Comcast Q2 2024 Earnings Call Transcript

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Provided by Quartr
July 23, 2024

Key Takeaways

  • Broadband ARPU rose 3.6% in Q2 within its historical range, maintaining a market-leading 32 million customer base while launching “NOW” no-contract Internet, mobile, and streaming TV packages for price-conscious consumers.
  • Xfinity Mobile added over 300,000 lines in Q2 (up 20% YoY), driven by new multi-line pricing plans and promotional offers, boosting converged broadband-mobile revenue and attachment rates.
  • Theme parks revenue fell 11% and EBITDA declined 24% YoY due to normalized post-COVID demand and timing gaps in new attractions ahead of next year’s Epic Universe opening.
  • An anticipated new 11-year NBA (and WNBA) rights deal starting 2025 will feature more regular-season and playoff games across NBC and Peacock, aiming to drive ad sales, subscriber growth, and year-round sports programming.
  • Peacock streaming revenue grew 28% with paid subscribers up 38% YoY to 33 million, while EBITDA improved by $300 million, offsetting declines in NBCUniversal’s traditional TV networks.
AI Generated. May Contain Errors.
Earnings Conference Call
Comcast Q2 2024
00:00 / 00:00

There are 13 speakers on the call.

Operator

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 this conference call is being recorded. I will now turn the call over to Executive Vice President, Investor Relations, Ms. Marcy Ryvicker.

Operator

Please go ahead, Ms. Ryvicker.

Speaker 1

Thank you, operator, and welcome, everyone. Joining us on today's call are Brian Roberts, Mike Cavanagh, Jason Armstrong and Dave Watson. I will now refer you to Slide 2 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.

Speaker 1

Please see our 8 ks 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.

Speaker 2

Thank you, Marci, and good morning, everyone. Before I hand it over to Jason, I'd like to comment on 3 key elements from the quarter. 1, broadband 2, parks and 3, the NBA. So first is broadband, where the competitive intensity that we've seen for the past several quarters and which is particularly felt in the market for price conscious consumers remains essentially unchanged. But throughout this period, our broadband strategy has been consistent and we remain confident in our plan.

Speaker 2

We are focused on generating healthy broadband revenue growth by striking the right balance between rate and volume and relying heavily on market segmentation that I'll speak to in a minute. As a result, in the second quarter, ARPU grew 3.6%, which was within our historical range of 3% to 4%. Despite the competitiveness of the recent past, we've maintained a market leading base of 32,000,000 broadband customers by refining our go to market approach to create options that fit each of our customers' lifestyles and budgets, Providing the best products with flexibility and choice at different value points has served us extremely well for many years and remains the core of our playbook. Of particular note this quarter, we launched our suite of NOW products, which are high quality Internet, mobile and streaming TV offerings designed to be incredibly simple with attractive all in pricing with no contracts or credit checks. These are great options for the price conscious segment and especially for those impacted by the end of the government's ACP program.

Speaker 2

While we are pleased with our enhancement to our offerings for the price conscious segment, the reality is that the vast majority of our customer base subscribes to more premium products, where we feel great about our market position relative to fiber, which is our true long term competitor. Are investing in additional network capacity, multi gig speeds and in home Wi Fi technology to capitalize on the Internet consumption trends we are seeing. One of the most important metrics we monitor is the magnitude of data traffic flowing across our network. And again, we saw double digit year over year growth this quarter with broadband only households consuming over 700 gigabytes of data each month. And our customers continue to take faster speeds with around 70% of our residential subscribers receiving speeds of 500 megabits per second or higher and 1 third getting a gigabit or more.

Speaker 2

These positive consumer trends play to our strengths and will only accelerate with the shift of live sports to streaming, which together with entertainment on streaming accounts for nearly 70% of our network traffic today. My final thought on broadband is the importance of bundling with mobile. With 90% of Xfinity mobile smartphone traffic traveling over our Wi Fi network. These two products work seamlessly together to benefit our customers from both the products experience and financial value standpoint. We are very pleased with the momentum we saw in wireless this quarter, where our line additions were again above 300,000 and nicely up year over year.

Speaker 2

Our new converged offers resulted in better overall yield and awareness as well as higher multi line attach rates and we are excited for some of the new mobile offers tied to the Olympics, which will be introduced to the market in just a few days. Now let's turn to parks, where our results were down in both revenue and EBITDA when compared to last year's record performance with 2 thirds of the decline driven by lower attendance at our domestic parks. We attribute this to a number of factors. First is what now appears to be a COVID recovery pull forward of a magnitude we hadn't previously appreciated. I think it's important to zoom out and look at how this business has trended over the past few years.

Speaker 2

Going back to 2022 2023, parks were clearly the early beneficiaries of substantial rebounds in tourism and travel after the pandemic, resulting in a surge in demand that contributed to us reaching record results for both of those years. More recently, other travel options including cruises and international tourism given the strength of the dollar have experienced their own surge in demand which caused visitation rates at our parks to normalize. The second factor affecting attendance at our domestic parks is the timing of our investments in new attractions, where we are light in Florida in advance of next year's opening of Epic and our lapping of Super Nintendo World in Hollywood is creating some headwinds for us as well. While the Parks results are below our original expectations for the year, we still view Parks as a terrific long term growth business for us. We couldn't be more excited about the opening of Epic Universe in 2025.

Speaker 2

As we've been releasing new details about Epic's 5 immersive worlds, the consumer reaction has been tremendous. And recently, we opened an Epic Universe preview center in Orlando and the foot traffic and guest enthusiasm have been off the charts. So we look forward to Epic Universe having a meaningful impact by driving incremental attendance, longer visits and higher per cap spending once the park opens in 2025. Finally, let me talk about the NBA. Our expectation is that soon an 11 year rights deal between ourselves and the NBA will be announced.

Speaker 2

We don't believe that the resolution of matching rights will affect the package that we expect to be awarded. This package, which begins with the 2025, 2026 season includes 100 NBA games each regular season across NBC and Peacock, which is more than any other media partner and more regular season games than each existing partner has under the current rights deal. For playoffs, we will have 1st and second round games each year exclusively on our national platforms and 6 NBA Conference Final Series over the course of the term of the deal, which has more playoff games on average each year than any other media partner. And exclusively for Peacock will be approximately 50 national regular season and postseason games, including national Monday night games and double headers. Additional elements of the NBA package include the annual NBA All Star Game and All Star Saturday night each season, the season opening NBA tip-off doubleheader each season, a special doubleheader on the MLK holiday and select NBA games and every NBA All Star Game on Telemundo.

Speaker 2

Beyond the NBA itself, we're excited that our package includes WNBA, where starting in the spring of 2026, we'll have more than 50 WNBA regular season and 1st round playoff games each season across Peacock, NBC and USA and we'll also have games in 7 WNBA Conference Semifinals and 3 WNBA Final Series. For USA Basketball, we'll have the rights to USA Men's and Women's Games leading up to the Olympics and FIBA World Cup. Sky Sports will air all of NBCUniversal's NBA and WNBA games in its markets. And finally, Xfinity will be the NBA and WNBA's marketing partner in the video category. Now I'd like to take a moment to explain why we're so excited to partner with the NBA.

Speaker 2

First, it brings in a broad, diverse and youthful audience that is culturally relevant and further expands NBCUniversal's tremendous reach across broadcast and streaming. This new fan base will also allow us to create new entertainment content that will work beyond the basketball season with exciting opportunities for companion programming and marketing collaborations that tap into the NBA's pop culture appeal. 2nd, the 9 month basketball season completes our year round calendar for sports, which already includes the NFL, Olympics, Premier League, NASCAR, PGA Tour, Big 10 and World Cup. And our NBA package will establish much watched Sunday, Monday Tuesday night traditions on NBC and Peacock. 3rd, we are uniquely able to drive strong value with the NBA in multiple ways.

Speaker 2

1st, by growing ad sales by selling NBA ad inventory package with the rest of our marquee programming 2nd, by acquiring and monetizing subscribers both on Linear and Peacock and third, by optimizing NBCUniversal programming investment across sports, entertainment and news. The NBA's decision to partner with us is a testament to our breadth and reach, our operational excellence in sports and innovation and our decades of experience delivering world class content to consumers. Much like our long standing relationships with the NFL and the Olympics, we look forward to putting the weight of our entire company behind our partnership with the NBA for decades to come. Before I hand it over to Jason, I want to share one final thought. In just a few short days, we have the honor of kicking off the 2024 Olympic Games in Paris.

Speaker 2

This will be NBCUniversal's 18th Olympic Games as a U. S. Broadcaster dating back to 1936 when we first covered the historic event on NBC Radio. It is one of the great moments of pride for our company and I want to thank the 3,000 people working to bring all of the action, excitement and incredible stories to our viewers across the country. Jason, over to you.

Speaker 3

Thanks, Mike, and good morning, everybody. I'll start with our consolidated results on Slide 3. Total revenue decreased 2.7 percent to $29,700,000,000 Within these results are 6 major growth drivers including residential broadband, wireless, business services connectivity, theme parks, streaming and premium content at our studios generated over $16,000,000,000 in revenue, well over half of our total company revenue and grew at a mid single digit rate over the past 12 months. Keep in mind that in the Q2 of last year, we had one of our most successful quarterly theatrical results in our history, which included 2 of 2023's top 5 grossing films at the worldwide box office, the Super Mario Bros. Movie and Fast X, and as such created a difficult comparison this quarter.

Speaker 3

If we exclude our studio results, total revenue would have been consistent with the prior year. Total EBITDA was consistent at $10,200,000,000 and free cash flow was $1,300,000,000 Free cash flow was impacted this quarter by higher than usual cash taxes, which were up $2,000,000,000 over last year's level and were impacted by a tax payment associated with our Hulu stake and other tax related matters. As you'll recall, we received a minimum floor payment for Hulu at the end of last year. During the Q2, we returned $3,400,000,000 of capital to shareholders, including $2,200,000,000 in share repurchases. And over the last 12 months, we have reduced our share count by over 6%, contributing to our adjusted EPS growth of 7%.

Speaker 3

Now let's go through our business results starting on Slide 4 with Connectivity and Platforms. As usual, I will refer to our year over year growth on a constant currency basis. Revenue for total Connectivity and Platforms was consistent at 20.2 $1,000,000,000 as strong growth in our connectivity businesses was offset by declines in video and voice revenue. Residential connectivity revenue grew 6 percent comprised of 3% growth in domestic broadband, 17% growth in domestic wireless and 14% growth in international connectivity. Business services connectivity revenue also grew 6%.

Speaker 3

In domestic broadband, our revenue growth was again driven by strong ARPU growth, which increased 3.6% this quarter, well within our historical range as our team continues to effectively balance rate and volume through customer segmentation. The environment for broadband subscribers remains intensely competitive, which when combined with traditional negative seasonality in the 2nd quarter led to 120,000 subscriber losses. Related to this, I would like to spend a minute on ACP. It has been well documented that the government ended all funding for the ACP program in June. Consistent with our approach to normal promotional roll offs, we were proactive and prepared for this action early in the quarter, communicating with our ACP customer base and migrating many of these we will remain well within our historical 3% to 4% ARPU growth that we will remain well within our historical 3% to 4% ARPU growth range for the remainder of the year.

Speaker 3

In terms of subscribers, we saw minimal impact from the end of ACP this quarter. Looking ahead, we expect the bulk of our ACP related subscriber activity to happen in the 3rd quarter, including losses associated with non pay churn. While it's too early to assess the full impact, we are encouraged with the response we see from these customers to date. Outside of ACP, we are seeing the same level of competitive intensity and expect an offset from seasonal tailwinds as the 3rd quarter is typically a seasonally stronger quarter compared to the 2nd. Turning to domestic wireless.

Speaker 3

Revenue growth was mainly driven by service revenue with some modest growth in equipment revenue this quarter as well. Customer lines increased 20% year over year reaching $7,200,000 in total, including 322,000 line additions this quarter. The acceleration in line additions compared to the prior several quarters was driven by some early success with new pricing plans launched in April targeted at multi line customers as well as continued traction with our buy one get one line offer. And you will see us continue to test new ways to capitalize on the significant opportunities we see ahead for us in wireless in terms of both increasing the penetration of our domestic residential broadband customer base, which currently sits at 12% as well as selling additional lines per account. Wireless continues to be a key growth area for us count.

Speaker 3

Wireless continues to be a key growth area for us

Operator

and one in which we are

Speaker 4

striking the right balance in

Operator

delivering exceptional value to our customers,

Speaker 3

bundling to enhance our opportunities in broadband and continuing to drive profitability higher. International connectivity revenue was mainly driven by broadband, which accounts for over 2 thirds of our international revenue and grew at a mid teens rate reflecting strong ARPU growth. The remainder is wireless, which grew due to both additional lines and ARPU growth, but at a lower rate due to the variability in handset sales. Business services connectivity revenue growth of 6% reflects steady growth in small business with even faster growth in mid market and enterprise. While the SMB market remains competitive, we are competing aggressively by delivering best in class products and services and growing revenue through ARPU growth driven by higher adoption of additional products that expand our relationship with our SMB customers like mobile, Security Edge, Connection Pro and Wi Fi Pro as well as through targeted rate opportunities.

Speaker 3

At the mid market and enterprise level, our revenue growth is primarily fueled by the increase in our customers, driven by the investments we have made in this space to build sales and fulfillment as well as expanding our capabilities in managed services, wide area networking and cybersecurity. Finally, video and other revenue declined in the quarter. The high single digit decline in our video is a function of continued customer losses coupled with slower domestic ARPU growth versus last year, and the lower other revenue mainly reflects the continued customer losses in wireline voice. Connectivity and Platforms total EBITDA increased 1.6% with margin up 90 basis points, reflecting a decline in overall expenses driven by the continued mix shift to our higher margin connectivity businesses coupled with ongoing expense management. As I have previously mentioned in prior quarters and think is worth noting here is that the only expense line item that had a meaningful increase over last year was direct product costs, which are success based and tied to growth in our connectivity businesses.

Speaker 3

Breaking out our connectivity and platforms EBITDA results further, Residential EBITDA increased 1.1 percent with margins improving 100 basis points to 39.9 percent. And business services EBITDA growth rebounded nicely this quarter returning to a mid single digit rate while margin declined 70 basis points to 57%, reflecting the investments in sales and fulfillment we are making to scale in the mid market and enterprise space. Now let's turn to Content and Experiences on Slide 5. Revenue decreased 7.5 percent to $10,100,000,000 and EBITDA decreased 11% to 1,900,000,000 dollars I'll detail these results further starting with theme parks. Revenue decreased 11% and EBITDA declined 24% in the quarter compared to year's record level for a second quarter.

Speaker 3

As Mike highlighted, 2 thirds of the decline was driven by our domestic parks due to lower attendance compared to last year, largely reflecting two factors, normalization in demand post COVID combined with the timing of our domestic attractions. This is the 1st full quarter comparison to the highly successful opening of Super Nintendo World in Hollywood early last year, which drove that park's record results in the Q2 of last year. And we haven't launched a major new attraction in Orlando since Velocicoaster in 2021 in anticipation of Epic Universe, which we originally planned to open this year. On the international side, underlying growth at our park in Osaka continues, partially offset by foreign currency as well as some softness at Universal Beijing due to the local macroeconomic environment. To reiterate, we couldn't be more bullish about the long term trajectory of Parks.

Speaker 3

In addition to Epic Universe, we have a fantastic slate of new attractions and experiences on the horizon. Donkey Kong Country in Osaka and a Fast and Furious roller coaster in Hollywood as well as the Universal Horror Unleashed in Las Vegas and our Universal Kids Resort coming to Texas. Now let's turn to Media, where revenue increased 2% and EBITDA was up 9% driven by Peacock. Peacock revenue grew 28% with 9% growth in advertising and 61% growth in distribution, driven by the 38% year over year increase in our paid subscriber base to 33,000,000. On a sequential basis, we held subscribers fairly steady.

Speaker 3

As we noted during our last earnings call, our focus in the Q2 was on subscriber retention due to the lack of new tentpole content in the quarter. This timing and content also contributed to some relief in our expenses, which helped drive year over year Peacock EBITDA improvement of $300,000,000 We are pleased with the progress we are making with media EBITDA for the first half of the year up nearly 3% as the improvement in the Peacock outweighed the pressure at our TV networks. As we look to the second half of the year, we expect continued modest growth in overall media EBITDA, but with some variation in the degree of year over year including the Olympics, Sunday Night Football, which will have an additional game fall into the 3rd quarter as well as Peacock's exclusive NFL game Brazil and the return of Big 10. Given the timing of this content, EBITDA growth will be skewed to the 4th quarter. At Studios, revenue decreased 27% and EBITDA decreased 51%, reflecting both the timing of our film slate and a tough comparison relative to last year's Q2, which included the tremendously successful Super Mario Bros.

Speaker 3

Movie as well as Fast X. We have said our film slate is weighted to the back half of the year, which we believe will drive better year over year performance and we're off to a strong start. Despicable Me 4 had a terrific opening weekend earlier this month, making the Despicable Me series of movies the first animated franchise in history to cross the $5,000,000,000 mark. And Twisters is off to a strong start landing at number 1 at the box office this past weekend. And we're excited about our upcoming titles, including Wild Robot in September and Wicked in November.

Speaker 3

I'll wrap up with free cash flow and capital allocation on Slide 6. As I mentioned earlier, we generated $1,300,000,000 in free cash flow this quarter, which includes a $2,000,000,000 increase in cash taxes over last year's level. Total capital spending declined 10% compared to last year, with the $3,400,000,000 in spending reflecting the significant investments we continue to make to support our growth drivers such as expanding our footprint and further strengthening our domestic broadband network, scaling our streaming business and supporting the continued build of our Epic Universe theme park ahead of its opening in 2025. Turning to return of capital. For the quarter, we returned a total of $3,400,000,000 to shareholders.

Speaker 3

This includes share repurchases of 2,200,000,000 dollars and dividend payments of $1,200,000,000 Notably, since we restarted our buyback program just 3 years ago, we have reduced our share count by 16% and returned just under $50,000,000,000 to shareholders through a combination of buybacks and dividends, prudently balancing investments we've made in the business around our 6 core growth drivers, protecting a strong balance sheet and providing strong capital returns to shareholders. Now let me turn it over to Brian for some closing remarks. Brian?

Speaker 4

Thanks. And just to tie everything together, what Mike and Jason have just said and as our results continue to show, I really believe we are dealing with the competitive landscape shifts exceptionally well. And that's because we have a great team across the company that knows how to execute and innovate. We have the scale, balance sheet and relevancy to compete with anyone. So if you think about what we're doing to position ourselves for growth, we've expanded our broadband network by 1,200,000 new homes passed in the last 12 months, the most in the company's history and we plan to continue to do that.

Speaker 4

We're upbeat about the long term in parks despite this quarter and are about to finish building the biggest most technologically advanced theme park to hit the U. S. Market in decades with Epic Universe next year. And as you've seen recently, instead of engaging in a process to buy content companies, we have focused primarily on organic opportunities like the NBA, one of the most coveted sports franchises across the globe, which will help drive growth for us well into the future. With that, let's hand it over to Marci to take your questions.

Speaker 1

Thanks, Brian. Operator, we are ready to open the line for questions, please.

Operator

Thank you. We'll now begin the question and answer session. Our first question today is coming from Ben Swinburne from Morgan Stanley. Your line is now live.

Speaker 5

Thank you. Good morning. And Mike, thanks for all the detail on the NBA contract. Appreciate that. I wanted to ask about Parks and Broadband.

Speaker 5

Maybe Jason on Broadband, you made some comments about ACP and how Dave and the team are managing. It seems like it's going well. It seems like you were implying Q3 losses might be down from Q2. I don't want to put words in your mouth, but you talked about an offset around seasonality. I was just wondering if maybe you could revisit that and a little bit about how you guys are managing it from a product and marketing point of view in the Q3.

Speaker 5

And presumably that's the end. We can move on beyond 3Q. We can put ACP behind this. So I wanted to ask about that. And then on Parx, thank

Speaker 3

you for all the color.

Speaker 5

When you guys look at your pacing data, which I imagine you've got months ahead of you that you can see, is there any do you see any turn or should we be thinking about year on year pressure on this segment moving at least through the end of the year and into next year as we get ready for Epic? Any more color on what the outlook looks like would be appreciated. Thanks so much.

Speaker 6

Hey, Ben. This is Dave. I'm going to jump in a little bit on the ACP part first. So on I think it's important to just cover a little bit of context and then we'll get to the outlook and view of Q3. Most of the enrolled ACP customers as we said before have been with us and they are on a postpaid basis.

Speaker 6

So I think that's an important thing to remember. And our strategy has been consistent. We've been looking to help the ACP customers stay connected through a variety of options, starting with Internet essential. And since 2011, we've connected 1,000,000 in the largest, most comprehensive private sector Internet adoption program in the country. The good news is that our ACP customers are eligible to switch to our Internet essential tiers that we have and we have a couple.

Speaker 6

In addition, we have Xfinity Mobile and we have good offers through this transition, and to help them save money on their monthly bills. The Internet essential customer, the plus tier, customers could take a free line of Xfinity Mobile for a year and ACP customers who add Xfinity Mobile can get an additional free unlimited line for a year. So and then we just started with now Internet, now mobile. And so nothing material on that, but I think it puts us in good position as we complete the transition. We spent, as Jason said, we spent a lot of time thinking about this, been very proactive, prepared for this.

Speaker 6

And in many ways, it's similar to the promotional role activity that we've managed for decades. So we're used to that. From a subscriber viewpoint, also as Jason said, we saw a minimal impact in ACP in Q2. Looking forward, we expect the bulk of the ACP subscriber related activity to happen in the Q3, including losses associated with non pay churn. Very focused on retention, it's early, but the biggest impact I think we're going to see will be on the non pay side and as we're just getting into the beginning of the non pay cycles.

Speaker 6

Encouragingly, we're not seeing much voluntary churn in this group. So our goal, we'd like to get through the ACP impact as quickly as possible. And right now, we're planning to take a reserve on incremental non pay activity in the Q3. But again, it is too early to quantify and we just won't know until we're further through the cycle. So we have a normal disconnect process that we manage for a long period of time.

Speaker 6

And again, this is the post pay universe that we have managed through. So that is our view. I think it will be primarily within Q3, but encouraged by at least the voluntary churn aspect. Jason?

Speaker 3

Yes. I think Dave said it perfectly. As you think about Q3, Ben, I think unpacking it and similar to what we saw in the Q2, the competitive environment remains intense, but it's stable. It's sort of no worse, no better than we've seen over the past couple of quarters. So I think that's the starting point.

Speaker 3

2nd, as we pointed out, it's a quarter where we do get seasonal tailwinds, the same things that were headwinds in the Q2 largely become tailwinds in the Q3. And then there's ACP that works against that where we will see an impact. As Dave said, the intention is to be largely through the impact by the end of the Q3 between actions we've seen and then a reserve we will take. And so that's the thing we have to make sure we're executing very well again. But as Dave said, the early trends on that, whether it's voluntary churn or trends we've seen so far in non pay and building non pay and reserves around that are

Speaker 2

encouraging. Great. And then Ben, it's Mike on Park. So to hit on that again and appreciate the question. I think we covered a lot in the earlier remarks, but I'll start where Brian last finished, which is we couldn't be more excited about and confident in the long term trajectory of the Parks business, particularly as we look ahead to next year with Epic Universe, which is truly looking truly unbelievable.

Speaker 2

And then other attractions coming, Hollywood is going to get a coaster and, Donkey Kong Country into, Osaka in the latter part of this year, timing TBD on both of those. But in the near term, I think that the domestic attendance challenge that was what drove 2 thirds of the poor comparison, the factors causing that, which is really the COVID pull forward that we talked about and the timing of attractions, particularly in Hollywood lapping Super Nintendo and in Florida, the fact that we originally planned to have Epic opened this year, but with COVID pushed it back and so have a lull in the action. We haven't started a new big attraction since Velascoaster in 2021. So as a result of that, I think the factors, even though we're excited about Hollywood Horror Nights in the second half of the year and a little bit of moving lapping, I think the trends that we are experiencing likely continue until we get to Epic opening up sometime next year.

Speaker 5

Thank you guys.

Speaker 1

Thanks Ben. Operator, next question please.

Operator

Certainly. Next question is coming from Craig Moffett from MoffettNathanson. Your line is now live.

Speaker 7

Hi, thank you. Good morning. A little bit more on ACP, if I could. Mike, could you just give any early insight you've got on the delinquency rate for people that are 30 days or 60 days past due, just so we can sort of get a sense of what non pays may look like. And then presumably there was some impact, certainly there was in the Q1 of just lower gross adds in the category because new enrollments were shut off and somebody moving across the street for example would lose it at their old address but not be able to get it at their new one.

Speaker 7

Do you have any estimate for how much ACP impact there might have been in the gross ad category? And then just one just simple housekeeping question. You typically report cable margins on the conference call in script? I didn't hear it, maybe I missed it, but I'm wondering if you could tell us what cable margins were in the quarter?

Speaker 2

I'll let Dave handle the ACP question, Craig. It's Mike.

Speaker 6

Hey, Craig, Dave. So in terms of delinquency rates, there's nothing you're watching. It's just we have a normal process that we manage through based on due dates, invoices and it goes anywhere from 2 to 3 months. There's nothing at this point to report on at this stage. We watch it closely.

Speaker 6

Other than to go back to what I said, been very proactive. And I think it were helped by experience and promotional roles and the fact that we tried to put customers into packages that made sense for them proactively. So there's a lot of work that went into that, ahead of time, but nothing at this stage and we'll give more as we go. In terms of the question in terms of lower gross adds impacts on connects, it was not material that we saw in Q2. So maybe just a little bit in terms of things that we said, but it wasn't a substantial impact in Q2.

Speaker 6

And we think the bulk of what we're seeing is really going to be on the non pay side,

Speaker 4

which will occur in Q3.

Speaker 3

Hey Craig, let me hit the margin question real quick. So I would say the way we're looking at the business is really across connectivity and platforms. Looking at it that way and managing the business that way. But to unpack it, legacy cable margin, if you wanted to look at it that way, the margin was up 110 basis points in the quarter. So really strong operating improvement to 48.4%.

Speaker 7

Okay, thanks. Could I squeeze in one more and just thinking is right now about bead and whether we might see more capital investment on the bead side?

Speaker 6

Yes, this is Dave. Bede, we're looking at it very closely. It is going to be worked out on a state by state basis. We're optimistic in a lot of cases, but we'll have to look for the guidelines and the specifics tied to it. Nothing at this point would suggest we're going to be beyond the capital intensity that we've already given out.

Speaker 6

I think with all we're optimistic. One of the points that Brian mentioned, the $1,200,000 that we've done in the last 12 months is astounding. And the machine is really going. So we're leaning in, going for it, but Bede will be on a state by state basis.

Speaker 1

Operator, we are now ready for the next question.

Operator

Certainly. Next question is coming from Jessica Reif Ehrlich from Bank of America. Your line is now live.

Speaker 8

Thank you. I have an MBA question and also one on advertising. The benefits as you outlined are pretty obvious of getting the MBA, but it does come at a significant price. I was hoping that you could walk us through how you expect to make a positive financial return and maybe elaborate a little more on what role Peacock will play since there's a clear benefit there. But how does it affect how does this new deal impact programming spend for other areas, including general entertainment?

Speaker 8

And then as part of Peacock, maybe you could talk about like the StreamSaver, the bundle with Netflix and Apple TV and the response you've had. And then on advertising, the upfront is now done. Maybe you can talk about a little bit about the unique selling position you've had relative to others and what the volume is overall, pricing, etcetera, just what you're seeing in the overall market?

Speaker 2

Sure. Hey, Jessica, it's Mike. So I think I've essentially covered everything that I wanted to cover and can cover at this stage on NBA in the prepared remarks. Obviously, when the NBA makes its ultimate announcements, we'll that'll be another moment where we can go deeper. But just to point generally, is that we are looking at the NBA, as we all said, as some of the premier content that is culturally relevant, excellent audience, widens out the calendar year for us across Peacock and NBC, can do a lot with the demographics that follow the NBA around other programming.

Speaker 2

So when you think about the business case for it, when you look at the long term and as we are managing the media business, broadcast and Peacock as one, I think the unique reach that we have and ability for a sport like the NBA to reach so far with our existing broadcast business and use, as I said earlier, plenty of exclusive games for Peacock to drive excellent acquisition in Peacock and we've talked about before using NBA. And as we've talked about before, sports has been a great source of acquisition for us in Peacock and a great source of value to the consumer. But what's very interesting to us is how significant the viewership is of sports viewers on Peacock of things other than sports. So when you take a zoom out and think about the total picture of what we're trying to do, which is to bring our excellent TV media assets into the future, I think, you can we view the NBA as an excellent piece in that puzzle, and it will allow us to rebalance programming from other areas. Obviously, we'll fill a few nights on NBC with this content versus other content.

Speaker 2

And we'll use this to do acquisition spend in Peacock and lighten up in some other places. But the long term goal for Peacock is to have a service that is a balance of sports, entertainment and news. And so our content teams are now very focused on that new audience and what we're going to be able to do to drive entertainment content with the advantage of being linked closely the NBA and to the audience that follows it. And then on advertising, so second quarter, pretty it's only a slight step down from the Q1, but clearly we had much heavier load of sports in the Q1 than the Q2. And so that adjusting for that, I'd say again that the advertising market remains pretty stable.

Speaker 2

We feel very well positioned for the second half of the year with the Olympics coming up starting this Friday, elections and a great slate of content coming to NBC and Peacock. In terms of the upfront, we're pleased with our results. Total volume for us is going to be basically in line with last year as is linear price. We got more well over $1,000,000,000 in upfront volume for Peacock again, which and nice growth over what we had last year. And so if you step back, we'd say the overall upfront market was pretty solid.

Speaker 2

We moved quickly given our strength of our assets to secure the volume that we got. So we feel we were a success in this more challenging upfront given the arrival of so many of the new players especially in the AVOD and SVOD space. So that's the report on the upfronts, but we're moving forward and feel like the team did quite a good job.

Speaker 1

Thanks, Jessica. Operator, next question please.

Operator

Our next question today is coming from John Hodulik from UBS. Your line is now live.

Speaker 9

Great, thanks. Maybe on the cable side, a little bit better trends in both video and wireless. On the video side, what's driving the improvement there? Do you expect it to continue? And are you seeing any effects of the launch of the NOW brand?

Speaker 9

And then in wireless, you guys talked about some new pricing and promotion. But do you guys think you're benefiting at all from some of the ACP losses on the prepaid side? I don't know if you guys saw yesterday Verizon announced they've sort of turned off 400,000 subscribers. I think we'll see similar with the rest of the wireless companies. But do you think this underlying growth is sustainable or do you think that ACP is somehow boosting the growth at this point?

Speaker 9

Thanks.

Speaker 6

Hey, John, Dave. So, in terms of video, as Jason said, it's our video losses are lower than the ones that last year is tied. We did take a slightly less rate increase in this year than last year. And the key for us in video is just positioning video with broadband and that video does help in that regard. We've seen positive churn in terms of video, reimagining video around the NOW TV product and IP and that has been steady.

Speaker 6

It's still early, but has been helpful. So video, I think for the right segment, we offer a lot of value and we continue to position it, I think very well with broadband. But difficult and still in terms of some of the fees and things that we have, but I think an important category for us. So in terms of the mobile side, now mobile is not material at this point, way too early. The acceleration in line adds over Q1 driven by the early success of the new pricing plans, really competitive now in multiline pricing, launched in April, targeted it for a while, now it's scaling and it's really gotten traction as well as the buy one get one line offer to our base.

Speaker 6

So wireless is such an important part of our overall strategy and key that it's 12% penetration, we got great runway ahead. Business mobile is just getting going, and it's a great position for us in terms of convergence. I think we're uniquely positioned in terms of ubiquitous offers across our entire footprint. And mobile will be front and center as we approach the Olympics. And we will have a great offer with broadband, with mobile being able to tie all this together.

Speaker 6

So very excited with it. The comment just one other part in terms of what happened in terms of Verizon's unpacking that. The only thing I'll say is, I think it's an important distinction that our ACP customers are postpaid versus their prepaid. It's a different group, a different dynamic. And so not really yes, we're just getting going on our NOW products.

Speaker 6

And so it's very, very early on. Excited about that and I think we're introducing it at a very good moment, but it's not material at this stage.

Speaker 1

Thanks, John. Operator, we're ready for the next question.

Operator

Certainly. Next question is coming from Jonathan Chaplin from New Street. Your line is now live.

Speaker 10

Thanks, guys. I guess for Jason, two quick ones on content costs in the connectivity business. Became in quite a bit lower than we expected. And I'm wondering if you can give us a little bit more color on what's driving the trend there and how sustainable it is? And then we're trending a little bit lower than guidance on CapEx so far this year.

Speaker 10

I'm wondering if that's just tightening related if it picks up in the back half of the year. And then Mike, I'm not sure if you I heard you loud and clear on having sort of said what you can on the NBA deal. I'm wondering if can just give us a little bit of context around the timing of costs and revenues though, When I recognize it's forward looking, but when should we expect to see the cost from the new contract start to hit? Thank you.

Speaker 3

Thanks, Jonathan. Why don't I start with CapEx? Dave will hit content costs, and then Mike with MBA. So on CapEx, you're right. We've had some variability this year.

Speaker 3

I would say relative to the initial guidance we gave both on the content experience side where we talked about this is the final significant year of FX spending and then we get relief beyond this. And then on the Connectivity and Platform side, which I think is probably where more of your question was, we gave a capital intensity envelope as we entered the year. We also said intend to do $1,100,000 plus in terms of homes passed. We're obviously trending a little bit above that at this point, but still feel comfortable with the capital intensity envelope that we gave. And so there are some timing aspects around equipment purchases within the year.

Speaker 3

I would say still feel comfortable with the existing capital intensity envelope. And within that, doing more and more homes passed at a really efficient rate, I think that's a testament how the team is executing here.

Speaker 6

Hey, Jonathan, Dave. So just on the content cost side of things, so that's also timing related. We that there in the sports side, well known thing in terms of RSNs and, but there are other timing related things. Every contract, with a programming partner is different. Every relationship is different.

Speaker 6

So, I won't go into the specifics, but it is key that we focus on for us flexibility, increasing market choice. We've segment the marketplace both video and broadband and together and that is important that we're competitive in every segment. And at the end of the day, we're focusing on value, combining linear streaming considerations on a case by case basis. But mostly at this point it was timing related.

Speaker 2

And Jonathan, it's Mike on NBA. I wish it were sooner, but the contract doesn't start till the 2025, 2026 season. So it's fall of 2025 that we would start to bear the expense of the right side of it. And obviously, that is also as we build into that, when we would begin to see the benefits of subscriber acquisition around the NBA.

Speaker 4

And this is Brian. Just want to just close out perhaps that Mike's opening comments on the NBA. Doesn't opportunities like this come along very rarely when there's long term relationships up for grabs. Inside and we'll have when it gets all announced, the detail that Mike described, we have probably more content than anybody and it's all I think at a value that we'll be able to, as one of the other questions asked, support and demonstrate. And one of our real advantages here is the way we're running the media business and Mike created one group with our existing assets like NBC and our growing asset like Peacock and putting that together is very appealing for the reach, for the consumer access, for the innovation that we'll have in the years ahead and you'll see some of that innovation during the Olympics.

Speaker 4

There'll be a lot of content on NBC, but way more content on Peacock and it allows for the trends that we're seeing in viewing behavior. So it's a very exciting moment and I think we'll have more to say in the weeks ahead.

Speaker 1

Thanks, Jonathan. Operator, next question please.

Operator

Certainly. Next question is coming from Michael Ng from Goldman Sachs. Your line is now live.

Speaker 11

Hey, good morning. Thank you for the question. I just have 2, 1 on Business Services and 1 on Wireless. First First on Business Services, I was just wondering if you could talk about some of the key initiatives or things that might be changing at Comcast Business following Ed's appointment as President to more aggressively pursue the mid market or enterprise? What are you seeing in terms of competitive side within SMB?

Speaker 11

Is it just fixed wireless or is there more to that? And then on wireless, given the strong potential upgrade cycle on the back of AI smartphones and the iPhone 16, I was just wondering if you could talk about the Xfinity Mobile strategy to capitalize this on this from a promotional marketing perspective. What levers are you planning to pull this holiday to potentially lean into wireless to help the broadband business and wireless at large? Thanks.

Speaker 6

Got it. Thank you. This is Dave. So a couple of things. Let me start with business.

Speaker 6

You said it is competitive in the small business categories, competitive in every category, but in particular the small business one. There certainly is some fixed wireless that we've seen. Saw it in the Verizon results, pretty high percentage of the fixed wireless that are in the small business thing. And we look at that closely. We are intensely focused on our competitive playbooks and we're going to constantly compete for share.

Speaker 6

But we're also focused on revenue per relationship. And so in the small business area, before getting into mid market, we're doing a lot of product upgrades, adding value and speed, Wi Fi, security. And so, we've made good progress and revenue focus around in small business. And it's such a huge opportunity for us and still in terms of small business. But Ed has stepped right in.

Speaker 6

It's a terrific team in the business services group that he's working with. And there really is, I think, a unique opportunity. When you look at the overall addressable market is $60,000,000,000 less than 20% there and a huge chunk of this will be mid market and enterprise. And we're and you add on top of that international opportunities that we're beginning to coordinate and work well with Dana and the team at Sky. So, yes, we really are seeing nice relationship growth in mid market and enterprise.

Speaker 6

That's the starting point. But in addition to like all of our strategies, we're adding more products and attaching new products on these relationships and going beyond just connectivity into a full managed relationship basis. So Ed is driving that and we're in a good competitive position for growth and I think we have a good ability to increase ARPU across an increasing higher end base of customers. So, on the mobile side of upgrade, it is every single upgrade moment pay close attention to that one too. And we're optimistic.

Speaker 6

We're in good position. We have a great trade in program for mobile that we've had in place now for a while. And then in addition to that, we go in and out in terms of subsidies on top of that trade in program. And then when good upgrade moments happen, we are the switching provider. So when people we have great core rates and we have good handset offers and good position for it.

Speaker 6

So being a switching provider, we're I think we are, I think in a unique position to really take advantage of that. And when you look at things going into the optimism for Q3, one of the most important programs that we'll do along with the handset upgrade initiative on mobile will be the Olympics. And the Olympics are such a unique opportunity for us to showcase the best broadband, the best mobile service offering. Combining those two things together in such an attractive offer on top of that is the greatest UI in the marketplace that helps you find whatever you want. So really excited about that.

Speaker 6

Look for that in the next couple of days, but mobile will be front and center along with broadband when that happens.

Speaker 11

Great. Thanks, Dave.

Operator

Thanks, Dave.

Speaker 1

Operator, we have time for one last question.

Operator

Certainly. Our final question today is coming from Steven Cahall from Wells Fargo. Your line is now live.

Speaker 12

Thanks. So with mid splits now reaching over 40% of the footprint, I was just wondering if you have an updated outlook on when you think you'll be at DOCSIS 4 for most of your architecture that you laid out earlier this year, when you think about the architecture that you laid out earlier this year, when you think about the capital intensity in C and P coming down and we'll start to see that benefit in growing free cash flow. So timing on that I think would be really interesting. And then how are you thinking about getting to just breakeven on Peacock? You talked about media EBITDA on a total basis growing in the first half and in the second half too.

Speaker 12

It seems like if the Peacock losses keep getting better at this pace, you could be close to breakeven, this time next year, but I know you've got NBA coming. So just wondering if we could think about that benchmark quite yet. Thank you.

Speaker 6

Hey, Stephen, this is Dave. Let me start and then hand it over on the Peacock side. So we're 42% mid split right now. We expect to be 50% by year end. And the DOCSIS 4.0 that follows multiple markets so far, It's early, no specifics in terms of the final rollout on that.

Speaker 6

But it really is tracking very well on top of the lot of new footprint expansions, the $1,200,000 over the last 12 months. This upgrade program is moving along very well and it tracks to where the customers are and our steady focus around the higher end. And one of the things that we see, we have the most effective and efficient build that's ubiquitous, that is addressing speed, capacity, coverage. And it helps us because as we're doing this, remember, we're virtualizing huge parts of the network and avoiding future node splits. So it's very efficient in helping us with the 70% of our customers are 500 megabits or higher, a third are taking a gig.

Speaker 6

And it's tracking to maybe one of the biggest tailwinds that is out there and that's the fact that our network consumption is still low double digits increasing. And that's not stopping. And so we're putting ourselves in position with a great upgrade program. And so that to me is I think a great advantage that we do have. In terms of competition, in terms of fiber, we're now 50% in terms of the overbuilt.

Speaker 6

We expect by the end of 2025 that will get to 60% will probably go higher than that. We have a long track record of competing against fiber 20 years at this point. So, we do think fiber is quite frankly the longer term competitor keeping our eye on, compete fiercely against fixed wireless and every competitor. But we anticipate where they're building, what they're doing and keeping track of all of that. So like our results and encouraged, when you look going into Q3, one of the reasons of optimism is that voluntary churn that continues to perform very well.

Speaker 6

And I think it's our superior network combined with better products and extreme focus on competition.

Speaker 3

Hey, Stephen, I would just round that out on the capital intensity question because I think embedded in that was sort of a long term capital intensity question. If you look at what we're doing now, the path towards mid splits, which as Dave mentioned, really good progress there, that kicking off DOCSIS 4.0 and then adding 1,200,000 homes passed, which is a record for us in the last 12 months and doing that all within through the existing capital intensity envelope, which is one of, if not the lowest, in the industry. So very good progress there. As you think about longer term, a lot of people ask this question in the context of is there the next big thing coming in terms of the network upgrade. We feel very comfortable between mid splits and DOCSIS 4.0 that leading to multi gig symmetrical speeds that, that is the network for the future.

Speaker 3

So we don't see the next big thing coming. The one area that I'd point out, we'd love to do more homes passed. We've accelerated the rate from $800,000 in the past couple of years up to currently $1,200,000 We won't get capital intensity because of that. If those are good returns and things we should be doing, we'd love to do more there.

Speaker 2

And Steve on Peacock and Media EBITDA, I think you heard us right anyway. You heard me right. I've been talking since I've been doing this that I don't really look at Peacock standalone. I mean it's an interesting exercise and I'm happy to share the numbers of what the loss is on Peacock as we're building it. But strategically to not pursue that path would leave the existing media business on a downward trend.

Speaker 2

So I think we are thinking about it over multiple years. I'm very confident that what we're doing around Peacock and the media business together, operating together is going to put us on a path to optimize that business. And as you said, think this is a year where we see the growth in Peacock offsetting the decline in some of our linear businesses and that's basically trend I would expect to see carry forward. There's going to be ebbs and flows. As Brian said, something like NBA is once in a generation almost to get an opportunity like that.

Speaker 2

So obviously we'll make some adjustments and it might pause our trajectory the year we take it on board. But I think it's part and parcel of the idea that we're bringing the media business to a better future by investing behind Peacock and doing it together with all our assets entertainment, sports and news as what our media business will look to be in the future. Well, thank you everybody. I think that's it. I stole Marci's line.

Speaker 2

Go ahead.

Speaker 1

Thanks Steve. This concludes our Q2 earnings call. Thanks for joining us.

Operator

Thank you. That does conclude today's question and answer session and today's conference call. A replay of the call will be available starting at 11:30 am

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