CMCSA
#Good morning, everybody
I'm on slide 4 for those following the presentation online
As <UNK> just said, we had a great first quarter
Cable delivered terrific results, balancing strong financial growth with healthy customer metrics
And at NBCUniversal, we had phenomenal growth this quarter, with good contributions from all the business segments
So on a consolidated basis, revenue increased 8.9%
Adjusted EBITDA grew 10.4%
And by the way, adjusted EBITDA is the new label for the metric we previously called operating cash flow
Earnings per share was $0.53, a 26.2% increase on an adjusted basis, and we generated $3.1 billion in free cash flow during the quarter
So now let's start with Cable Communications on slide 5. Cable Communications delivered strong first quarter results
Revenue increased 5.8% to $12.9 billion
We added 297,000 customer relationships, and we grew total revenue per customer relationship by 2.6%
Beginning this quarter, we are providing additional disclosure for residential and business customers, given the success of Business Services, which now annualizes at about $6 billion in revenue
Now for the numbers, starting with our Residential business, we added 263,000 net new relationships, an increase of 11% over last year, and ended the quarter with nearly 27 million relationships
Contributing to these results were the positive benefits of customer retention with our Video and High-Speed Internet churn remaining at the lowest levels in over 10 years
Customers continue to respond to our innovative X1 platform, our best-in-class high-speed data product, and the meaningful strides we have made in improving the customer experience
Our ability to bundle our products is also a key driver of customer retention, and we continue to do so successfully with 71% of our residential customers now subscribing to at least two products
In terms of the individual Residential revenue categories, High-Speed Internet continues to be the largest contributor to overall Cable revenue growth
Revenue increased 10.1% to $3.6 billion in the quarter, driven by an increase in our residential customer base and rate adjustments
Building on the strong performance in 2016, we added 429,000 total high-speed data customers in the quarter, with 397,000 of them being residential
We've invested to provide a best-in-class broadband product as we have consistently increased the speeds we offer our customers, and we continue to invest to improve the Wi-Fi experience in and out of the home
We ended the quarter with 54% of our residential customers taking speeds of 100 megabits per second or higher
Looking ahead, we believe we have a long runway for growth in adding broadband customers and a great roadmap to provide additional value to our existing customers
Video revenue increased 4.3% to $5.8 billion in the quarter, primarily due to rate adjustments as well as customers subscribing to additional services and an increase in our residential customer base
Of our 42,000 total video customer net adds in the quarter, 32,000 were residential
X1 continues to move the needle on the customer experience, ARPU and retention, driving higher customer lifetime value
We ended the quarter with 52% of our residential video customers having X1 compared to 35% a year ago, and we continue to expect our X1 penetration will be in the low 60% range by year-end
Voice revenue declined by 3.6% to $863 million in the first quarter, reflecting a modest decline in ARPU as well as the loss of 27,000 net residential customers
We continue to believe that our voice product is a good value for our customers and an important part of our triple and quad play bundles
Business Services delivered another solid quarter of double-digit growth, as revenue increased 13.6% to $1.5 billion during the quarter
We added 34,000 business customer relationships and grew revenue per business customer relationship by 5%
The small business segment accounted for about 70% of our revenue and 60% of our growth, driven primarily by the net increase in customers
And our mid-size and enterprise segments continue to grow at higher rates, given the strength of our product set and the earlier stage of our efforts in these areas
Cable Advertising revenue decreased 6.3% to $512 million in the quarter, reflecting lower political revenue compared to last year
Excluding the political contribution, our Cable Advertising revenue decreased 2.3%, reflecting a challenging advertising environment this quarter, particularly in discretionary categories
Turning to slide 6, first quarter Cable Communications EBITDA increased 6.3% to $5.2 billion, resulting in a margin of 40.3%, up 20 basis points compared to the first quarter of 2016. This is a terrific financial performance as we manage through a period of higher programming costs by offsetting this impact with strong revenue growth and real discipline on non-programming operating expenses
Programming expenses grew 11.7% during the quarter, reflecting the timing of contract renewals
Because of these renewals, our programming expense growth should trend higher for the remainder of the year, consistent with our guidance at year-end
Non-programming expenses increased 1.4% for the quarter, helping preserve margins given the increase in programming expenses
As we noted during our year-end call, this growth rate is trending lower than previous quarters as we benefit from our customer experience initiatives and overall disciplined cost management
Notably, Customer Service expenses declined 1.1% this quarter, even as we grew our customer relationships by 3.2%
Consistent with our objectives, we expect the rate of growth for our non-programming expenses to continue to trend lower this year compared to 2016. Now let's move on to NBCUniversal's results
On slide 7, you can see NBCUniversal's revenue increased 14.7% and EBITDA increased 24.4% in the quarter
These strong results were driven by a successful box office, strong growth in retrans and affiliate fees, as well as the continued healthy performance at Theme Parks
Cable Networks delivered strong growth this quarter, with revenue increasing 7.6% and EBITDA increasing 16.8% to $1.1 billion
This EBITDA growth is higher than recent trends of low to mid-single-digit growth, and it was the result of two factors
First, distribution revenue increased 8.6%, due to the successful renewals of a number of our distribution agreements, and should continue to contribute to healthy EBITDA growth for the remainder of the year
Second, content licensing revenue increased 54%, reflecting a new licensing agreement and is timing-related
Partially offsetting this growth was a 2.9% decline in Advertising revenue
Broadcast Television delivered another solid quarter with revenue growth of 5.9% and EBITDA growth of 13.4% to $322 million
This growth was primarily driven by higher retransmission consent fees, which increased over 70% to $350 million and reflect the same contract renewals I just mentioned in Cable Networks
We remain on track to reach $1.4 billion in retransmission revenue this year, a 65% increase over 2016 results
In addition, Advertising revenue was stable compared to the first quarter of 2016, reflecting higher rates offset by audience rating declines and lower volume
Partially offsetting this quarter's EBITDA growth were higher programming and production costs
Film revenue increased 43.2% and EBITDA increased 120.6% to $368 million
These results primarily reflect higher theatrical revenue, which increased by $415 million to $651 million due to the strong performances of Fifty Shades Darker, Get Out and Split, as well as the continued success of Sing in the quarter
In addition, Films' EBITDA growth reflects a positive contribution from DreamWorks, partially offset by higher programming and production costs
Theme Parks revenue increased 9% and EBITDA increased 6.1% to $397 million in the first quarter
These results reflect higher attendance and higher per capita spending, despite an unfavorable comparison from the timing of spring break vacations
The Easter holiday occurred in the first quarter last year but occurred during the second quarter this year, creating a challenging comparison this quarter
If we adjust for this timing, EBITDA would have grown double digits this quarter
We just opened the Jimmy Fallon attraction and we will be opening our third gate, the Volcano Bay water theme park, later this quarter
We expect these new attractions to drive growth at the parks this year
Let's move to slide 8 to review our consolidated and segment capital expenditures
Consolidated capital expenditures increased 10.2% to $2.1 billion in the first quarter
At Cable Communications, capital expenditures increased 13% to $1.8 billion for the quarter, resulting in capital intensity of 13.8%
For the full year, we continue to expect capital intensity to remain flat to 2016 at approximately 15% of total Cable Communications revenue
For the quarter, the increase reflects a higher level of investment in customer premise equipment related to the deployment of the X1 platform and wireless gateways
However, the increase is timing-related and we continue to expect full-year CPE spending to decline
In addition to our CPE investment this quarter, CapEx growth reflects a higher level of investment in scalable infrastructure to increase network capacity as well as increased investment in line extensions
At NBCUniversal, first quarter capital expenditures decreased 3.3% to $285 million, reflecting an increased investment in Theme Parks, offset by lower spending at headquarters
For the full year, we continue to expect NBCUniversal's capital investment plan to increase approximately 10%
And now finishing up on slide 9, as I mentioned earlier, we generated $3.1 billion in free cash flow in the quarter
In terms of returning capital to shareholders, this quarter included: dividend payments totaling $657 million, up 7.5%; and share repurchases of $750 million
We do continue to expect to repurchase $5 billion of our common shares this year
In terms of leverage, we ended the quarter at 2.2 times net leverage
This reflects investing activity this quarter, which primarily included a $500 million investment in Snap as part of its initial public offering, and the acquisition of Icontrol Networks
I would note that subsequent to the end of the quarter, we purchased the remaining 49% stake in Universal Studios Japan for $2.3 billion
Regarding the recently-announced results of the FCC's Broadcast Incentive Auction, as <UNK> said, it is still the quiet period, so we cannot discuss or answer any questions related to the auction or spectrum strategy today
However, based on facts disclosed by the FCC, I can confirm that, first, in the reverse auction, NBC sold spectrum in New York, Philadelphia and Chicago for expected total proceeds of $481.6 million
In the forward auction, Comcast invested $1.7 billion to acquire spectrum in the markets identified in the FCC's Public Notice
The average price Comcast paid per megahertz pop was $1.17. Hence, our net spectrum outlay is $1.27 billion
These results confirm the comments we made prior to the auction
We stated we would evaluate the opportunity and purchase spectrum only if we thought the price was right and if we thought the spectrum would have strategic value
That concludes our summary of the quarter
I hope that everyone now has a good sense for how pleased we are with our results as well as our momentum for the rest of the year
Now, I'll turn it back to <UNK> to lead the Q&A
And finally, <UNK>, it's Mike
On spectrum, we can't speak to the spectrum, other than to confirm what we did, which I did earlier
But I'll just say we approached it the way we said we would before the auction started, and we're pleased with the outcome
Just on Cable margins, we gave guidance for the year that we'd be flat to down 50 basis points for the year, with programing costs continuing to be high this year and that we did expect to drive improvement in the rates on non-programming expenses
So had a very good first quarter, but as far as going down the road on changing any guidance, we're not doing that
That said, I'll hand it over to Dave to give some qualitative stuff of what he's doing because all that will really continue
And, <UNK>, on capital returns, so the company's got a great track record of being very thoughtful about how we balance our needs to invest in the business and return capital to shareholders
So we maintain a strong capital structure, as you know
And we think that's strategically important
We like the idea of consistently increasing the return of capital to shareholders, but making sure that we keep the ability to allocate strategic capital to take advantage of opportunities when they arise
So it's way too early on tax reform to say anything, other than we seemingly are positioned well to be a beneficiary of the various ways in which it might shake out
And once we have some final details, we'll take all that into consideration through the lens that we've always talked about, our balancing capital priorities
Well, <UNK>, it's Mike
Thanks for the question
I mean, Dave covered earlier all of the things that are ongoing in the business, in terms of attacking non-programming expenses
And we've commented previously on where programming goes
So the answer, as I said earlier, is we're not going to go beyond the guidance we already gave of margins for this year, but we'll keep working on optimizing the business for the long term and we'll be back to you early next year with our thoughts
