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CMCSA.OQ - Comcast Corp at JPMorgan Global Technology, Media and Communications Conference (Virtual)

EVENT DATE/TIME: MAY 26, 2021 / 1:40PM GMT

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MAY 26, 2021 / 1:40PM, CMCSA.OQ - Comcast Corp at JPMorgan Global Technology, Media and Communications Conference (Virtual)

C O R P O R A T E P A R T I C I P A N T S

Michael J. Cavanagh Comcast Corporation - CFO

C O N F E R E N C E C A L L P A R T I C I P A N T S

Philip A. Cusick JPMorgan Chase & Co, Research Division - MD and Senior Analyst

P R E S E N T A T I O N

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

Hi. I'm Phil Cusick. I follow comm services and infrastructure space here at JPMorgan. Thanks for joining us. I want to welcome Mike Cavanagh, CFO of Comcast, back to the conference. Mike, thanks for coming. It's great to have you back.

Michael J. Cavanagh - Comcast Corporation - CFO

Great to be here. Hard to believe it's the second year in a row we're doing it this way. So I look forward to getting back live.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

I wish all your peers felt the same, but I hope we do, too.

Q U E S T I O N S A N D A N S W E R S

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

It seems like the U.S. is more open every week. Can you just start off with an update on what you see recently from the consumer and business side?

Michael J. Cavanagh - Comcast Corporation - CFO

Sure. I mean I think the trends look good, especially in our COVID-impacted businesses, which we talked about going back a couple of months of our outlook at the beginning of the year. And so we like what we see, just ticking through businesses that are front of mind for folks.

Obviously, in parks, it's really good that in Florida, we've been open with capacity constraints for a little while now. But despite that, things are going really well. The scores for customer satisfaction are excellent, and we're actually at the state -- we're hitting some days now where we're actually doing better than 2019 pre-COVID or as good as on some attendance days. So I mean the signs are there that as opening continues, what we always expected was on the other side of COVID, we're going to really see strong demand in parks, and that's the case.

In Hollywood, we're maxing out at 35% capacity, most -- pretty much steadily. And June 15, we'll see capacity constraints kind of increased yet again. So that's on its way. Unfortunately, Osaka, which had reopened, is temporarily closed again, but what we saw when it was reopened was, again, very strong demand. So we look forward to that coming back. And then finally, we will see Beijing opening later this summer.

So in parks, we're really pleased that through the pandemic the last year, we just continued on with, obviously, Beijing. But in our existing parks, we've got good attractions that are new so that are really going to help. So VelociCoaster, which is in Orlando, is I think something -- 95% top 1 box for the people who have tested and ridden it so far. So that's -- it's a phenomenal roller coaster there. We've got Secret Life of Pets in Hollywood and then Nintendo World in Japan. So I think parks looking good subject to restrictions lifting.

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MAY 26, 2021 / 1:40PM, CMCSA.OQ - Comcast Corp at JPMorgan Global Technology, Media and Communications Conference (Virtual)

On the TV side, we got productions back, basically back to levels of TV production we've been at historically, 50 things in production right now. Obviously, that impacted all of the platforms we have, Peacock included. But now you've seen Rutherford Falls on Peacock, Girls5eva, Bel-Air coming soon and a few others, Dr. Death as well.

Advertising on the TV side, really strong Upfront that we're sort of ending or in the middle of really, volumes that are in line with where we were pre-pandemic and really some of the best pricing we've seen since we acquired NBCU. And that is us and another company are really well positioned with obviously strong linear properties but also -- so able to handle reach but also addressability with Peacock. And the CPMs we're seeing and these Upfronts on Peacock are incredibly strong.

Theatrical side, we've got -- feels like we're heading towards domestic openings of theaters. So while we haven't had any major releases in the U.S. thus far, we did have one with Nobody that did well. But the big ones are coming, just coming off of a weekend where we opened Fast 9 in China and Asia to $160 million. So a fantastic opening weekend for Fast, and that'll be coming to theaters in the U.S., I think it's June 25. So optimism there.

And then in Sky markets, opening was -- reopening was having some impact on advertising and pubs and clubs, as we call it. But now we see that starting to come back our way.

And then finally, in Cable, I think one of the things I'd point out there is that consumers continue to do well in the U.S. Importantly, that's having a positive effect on bad debt. So I think one of the things -- even better than I would have expected 2 months ago. So we'll see some help to our nonprogramming expense growth, should be a little bit better in the near term than I would have expected back in the last earnings call even.

So with all that said, and given that we tied capital return to seeing COVID-related businesses get back on track, pleased to just say we're getting back effective now on our buyback. So Board and its regularly scheduled meeting yesterday, re-upped our authorization to $10 billion from $2 billion. And so starting now, today, we'll be back in the business of doing buybacks long awaited. We're happy to do it.

Obviously, we'll stay at historical levels. As we've said, everything else is, as we said in January, we'll stay at historical levels of buyback on average between now and the time that we actually get to the ratings levels -- rating agency expectations, leverage-wise, which, as we pointed out then, we got a little bit of a lag effect as the traditional measures look at trailing 12 months EBITDA for leverage. So we're jumping in before those ratios get to where they need to go. But with us buying back at historical levels starting now, we continue to expect to be all the way to the official levels by end of 2022. So that's great news.

We've been saying for quite some time, we are out of balance. We like to have the ability to invest in our businesses, keep the balance sheet strong and return ample shareholder -- capital to shareholders through steadily increasing dividend and buybacks. That was the pattern and history of the company. Tremendous buyback power you saw from the time the company bought NBC to Sky. And so I'm glad to be back in more balance.

I will point out that it's not going to be at the expense of any of the investments in growth that we are excited about. So we'll talk more about wireless trends there, great opportunity for growth. Business services, we'll get to that in Cable. Peacock and parks where, again, we turned off the project temporarily for Epic World, our new project in Florida. But as we said at the beginning of the year, we turned that back on. So all those growth opportunities continue to be funded as we kind of get back to balance. So that's kind of the opening.

I would just jump off from that point and make 2 points beyond that, that kind of tie to returning to sort of a normal posture on capital allocation. And one is that we feel like we've got all the advantages we need to pursue value-creating opportunities for growth in NBC and Peacock. Know that's a big question that people have for one. And the other is that we like our portfolio. We like the portfolio of businesses we have, NBC, Cable, Sky together.

And so to just drill into those a little deeper, sort of the advantages. I think, obviously, people talk about scale when it comes to the media businesses these days. But I think personally, what's underestimated is the ability to execute. And when you pick underneath the concept there, you've got to have talent.

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MAY 26, 2021 / 1:40PM, CMCSA.OQ - Comcast Corp at JPMorgan Global Technology, Media and Communications Conference (Virtual)

And I think that comes without saying, I think our leadership team in our various businesses, media included, whether it's NBC, in particular, and inclusive of Peacock, the talent they have, the talent they've attracted, we're in a place where we feel very good about that. The ability to serve the creative community -- obviously, our company has been in Hollywood for its entire existence basically -- and the ability to work with talent, respect talent, content creators is tremendous.

I think we have the sort of a tremendous library, tremendous assets in new sports and content creation, ability to fund originals, and finally, an advertising platform that we'll get to that is better than anybody else's in the space. And when I look at that, I say that's plenty of advantages to play our hand and invest appropriately behind good ideas to grow in the media space, including Peacock.

And then portfolio together, there's just -- it does come back for me to execution. It's the ability to look at our 3 operating units and really look and say they are performing really well. Cable, best-in-class operator; NBC, the fastest-growing media company in the U.S. over the -- since we bought NBCUniversal; and Sky, we're very optimistic about what we see in Sky and the teams there.

So we've done things in the last year because we're together that I think contributes to that, things like changing film windows on the fly coming into COVID, leveraging all we have in our advertising assets from FreeWheel to NBC to Sky, using X1 and Flex and Sky technology to get Peacock going, using business services to get a jump in Europe and broadband in Italy, using our combined NBC and Sky to build our Elstree Studio outside London for European content creation that will be -- and we just attracted a great executive from Yahoo! to lead that for -- on a combined basis for Sky and NBC. So I think we feel very good about our ability to run these businesses well for our shareholders with the capabilities we have.

I'm sure you're going to ask me about M&A, but -- so I'll just say, of course, it's our job to consider anything that could be possible to be smart and add value, but you got to look at that, obviously, through the lens of -- is it the right strategy? Can you get it at the right price? And do you have the confidence in your ability to execute and have bandwidth?

We've got a track record there. Obviously, we know how to do that if necessary. But hear me loud and clear, we like the hand we have, and M&A is not an answer. We like the hand we have without M&A, but we'll obviously do what's right for shareholders as time passes.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

There's a lot to...

Michael J. Cavanagh - Comcast Corporation - CFO

There's a lot there. Sorry, Phil. I kind of -- I wanted to try to hit on a lot of the things around people's minds.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

Okay. No, that's a good sort of overview to start. Probably the biggest incremental there is talking about resuming the buyback. Can you remind us -- historical levels of buyback, as I remember, was about $5 billion a year. And what was the leverage target that you've talked about before? Was that 2.5x to get at the end of '22?

Michael J. Cavanagh - Comcast Corporation - CFO

So about $5 billion a year in that range. As much as that is the historical level. In terms of where we're trying to get -- 2.5x is going to be a good place to get to at the -- that's the pre versus post. We'll talk more about where we go on the other side.

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MAY 26, 2021 / 1:40PM, CMCSA.OQ - Comcast Corp at JPMorgan Global Technology, Media and Communications Conference (Virtual)

But our point is that we'll stay at historical levels this year and through the better part or all of next year until we hit the mark with the -- rating agencies do their calculations differently. So I'll give you more of a time-based expectation, which is that we're at historical levels through next year. Consider that will be -- expect there.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

Yes, that's fair. And I know it's not precise. But the other thing you mentioned, and we don't need to spend a ton of time on M&A. I don't know how much value you can really contribute. But does the price at which you could buy back your stock impact how you think about using your cash for other things? Or are those really 2 different calculations?

Michael J. Cavanagh - Comcast Corporation - CFO

We look at everything when we consider M&A and so inclusive of our alternatives for allocating capital. But obviously, plenty of -- we look at every which way when we do those things.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

Okay, okay. So let's move on. You talked about Cable and a confident consumer. So one thing just to follow up there. You said bad debt running. It sounds like lower even than you expected and some nonprogramming OpEx lower than you expected a few months ago. I mean my impression is that bad debt is extremely low across the board and has been for quite a while. I'm curious why it would be running even better than it was in April.

Michael J. Cavanagh - Comcast Corporation - CFO

Outlook versus expectation more than anything else. I can't -- I -- off the top of my head, I won't be able to rattle off months -- sequential months and what it looks like. But pretty much -- suffice to say that relative to what we expected, it's running a little better.

Philip A. Cusick - JPMorgan Chase & Co, Research Division - MD and Senior Analyst

Okay. And in terms of the growth you've talked about, you -- there's been a lot of focus on incremental competition, whether that's 5G or from fiber, but you guys have guided to a mid-single-digit better growth than 2019 a couple of times. How does that look with that better consumer?

Michael J. Cavanagh - Comcast Corporation - CFO

So we feel good. It's -- you're right. It's a combination of our outlook and consumer doing well. And obviously, there's lots of questions about competition we face. But we feel very good about our Broadband business. It's obviously tremendously important to us, and no one's taking their eye off the ball there.

It's been 15 years of adding 1 million-plushigh-speed data subs. And as you saw, we had strong momentum in the first quarter with churn continuing to drive lower and healthy connect activity. And so consider us to be -- that's the momentum we brought into the second quarter.

And in terms of competition, I would just point out that it's always been a competitive marketplace before my time in the business. But when I think about it, in 15 -- in the last 15 years, we've added 20 million broadband subs, while fiber has overbuilt 40% of our footprint. So it's not like this is a business that hasn't ever seen competition come in. So whatever form it is, I think it's just competition. And as we've said, we know what that looks like, and we'll face up to it as needed.

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