Comcast Corporation

Ladies and gentlemen, thank you for standing by. Good morning and welcome to the Comcast First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that this conference call is being recorded. I will now turn the conference over to Senior Vice President, Investor Relations, Ms. Marci Reivicker. Please go ahead.

Thank you, Operator, and welcome everyone to our First Quarter 2020 Earnings Call. Joining me are Brian Roberts, Mike Cavanaugh, Dave Watson, Jeff Schell, and Jeremy Derrick. Given these extraordinary times, we have slightly changed the format of this morning's call. Brian and Mike will spend a bit more time than usual in their prepared remarks to provide as much color and visibility as possible on all of our businesses, as well as update you on how we are managing our customers and employees through COVID-19. We will then use the time remaining to answer as many analyst questions as we can. Before we begin, I refer you to slide two, which contains our safe harbor disclaimer. I remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call, we will refer to certain non-GAAP financial measures. Please refer to our 8K and trending schedules for the reconciliations of non-GAAP financial measures to GAAP. With that, I turn the call over to Brian Roberts. Brian?

Thank you Marcy and good morning everyone. These are truly extraordinary times and on behalf of all of us at Comcast, our hearts go out to everyone who has been impacted by this terrible disease. I'd like to echo our thanks to the thousands of heroes on the front lines. Society today is being challenged like never before in our lifetime. And I couldn't be more proud of our company, our employees, and our leadership teams across Comcast Cable, NBCUniversal, and Sky for making a lot of tough, fair, and I believe best decisions for our customers and our organization. I truly believe that when we look back at this unprecedented time, we will be reminded of the strength of our employees, the resilience of our business, and the important role our service has played in our customers' lives. COVID-19 has created a tremendous amount of uncertainty and financial strain for people and businesses around the globe. Every company is different, and few are immune to this dynamic. Comcast is no exception. We have businesses like Broadband, which had the best first quarter net ads in 12 years and continued its sales momentum in April. And then we have businesses like theme parks, as well as television and film production, which will be under substantial duress because we must shelter in place. On today's call, we will discuss our first quarter performance and provide as much information as we can about the future. But perhaps the most important thing we can do is give you a sense for the guiding principles we are using to run our business during this pandemic and share some of the important decisions we've made to help move our company forward. First, how are we supporting our most important asset, our people? We saw the virus in China and then in Italy and Europe, and it gave us a real sense of urgency as to how quickly decisions had to be made and required us to change procedures almost instantaneously across the globe to get ahead of this crisis. It is this global perspective that has helped us immensely, as you will hear. The first thing we needed to do was protect our employees, especially on the front lines. So for those working in news, managing our network, and ensuring that our customers maintain vital connectivity, we've taken many safety precautions to keep them and our customers safe. At the same time, we've successfully moved tens of thousands of employees across Comcast Cable, NBC Universal, and Sky to a work-from-home environment. Most impressive has been our ability to shift thousands of call center representatives at Comcast and Sky to working remotely in a matter of days and weeks. In fact, over 95% of our U.S. call center employees are now serving customers from their homes, and I'm not sure that's ever been achieved before. We've been doing this now for about 45 days since the second week of the crisis, an extraordinary feat. Our digital tools have been instrumental during this time of need. Usage of our XFi digital app is up 60%, and we're seeing a 20-point increase in customer satisfaction when they use our digital tools to activate their internet service. Use of our AI-powered Xfinity Assistant is also up 445%. It's clear that our multi-year investment in digital and AI has prepared us for this crisis, and I could not be prouder of the work of our teams. For our employees who are not able to work because operations have been closed or severely impacted, we've differentiated ourselves by committing $500 million in direct support to help bridge this moment. Our employees have shown us that they are among the most engaged in the country, and we want to do what we can to support them during this crisis. Our second guiding principle is to serve our customers and continue to innovate at a time when they need us most. This starts with Xfinity Internet. In the face of COVID-19, we quickly agreed to continue service for customers facing economic hardship, committing to the FCC's Keep Americans Connected pledge, and going further to ensure that all our customers stay informed, engaged, and in touch. We're not disconnecting Internet or voice services for failure to pay. We're also offering new Internet Essentials customers two free months of service, providing free Xfinity Wi-Fi access by opening our public hotspots and giving all customers unlimited data for no extra charge and permanently increasing the speed of our low-cost Internet Essentials service. Through all of this, The company is working overtime to ensure that our world-class network and services have the capacity they need to keep Americans productive, informed, and entertained during this difficult time. At both NBCUniversal and Sky News, we seamlessly move to production at home, working 24-7 to keep viewers informed. Sky's riveting documentary, Coronavirus Inside the Red Zone, taped from inside the hospitals of Italy, is an example of an incredible investigative look at what's happening in one of the hardest hit regions and countries. It's prominently featured along with other virus-related content on our X1 and Flex boxes, which you can pull up by just saying coronavirus into your voice remote. In the U.S., we responded quickly as theaters shut down, bringing several of our movies, including Trolls World Tour, to customers' homes. And we swiftly redated Fast 9 and Minions to next year to give us a strong theatrical slate in 21. While this certainly wasn't our plan, there may not have been a better time to launch our free ad-supported streaming product, Peacock, for Xfinity customers. Now, it's only been three weeks, but what I can tell you is we're already pacing ahead of our internal forecast on monthly active users and in time spent viewing. And we're still on track to launch Peacock nationally in July. Moving to our third principle, our balanced efforts to successfully navigate through the crisis while simultaneously thinking about how to emerge with an even stronger future. We don't know when we will be through the worst, nor do we know the shape of the global economic recovery. But we are not sitting still. Company-wide, we are using this moment to step back and are looking at our organizational structure and costs. To that end, I'm grateful to have as my partner and Chief Financial Officer Mike Kavanaugh, who helped J.P. Morgan successfully endure the worst of the financial crisis and emerge stronger than ever in 08-09 as their CFO. Mike and I lead our global leadership calls where we meet virtually with our teams frequently, collectively sharing best practices, making real-time decisions across the entire organization. Our strategy has not changed, but our pace and tactics are being reprioritized so that we can emerge quickly as industry leaders across each of our businesses. We've also enhanced our already strong balance sheet by accessing the debt markets. and we currently sit with over $15 billion of liquidity, putting us in an even better position. At this point, I want to touch on some of the specific issues important to many of you on this call. First is broadband. Our network is operating incredibly well, and we stress test it with 700,000 diagnostic speed tests on most days. As you know, our cable business comprises roughly 70% of our consolidated EBITDA driven primarily by our connectivity businesses. While we have limited access to people's homes as we shelter in place, we continue to connect customers with our newly implemented drop-and-go strategy, and we've had tremendous success with our self-install kits, which are especially easy for broadband. In fact, we had our best first quarter high-speed data net additions in 12 years of 477,000 excluding any free Internet Essentials customers, and that's up 27% year over year. Our engineers have done a wonderful job in creating and maintaining a network flexible enough to allow so many of us to learn and work at home. We've seen an unprecedented shift in network use, with a 33% increase in upstream traffic. Yet, our network continues to perform exceedingly well, And if you're interested, you can go to our corporate website to read more about our network performance and some amazing stats. In fact, it is tough to fathom what would have happened if this virus struck just five years ago. The investments we have been making in our broadband products and network every single year are paying off better than almost anywhere in the world. And we will continue to innovate and invest in our network as we had always planned. Second, I want to touch on theme parks. As of today, our theme parks remain closed, resulting in substantial operating losses, which Mike will detail. We have also delayed construction of the fourth gate in Orlando, and Super Nintendo World Japan is likely to open a few months past our original expectation. But there is no doubt that our theme parks will reopen, and when they do, I believe we'll benefit from strong pent-up demand. We love these businesses. They have been one of our fastest growing for the last 10 years. They are extremely profitable, historically resilient, and enjoy high barriers to entry. Our talented parks team is taking the right near-term steps to control costs while remaining laser-focused on putting in place the appropriate protocols, technology, and infrastructure so that when we do reopen... Our parks are safe and feel that way to consumers. And while we don't know when that will be in the U.S., I am heartened by what we're seeing in China, where we have been building a magnificent park in Beijing. As we all know, the first case of COVID occurred in China right around the Chinese New Year. Going into that holiday, we had 12,000 construction workers going full bore. But as a result of the virus, that number soon went to zero. As of today, we now have over 15,000 construction workers back at our site, even more than before the virus started. I was part of a group that recently spoke with Mike Hightower, a 40-year Parks veteran, who is the head of construction living in Beijing, and he reports we have a safe working environment with many protocols in place. I'm pleased to announce we expect to be open amazingly on time and on budget in 2021. Beijing may be different, but perhaps it shows the arc of this crisis. My third topic is sports, which have been postponed across the globe, creating significant timing impacts on financial results and forecasts. We absolutely believe that sports will come back, and when they do, there's bound to be so much excitement and enthusiasm which may resonate even more than before, regardless as to whether or not stadiums are filled with fans. Bringing these stories to the world is what our sports teams do best. Given how the sports programming business works in Europe, the postponement of so many games has been a material event with many customers pausing to their sports subscriptions. I have reason to be optimistic, as many European teams are already back practicing, and we have hope that they resume play as early as May. Perhaps this will be the playbook the rest of the world uses and allows us to have conversations with our partners as we constructively work together to find solutions to bring sports back. Fourth, this crisis has shined a bright light on just how much video consumption is evolving. And while such change is disruptive to parts of the company, it reminds us how well we are positioned overall, given our strength in broadband, our innovation in streaming products such as Peacock and Flex, and our diversification of world-class content across NBCUniversal and Sky. Great content is more valuable than ever, even while technology disrupts. You know, in both good times and bad, I think about my father, Ralph, who 57 years ago built this company to be vibrant, relevant, and attract the best talent to work for us while creating long-term value for shareholders. Ralph was truly the most optimistic man I've ever known. And at the same time, he lived through some of the worst events, like the Great Depression and World War II, which instilled in him the need to be prepared for anything. And Ralph's views are deep in my DNA and throughout all of Comcast. And that means having a very healthy balance sheet, a strong portfolio of complementary, best-in-class assets, good sense to always take care of your people, and a belief that scale really matters, particularly in difficult times. Pulling all of this together requires an entrepreneurial global leadership team able to pivot at a moment's notice. We are working really hard to find a safe path back while we continue to operate and serve our customers every day. Mike will now take you through our first quarter financial results. which under these circumstances I feel were quite strong. Mike.