinking about further transitioning NBC sports to a business that is mostly streaming is it something you think you would need a partner for and maybe broadly.

Speaking do you think.

Sports business has become a screaming centric there there is an opportunity or need for consolidation among those those platforms. Thank you.

Thanks, but it's Mike so.

The.

Been asked about and read the speculation that in some way we might be interested in swapping businesses as part of what's going on.

In the sports space and I would just say that that's very improbable given the.

You could imagine there's tremendous issues around tax minority shareholders structuring generally so I would put aside the idea that there is any.

Any anything inorganic is likely to happen around.

E S. P N in particular, which is what we've been asked about.

When I think about our own sports business I think we've got one of the best portfolios in sports Sunday Football Big Town EPL NASCAR WWE Olympics next year PGA, So and we've got.

Very acclaimed group of people in terms of producing.

Excellent excellent.

Content around those sports. So obviously it makes us a really strong partner two leagues and around the world were known for that and I think we bring a lot to the table whenever there's a time and that includes sky sports as well, obviously, so that brings us.

To the table with more than money when it comes time for discussions are out around how rights owners want to create value for their participants and I think.

We've.

Are doing a very good job in my mind of continuing to do that in a way that has tremendous reach obviously through N B C and the broadcast side, we can leverage our cable nets as we've done through and various sporting events.

Using our cable nets, but really importantly is peacock and we looked at one of the great drivers of Peacock subscriber growth has been sports and I think it adds to the value of.

Peacock subscription the fact that when we looked at the <unk>.

Just sports within Peacock, So I think that's how we see.

Our evolution, where in sports, we're going to continue to be in sports and that's the game.

Thank you. Thank you.

Operate our next question please.

Our next question is coming from Phil Cusec from J P. Morgan. Please go ahead.

Hi, guys. Thank you.

Lots of talk about one follow up on bread do you think that you have the right sports right snakes or could you stretch your lead and peacocks lead by taking more overtime and then and then second could you dig into the strong Hollywood and the weaker Orlando number so it looks like Orlando just in general.

There's a little bit softer year over year, but we ended the you had been taking sure do you agree with that and how do you see that going forward. Thanks very much.

So sports rates going back to that last question for other reasons I said I'll keep it shorter. This time, we should we're always looking to see if there's ways to add more value to our business and likewise work with partners. So obviously nbas coming up that's a fantastic property.

We don't necessarily need it given the portfolio, we have but given given its strength and our historical involvement in the sports something I'd like to see us take a look at as a for instance, but we'll we'll see where that goes.

And then on theme parks.

Have.

I think one of the best quarters, we've seen tremendous momentum and the overall portfolio feel very very good about the parks business overall Hollywood was record on the back of Nintendo opening up.

Japan.

Well in a record as well there for a second quarter and Beijing highest ranked highest level of profitability.

Orlando.

It is really compares very well to pre pandemic pre.

Pre pandemic, we're obviously down on attendance, which was kind of unprecedented in the back of.

Of of.

Coming off Covid, so not surprised by that softening that said, we're at levels of attendance and per caps being better. So that overall, we feel good about what we're seeing in Orlando.

We have had a stronger dollar you still are seeing softness of international attendance, which continues to be about 30% lower than pre pandemic levels, we expect that to sort of continue and on the domestic side. It's just been a rebalancing with cruise lines back and people the flip side of the dollar doing some international travel.

<unk>, it's the dynamics that you see in Orlando feel really good about what's going on there and Brian .

And here just wanted to add that.

Really bullish on the parks is one of the six areas, Jason mentioned that we feel of the growth driver of the company in the years ahead, we were just down in Orlando.

Recently looking at epic universe progress and spectacular.

What's coming in 2025, we have the two parks.

The smaller parks in Vegas and outside Dallas.

So we're looking for growth in this area, we're pretty excited.

Excited about the results that Jason and Michael talked about and I just draw your attention that the <unk>.

<unk> in Orlando with epic is pretty massive we believe.

Thanks. Thanks.

Thanks, guys. Operator next question please.

Our next question is coming from Jessica.

The Security's. Please go ahead.

Thanks.

Megan longer term and one time.

My first time content.

Announced a restructuring and and your content area and with the current strike, which is kind of reminiscent of the pandemic. We're all production shut down at least in the U S. It seems like an opportune time to rethink your entire content strategy.

Okay, and you're thinking differently at all about how you produce what you produce what the costs are.

Anything you can say about how N. B C. You may change its approach to to contact in coming years, and then on advertising.

The upfront I guess is still dragging on can you talk about.

What you're seeing with a strength.

And where the dollars are being out of allocated to what platforms.

Jason just said that.

I think it would be similar to to.

Okay. So in terms of content I'm really pleased with.

Jessica with the.

Elevation of a couple of my partners at NBC, one of them being Donald Ang. Lee is one of the most respected people in Hollywood along with.

We've got a great leader printed Buckley, who runs our television studios, so I think giving them.

A sort of content vertical that's going to work closely with Mark Lazarus on the television side and and platform side and.

And <unk> on news and Telemundo I think is going to.

Really make take advantage of the company that we have.

We're going to obviously be very much focused on.

Creating great content, but we.

We already do cricket Great content think when you look at the movie Slates, we've had and the television that we produce for ourselves and others and I think that strategy is going to continue we're not going to be creating content exclusively for ourselves, but I think it's a great advantage for our studios to actually have platforms that can take a substantial amount.

Though not all of the content that we can create which puts us in a great position to work with all sorts of talent and creators in Hollywood elsewhere.

Come work with are great leadership in our studios and we helped bring their ideas to life in terms of cost and strategy and so forth.

We will work in the context of the industry and the buyers and what they're looking for and be responsive to that but I feel very very good about the way our studio of businesses.

Setup.

In terms of advertising the market AD market soft inverse soft and versus last year. It's stabilized as it came into this year and has stayed stable and I think that would be.

On the back of uncertainty.

Canonic uncertainty about economic outlook looking forward and I think jason's comments or we don't see that condition changing as we're looking into the third quarter in second half of the year as.

As you know I think we feel good about our our.

Are upfront.

Up front.

Despite those headwinds are total cash and pricing levels were roughly in line with last year and really strong related to peacock in particular have been a lot of that comes from the strength of our portfolio as I've kind of mentioned earlier.

Where we see strength around big 10, Sundance Football Peacock, one platform and like all things that are helping us out quite a bit.

Thanks Jessica.

Operator next question please.

Our next question comes from Steven.

Margo your lifestyle life.

Thank you just two on the connectivity side of the business, maybe first on the broadband or poo really strong at 4.5% I was wondering if you could help us unpack that a little bit maybe what in there is price increase how much do you think you're getting from customers up tearing two faster speeds.

And maybe what might be coming from court cutting some of your double play video subs go to single play Internet, our Internet plus mobile bundles and then on the international side, where revenue growth has really strong can you just help us think through what kind of margin contribution you get an international you talked about more handsets in the quarter I'm guessing those are a little lower.

Margin as as some of the UK connectivity stuff, but we just think about that as a growth driver how should we think about the the margin or EBITDA contribution from international. Thank you.

Got it so let me start with art.

And you hit on a couple of the key points first off pretty strong performance in the quarters. We've said, we've seen 4.5% and there are multiple drivers.

There was a little bit more rate that we took.

Really on.

Wildly different but a little bit more that we did in the beginning of the year I think are critical one for us as terror mix and we have the third of our base.

Gigabit, plus and that 75% 400, megabits, a higher that definitely impacts.

The path to upgrading the gateway over time, you have an opportunity to do that and advanced securities included in that unlimited is included in that and then a coverage plan, making sure. Your whole house is covered so X Y complete is a great tier good value to customers a 25% of the base.

There's the bundled discount that you mentioned when customers go to HST only you lose the bundled discount and so all of those things factor and so I think it's a positive that there are multiple drivers that are helping and the thing Steven that starts with is where the market's going and I mentioned.

Net before and you have this.

Stable group of customers and that are just using more on overtime that continues to trend up.

And we have this balance of a stable base unhealthy <unk> growth on international connectivity.

And a margin sites. So this is a great growth area for us and you look at the from a revenue perspective, just starting with that cause that impacts margin.

The revenue increased 20, 26% this quarter.

Jason said and the call and two thirds of that revenue comes from broadband.

Which continues to grow at mid teens mid teen level and was driven by higher level of customers <unk> compared to a year ago remaining third is wireless.

Tends to have more variable growth quarter to quarter due to handsets.

So.

This is a solid quarter growth rate.

And it will impact margins, so, but normalising for mobile side of things revenue growth I think maybe at the right level to focus on is more closer to the 20% level.

For international connectivity so.

I think this is a strong part of the portfolio and a definite contributor towards as Jason has said one of the main pillars of not only just domestic broadband and mobile but.

Also the international broadband and mobile Jason I think Stephen important for US as we came into this year with the Resegmentation, how we sort of presented out to the world. This was an important category. So international connectivity as we think about sky.

Taking the brand name and reputation that they've sort of earned in video and taking that into other products like broadband and wireless the way they have.

This quarter $1 billion in revenue coming from connectivity internationally, so kudos to the team and I think you are important that we've been able to highlight that the street.

Accurate our next question please.

Our next question is coming from John holding from UBS. Please go ahead.

Great. Thanks, guys, maybe a couple of questions on profitability I think maybe for Jason.

Really impressive performance on the cable side 240, bibs 47 per cent I mean.

Half the visibility into further margin expansion from here, especially given you know you've got a couple of mix shift issue more broadband and that's media, but also more wireless. So anything you can tell us about that sort of outlook. There and then on the Peacock side doing better in terms of the lawsuit. There is is 3 billion losses for this year. So the right number for feedback.

And you'd say that those are a pack of profitability beyond twenty-three would be great. Thanks.

Yeah. Thanks, John good questions, so on mix and margins in the connectivity business I think we've had a fairly consistent track record. If you look at the last several years.

Of margin expansion.

If you look at the core sort of legacy cable business as we mentioned this quarter record margin over 47% and the factors that have contributed to that historically are in place as we look forward I think Mike's comments upfront about being able to grow revenue being able to grow margins.

Keep part of it so to your question specifically on connectivity there is a mix shift going on when we talk about sort of the six key growth drivers across the company three are sort of core connectivity growth drivers, whether it's broadband residential broadband business services or wireless. This is an accretive mix shift for us as we think about the way the categories are sort of shifting and what's.

Growing versus what's not growing so I would look for more of the same I think also importantly for the team for the second consecutive quarter every expense line in connectivity and platforms was down year over year, except for direct product costs and those are the cost that directly support the connectivity and platforms revenue growth in the categories, we talked about so.

Outlook for more of the same and continued margin expansion out of the business I think on Peacock, you're right. We came into the year Cape guidance for.

Roughly $3 billion in losses, no change to that as you see were pacing to that over the first couple of quarters. We've got a lot of incremental content as we think in the back half of the year as Mike said no change that guidance.

Thanks, John Thanks, Operator next question please.

Our next question is coming from BJ giant from Evercore ISI. Your line is that life.

Good morning. So I think you can you can talk to about future expansion of the footprint being a high priority and.

The bead.

<unk> can you just talk about is that really going to be a big opportunity in terms of participating in that and driving that footprint.

<unk>.

Hey, there. This is Dave let me, let me jump in to that so we we operate in 39 states where they are.

As expected B subsidy money and we are actively engaged both at the federal and state government levels. So.

As the framework rules of bead participation are being developed.

We're actively.

Looking at it and working I think.

Good way at all levels, so assuming satisfactory.

Comes on the framework rules, we're going to be full participants and bidding where it is consistent with our business goals, but.

It's too early in the process for us to comment on where will bid or the potential win right, but we're we're active right now building out edge Alex's Jason's talked about we're going to build out even before any bead activity in the beat activity by the way is really going to be more <unk>.

Rules will come out and be clarified it has a 20 526 kind of an impact once it.

Clears up but in the meantime, we're actively edging out and looking at opportunities, where it's a profitable return and aggressively pursuing it so a million homes pass we expect to build this year alone. So we are going to be aggressive in the meantime, but <unk>.

Considering <unk>.

<unk> closely at at and assuming the satisfactory outcome will be participant.

Thanks.

We'll take our last question.

Our last question today is coming from Jonathan.

Please go ahead.

Thanks Skype.

Into broadband in a little bit more detail <unk>.

<unk> from one Q2 Q.

Was it was quite different from what it has been historically attempt to pull down there that I'm wondering if you can give us just a little bit more color on how much of that was muted seasonality.

Some of the the initiative.

You guys have been pushing on the competitive front with Noah and brought that to offer and that the wireless bundles and in that context, you mentioned that wireless is starting to have a bigger pull through impact on on your <unk>. So that they're more muted Comcast that's taken.

Wireless I'm wondering if you can give us a little bit more context around that and then sorry to pile on but one last one on wireless for for Jason When we look at Verizon Hope.

Wholesale revenue seems to have flattened over the course of the last three quarters, which suggests that maybe you're getting some gross margin expansion in the wireless business I'm wondering if that's accurate. Thank you.

This is Dave let me start on the broadband part and a little bit on wireless.

So.

As we saw the bases stable 32 million.

And this is sequentially and year over year for this quarter, we also flag.

We talked about this last quarter, we expected more normal seasonal activity.

So the net ads would be lower than Q1, but we also expect that a more muted step down and that adds from Q1 Q2. This is a combination.

Lower.

Overall move activity the overall macro issues that we've experienced over the past year in the market the.

At the same time, we did as you brought up we go in and out in terms of offers we had some offers.

[noise] targeted in the multiple segments that we serve more on the lower end and we had some traction on some of that so that did help and so we will continue to be opportunistic throughout the year and.

We as I mentioned before to your point on wireless we absolutely aggressively.

<unk> mobile with broadband and this is for new and existing customers. So it's a mobile is a great <unk>.

Sentient of the relationship and really profitable way to existing customers.

That are HST only so it's one of the key things that we do and I think over time, we're going to continue to stay focused on that I think is as much of an opportunity to grow.

The mobile business and.

Helped broadband.

Is going to the base as well as attracting new customers. So it's a double win from our perspective Jason.

Just Ah Jonathan Thanks for the question on wireless can't speak to Verizon and their revenue trajectory I know they've got a few different things in the wholesale revenue category.

Just cable, but I can't speak to obviously, the economics of our business. We're happy with it we think it's good business for Verizon that's sort of what they said yesterday, they think about traffic and ways to fill up their network, but for US specifically, we've got a revenue stream coming in for customer from customers. We have a wholesale deal with Verizon to accommodate that traffic where there's outflow.

But then we're also trying to offload as much traffic as we as we can on our own network. We've got a fairly efficient acquisition vehicle and that a lot of this is just marketed to our own broadband subscribers. So in terms of acquisition costs I think we're fairly efficient in the market and then all the way down sort of closer to cash flow. This is a capital late model, which we like I'll leave it there.

Jonathan and thank you everyone for joining us on our second quarter call.

That concludes the question and answer session and today's conference call. A replay of the call will be available starting at 11 30 am Eastern time today on Comcast Investor Relations website. Thank you for participating you may I'll disconnect.

Q2 2023 Comcast Corp Earnings Call

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