In the second quarter of 2023, Comcast had a successful earnings conference call. Executive Vice President of Investor Relations, Marci Ryvicker, welcomed all participants and gave a disclaimer. Mike Cavanagh then reported that total revenue had grown 2% and the six priority areas of growth had grown 10%. This growth combined with careful management of margins resulted in mid single-digit EBITDA growth and double-digit earnings per share growth.

The company expects to drive significant growth in the future and has established plans to enable their businesses to contribute financially and strategically. They have the strongest balance sheet among competitors, which allows them to invest for growth while returning substantial capital to shareholders. In the quarter, they generated over $10 billion in EBITDA and had 4.5% broadband ARPU growth. They have a winning hand in convergence as they are the largest broadband provider with a high-quality network and a cost-efficient upgrade path to higher speeds. They can also compete effectively in wireless with a capital-light approach and a strong value proposition for customers.

This paragraph discusses Comcast's consistent success in providing industry-leading features and capabilities for their products, resulting in near-record low levels of churn and ARPU growth. It also highlights the success of their parks, film studios, and animation business, such as the opening of Super Nintendo World, Minion Land, and Epic Universe, as well as the success of franchises like Fast and Oppenheimer.

Comcast is proud to partner with Christopher Nolan to bring the powerful movie Oppenheimer to audiences globally. Comcast has invested in a strategic slate which has contributed to their success in the box office. With a strong leadership team, commitment to innovation, and disciplined approach to capital allocation, Comcast is confident in their ability to continue to invest and deliver. NBCUniversal is a special place with a diverse array of businesses, including film, parks, the number one TV portfolio, an award-winning TV studio, the number one most watched news organization in the US, and a variety of sports.

Mike is confident that NBCUniversal has the right strategy for the future, which includes producing premium content through their studios, distributing it through their TV networks and Peacock, and further monetizing it with their theme parks and consumer products. Peacock has gained two million paid subscribers in the second quarter, driven by conversion of Comcast subs to paying relationships. Despite challenges such as cord-cutting and new competitors, Mike believes they have the business strategy, management team, and financial strength to succeed. They are also committed to reaching a fair deal with the writers and actors strikes so they can get back to making great content. In the second quarter, revenue increased 2% to $30.5 billion, while adjusted EBITDA grew 4% to $10.2 billion.

In the second quarter, Connectivity & Platforms revenue was flat at $20.4 billion, with domestic broadband, domestic wireless, international connectivity, and Business Services Connectivity increasing 7% to over $10 billion in revenue. Video, advertising, and other revenue declined 7% to $9.8 billion. The strategy of investing in and driving growth in high-margin businesses while protecting profitability in businesses with secular headwinds resulted in 170 basis points of margin expansion for Connectivity & Platforms, and a record high of 47.3% for the domestic legacy cable business.

Domestic broadband ARPU has seen strong growth for two consecutive quarters, and demand for higher speeds and increased network consumption is increasing. The average monthly data usage for a broadband customer has nearly doubled since 2019, and most customers are now in plans of 400 megs or higher. The company is transitioning to DOCSIS 4.0 and is on track to launch it commercially soon, and is expanding its footprint with the goal of reaching 1 million new homes and businesses by 2023.

Comcast's domestic wireless revenue grew due to an increase in customer lines and new converged offers, with a long runway for growth. International connectivity revenue also grew to a record high, with broadband growing at a mid-teens level and wireless revenue increasing due to handset sales. Business services connectivity revenue increased 4%, but was offset by declines in video, other revenue, and advertising due to lower political revenue and the macro environment.

Connectivity in platforms total EBITDA increased 4% to $8.3 billion, with an adjusted margin of 170 basis points, driven by the mix shift to high margin connectivity businesses and expense management. Content & Experiences revenue increased 4% to $10.9 billion, with EBITDA increasing 7.5% to $2.2 billion, driven by record results at parks and the success of Super Mario Brothers. Media segment revenue was stable, with a strong growth in Peacock offsetting declines in linear revenue. Immediate EBITDA decreased 18%, which included a $651 million EBITDA loss at Peacock.

Domestic advertising declined 5% in the second quarter, partially offset by strong growth in advertising at Peacock. Domestic distribution increased 2% due to Peacock distribution revenue growth. Peacock paid subscribers increased due to an effort to transition Comcast bundle subscribers to a paid relationship. Studios had a great quarter due to the success of the Fast franchise and Super Mario Bros. Theme Parks had a record quarter with revenue increasing 22% and EBITDA increasing 32%.

The park in Hollywood had a record quarter of EBITDA due to the positive consumer reaction to the opening of Super Nintendo World. The international parks also experienced a rebound post COVID. The Orlando park had lower comparisons due to last year's high visitation levels, but still had relatively in line attendance and substantially higher revenue compared to 2019. The company generated $3.4 billion in free cash flow while investing in their network and theme parks. They repurchased $2 billion worth of shares and paid $1.2 billion in dividends, totaling $3.2 billion in return on capital. The net leverage was 2.4 times, in line with their target leverage.

Brian Roberts is pleased with the team's performance in the first half of the year and is excited about the future. He believes that the company is able to leverage its faster growing businesses to generate revenue growth and convert it into free cash flow per share. Marci Ryvicker then opened the call for questions, with the first one coming from Ben Swinburne from Morgan Stanley. He asked about the ability for the company to return to consistent broadband customer growth and the impact of the strikes on free cash flow and Peacock profitability.

Dave Watson explains that the broadband market is continuing to see an increase in usage due to streaming, gaming, and multiple device usage. He also notes that sports streaming is popular and requires reliable, fast speeds to be successful. Finally, while competition is increasing, there is rational promotional activity and churn levels remain below pre-pandemic levels.

Dave states that the company is investing in their network and upgrading, and will focus on segmenting the base. 75% of customers have access to 100 megabits or more, and they are utilizing mobile and new broadband partners like NOW TV to keep ARPU growth stable. Despite the current environment, they anticipate returning to subscriber growth over time with the return of back-to-school in Q3 and seasonal normalization. Mike Cavanagh then follows up with a question.

Dave and his team have been working to set up the broadband business for long-term success by improving the product, adding innovation, segmenting the base, and extending the footprint while protecting pricing. The company is committed to reaching a fair deal with the guilds as soon as possible, but a prolonged work stoppage will have a negative impact on the industry. Free cash flow will be lower in 2023 due to studio working capital, and the effect of the strike on Peacock in the second-half of the year is unknown. However, Peacock has a lot of strong content coming, including an exclusive NFL wild-card game.

Comcast discussed the content they have coming in the second-half of the year, including Big Ten, Super Mario Bros., Exorcist, Five Nights at Freddy's, Continental, and other originals. They also mentioned their efforts to convert Comcast subscribers to a paying subscriber status on Peacock, and their optimism about the doubling of Peacock subscribers year-over-year. Craig Moffett asked questions about the durability of the relationship with Verizon and the customer lifetime value of new customer acquisitions with handset subsidies.

Dave Watson discussed the wireless MVNO that they have, which provides customers with savings of 30-50% compared to telephone companies. He also discussed their capital-light approach, core service offering, and the promotions they have such as gift cards, discounts, and free devices. They are focusing on higher-end mobile tiers and have a long runway ahead for wireless growth.

Michael Cavanagh has stated that any speculation of swapping businesses between NBC Sports and ESPN is very improbable due to the various issues that would arise. He believes that NBC Sports has one of the best sports portfolios in the business and is a strong partner for leagues around the world. He believes that they bring more than money to the table when it comes to discussions about how to create value for rights owners, and that their reach through NBC on the broadcast side is very strong.

Jason Armstrong states that they are always looking to add more value to their business, and they are considering the NBA for the strength of the property and their historical involvement in sports. He states that they don't necessarily need it, but they are taking a look at it.

The theme parks business has had a great quarter with record profits in Hollywood, Japan, and Beijing. Attendance in Orlando is lower than pre-pandemic levels, but per capita spending is higher. International attendance is down 30% due to a strong dollar, while domestic attendance has rebalanced due to the return of cruise lines. Brian Roberts is bullish on the parks business and believes that the Epic Universe park in Orlando will be a major growth driver for the company in the years ahead.

Brian Roberts is pleased with the restructuring of the content area at NBC and the elevation of Donna Langley and Pearlena Igbokwe. He believes that this new content vertical will enable them to create great content for TV, movies, and news. He also believes that the focus will be on creating great content but also on optimizing costs. Lastly, he mentions that the Q3 advertising will be similar to Q2.

Jessica is confident in the position of the studio business and the ad market has stabilized despite some economic uncertainty. She is pleased with the strength of their portfolio, which includes Big Ten, Sunday Night Football, and Peacock. This has helped them to have a successful upfront with cash and pricing levels roughly in line with last year.

Brian Roberts discussed the factors driving the strong 4.5% broadband ARPU, which includes a bit more rate, pyramids, and XFi Complete. XFi Complete includes a gateway, the opportunity to upgrade the gateway, advanced security, unlimited coverage, and a coverage plan. Roberts also mentioned the margin contribution of international revenue growth, which includes more headsets and U.K. connectivity.

XFi Complete is a great tier with good value for customers, and it has a 25% base. Bundled discounts are available when customers go to HSD-only, resulting in a stable customer base and healthy ARPU growth. International connectivity revenue increased 26% this quarter, with two-thirds of that from broadband and one-third from wireless. This quarter's growth rate was solid, and when normalizing for mobile, the revenue growth is closer to a 20% level. This is an important category for the re-segmentation of the company.

Sky's international connectivity has earned them $1 billion in revenue this quarter. Stephen Kale and Marci Ryvicker thanked the team for this success. John Hodulik asked about the visibility of further margin expansion in the cable side, as well as the path to profitability for Peacock. Jason Armstrong answered that Sky has had a consistent track record of margin expansion in the past few years, and the factors that have contributed to this are still in place.

Dave Watson states that NBCUniversal is actively engaging with federal and state governments to expand their 39-state footprint. He also mentions that NBCUniversal is expecting bid subsidy money and that this will be a big opportunity for product stating and driving their footprint.

The company is actively working to develop framework rules for bid participation, and is aggressively pursuing profitable opportunities. They expect to build a million homes passed this year alone, and are looking to be a participant in the bidding process once the framework rules are clarified. Additionally, they have noted that wireless is having a larger impact on their broadband subscribers, with more muted Comcast subscribers taking wireless.

David Watson discusses the broadband business and how they are targeting multiple segments with offers that have gained traction. He also talks about aggressively packaging mobile with broadband for both new and existing customers, as it is a great extension of the relationship and profitable way to attract and retain customers. Jason Armstrong then states that he cannot speak to Verizon's revenue trajectory in the wholesale revenue category.

Jonathan spoke on the economics of Comcast's business, which he stated was good for both Verizon and Comcast. He mentioned that there is a revenue stream from customers, a wholesale deal with Verizon, and an efficient acquisition vehicle. He also stated that it is a capital-light model, which they like. The call concluded with Marci Ryvicker thanking everyone for joining the second quarter call.

This summary was generated with AI and may contain some inaccuracies.