Comcast Corp - Class A (CMCSA) — Q2 2015 Earnings Call Transcript

Good morning, ladies and gentlemen and welcome to Comcast’s Second Quarter 2015 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 call over to Senior Vice President, Investor Relations, Mr. Jason Armstrong. Please go ahead, Mr. Armstrong. Thank you, operator and welcome everyone. Joining me on this morning’s call are Brian Roberts, Michael Angelakis, Mike Cavanagh, Steve Burke and Neil Smit. Brian and Mike will make formal remarks, and Michael, Steve and Neil will also be available for Q&A. As always, let me now refer you to slide number 2, which contains our Safe Harbor disclaimer, and remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, in this call, we will refer to certain non-GAAP financial measures. Please refer to our 8-K for the reconciliation of non-GAAP financial measures to GAAP. With that let me turn the call to Brian Roberts for his comments. Brian?

Thanks Jason and good morning everyone. As this is the first call since the death of my father, I’d like to express my gratitude for the tremendous outpouring of support for me and the entire Comcast family. So many of you recalled your favorite memories and stories, and for this I'm beyond grateful. And as I think about today, reporting on another terrific quarter, it’s such a great reflection of the special company Ralph built, and I'm honored to help lead. Comcast NBCUniversal has real positive momentum on many fronts and so we are pleased to report that in the second quarter we grew revenue by 11.3% and operating cash flow by 8%. Our growth was broad based. In cable, our investments in customer experience, a faster X1 rollout, and our leading broadband network are all paying off. We grew overall customer relationships, added broadband customers and reduced our video losses in half. In fact, this is the best second quarter result in video that we’ve had in nine years. But the highlight of the quarter was Universal Pictures and Universal Theme Parks. And overall at NBCUniversal, I just can’t say enough great things about the second quarter. Operating cash flow increased 19.4% following a 14% growth in the first quarter. Steve Burke and his team continue to transform the business and are on track to soon double the operating cash flow since we made our original announcement with GE in 2009. Led by blockbusters Furious 7 and Jurassic World and a successful Pitch Perfect 2, the Filmed Division put up an unbelievable quarter. We broke a long list of records, so let me just highlight a couple. Universal’s worldwide box office grosses have already set a yearly record for the company, exceeding the prior high achieved in 2013. Jurassic World generated $1 billion in worldwide box office in its first 13 days, which is faster than any film in history, and now stands as the fourth highest grossing film of all time, and Furious 7 is the fifth highest grossing film. Notably, we’ve had outstanding success internationally. Furious 7 became the highest grossing film ever in China. And Minions, which is off to an excellent start, will help continue the trend of global success into the third quarter. This all demonstrates not only our focus on franchises and sequels but also our approach to global marketing and distribution under the leadership of Jeff Shell, Donna Langley, Ron Meyer and many others. Turning to Broadcast and Cable networks, industry viewership continues to be under pressure but we have a strong diversified and enviable line-up of networks. A big success was NBC Broadcast, which won the 2014-2015 season for adults 18 to 49, marking the second year in a row as number one. NBC Sports continues to demonstrate the power of live sports with year-over-year viewership gains across the NHL Stanley Cup Finals, The English Premier League, Top Channel and now NASCAR. We also remained focused on original programming; a recent example is we’re very encouraged by how strongly Mr. Robot has gotten out of the gate on USA. It now ranks as a number two new scripted cable series of the year. Finally, at NBCUniversal, our terrific momentum at Parks continues. Tom Williams and Mark Woodbury and their teams have led the business to a stellar 45% operating cash flow growth. The enormous success of the new Harry Potter attraction in Orlando was sustained in the second quarter. Our strategy of consistently launching new attractions is really working. Our recently opened Fast and Furious supercharge attraction in Hollywood provides already an additional boost to that park and we have an exciting roadmap with other new attractions that we will be launching in the future including the highly anticipated opening of Harry Potter in Hollywood next summer. All-in-all, the team at NBCUniversal is doing a fantastic job and is executing incredibly well. Moving to Cable Communications, Neil Smit and the team continue to drive the industry’s best technologies and platforms forward and the results prove this out. In the second quarter we increased revenues 6.3% and operating cash flow 5.1%. We continue to believe X1 is an absolute game changer, better connecting our customers to content serving as a platform for so much more. We have scaled our deployment to nearly 30,000 boxes per day and we are pushing to go even faster. The results are measurable and I am pleased to report that the significant improvements we’ve shared previously around X1 viewing patterns, churn, DVR penetration and additional outlets, amongst others, continue to hold as we get further into the base with our deployment. We very much believe in the video business and our place in its future and we will strive to lead in innovating to match the demands of our customers. Along these lines we continue to generate serious interest in licensing opportunities for X1 with Cox and now Shaw engaging with us on trials, and a number of other companies expressing interest. Importantly, we are making progress in our commitment to improve the customer experience. We told you that our intention was to take the same focus we’ve had on product innovation and technology experiences and apply that to customer service and we’re doing it. Some notable examples we recently announced include new cloud-based platforms to give our employees a better view of customer’s account history, a reimagined retail experience, apps that put customers in the driver's seat to troubleshoot problems themselves, a tech tracker feature and commitment to service windows, and our plan to add more than 5,500 customer service jobs. In short, our goal is to make customer service and the customer experience our best product, and our customers are responding to these efforts. Churn is down in every category; video, data, voice and home security which is excellent news and evidence of the progress we are making. And the future holds even more for our customers. We recently began providing voice remote standard with our X1 product; the next iteration in simplifying search and discovery on our platform. And just last week we announced that we are launching a new video product called Stream, that will offer Comcast Internet-only customers an easy way to add a light cable package to their subscription, enjoy immediate access to programming across computers and mobile devices. We also announced a gaming service in partnership with Electronic Arts on the X1 platform, and later this year we will begin trialing and ultimately deploying DOCSIS 3.1 in our network which will provide significant added capacity and lay the groundwork for future speed increases for our broadband customers. In addition to our strong performance on the residential side, our business services, Bill Stemper and team continue to deliver, with another quarter of greater than 20% growth in revenue. The consistency of the growth has been amazing, and we have significant runway ahead. Summing up, we have a great portfolio of complementary businesses. The diversification of our businesses carries significant benefits as evidenced again this quarter. The key to our success is not only a great set of assets, it’s also our collaborative culture. We make sure that our people work together, enabling us to innovate and execute more quickly. And I am excited today for you to meet Mike Cavanagh, who is here with us on the call. As you know, he recently joined us to become Chief Financial Officer. Mike has an incredible background and will be able to contribute broad experience and perspective to the role, and he is going to be a great partner to me and to the senior team. But it’s bittersweet that this will be Michael Angelakis’ last earnings call. So I want to thank you Michael for all that you have done as our Chief Financial Officer and Vice Chairman, and so much more for the past eight years. But we are all excited by your new initiative, which I think will be exciting for shareholders, for the company, and for you personally. You’re one of the smartest and most successful deal makers I know. We wish you only the best of luck. So Michael, why don’t you take a few words before we turn it over to Mike Cavanaugh.

Thank you, Brian. I very much appreciate the kind words. I'm proud of what we’ve accomplished and it has been an honor for me to represent this amazing company and all my talented colleagues, to our shareholders and the investment community. As you can see from these results, the company is so well positioned and has incredibly strong leadership teams throughout the organization. I’d like to thank all of my Comcast NBCUniversal colleagues for their friendship and dedication. Also, I am very pleased that Mike has joined the team. His experience, his energy and fresh perspectives, as well as great business judgment has made our transition seamless. I am proud and delighted he is here and look forward to our partnership. Now let me turn it over to Mike who will review the quarter’s results.

Thanks, Michael and good morning everybody. Although it’s only been about two months since the announcement, I feel welcome and at home at Comcast. It’s great to be joining the team at a time as exciting as Brian just described. Before jumping into our results, I’d like to say a few words about Michael. He has established a great culture and financial organization inside of Comcast, putting me in a great position to step to this role and to provide leadership from this special seat. He himself is an outstanding leader and has been and will continue to be a trusted partner of mine. I wish him the very best as he pursues his new growth opportunity for our company. Now let me begin reviewing our second quarter consolidated financial results, starting on slide four. Overall, we are very pleased with our second quarter performance, which reflects healthy growth and consistent execution across our businesses. For the second quarter, consolidated revenue increased 11.3% to $18.7 billion, and operating cash flow increased 8% to $6.3 billion, reflecting healthy organic growth in our cable business and outstanding performances in Film and Theme Parks and NBCUniversal. This result includes Time Warner Cable and Charter transaction related costs in the second quarters of both 2015, and 2014. Excluding these transaction costs, consolidated operating cash flow increased 8.5%. Year-to-date consolidated revenue increased 6.8% to $36.6 billion and consolidated operating cash flow increased 7.8% to $12.2 billion. For comparison purposes, if we exclude the $376 million of revenue generated by the Super Bowl this year as well as the $1.1 billion of revenue generated by the Sochi Olympics in the first quarter of 2014, consolidated revenue increased a very strong 9.3%. Similarly, if we exclude transaction related costs incurred in the first six months of this year and last year, consolidated operating cash flow increased 8.7%. Earnings per share for the second quarter grew 10.5% to $0.84 a share, versus $0.76 per share in the second quarter of 2014. However, excluding several adjustments we outlined in our press release, EPS increased 12%. Year-to-date earnings per share increased 12.2% to $1.65 a share versus a $1.47 a share in the prior year, and again, excluding adjustments, our normalized year-to-date EPS increased 14% to $1.63. Free cash flow for the quarter increased 30% to $1.5 billion and a free cash flow per share increased 34.1% to $0.59 a share driven by growth in consolidated operating cash flow and improvements in working capital, partially offset by increased capital expenditures and cash taxes. For the first half of this year, we generated $4.7 billion of free cash flow, an increase of 17.7% over the first six months of 2014, and year-to-date free cash flow per share increased 21.9% to $1.84 per share. Now let’s review the results of our businesses in more detail, starting with Cable Communications on slide five. Our Cable Communications team continues to execute well and we are pleased with our second quarter performance of solid revenue and operating cash flow growth along with healthy customer metrics. Cable Communications revenue increased 6.3% to $11.7 billion, reflecting the ongoing strength in high-speed data and business services as well as higher video revenue. Total revenue per customer relationship increased 4.5% to $143 per month, driven by a higher contribution from business services, customers subscribing to multiple products and higher levels of service and rate adjustments. In addition to strong financial growth, we continued to deliver strong metrics. As Brian highlighted, despite the typical seasonality we experience in our second quarter, we added 31,000 customer relationships during the quarter, compared to a loss of 25,000 customers last year. More encouraging is that the improvement was driven by increases in our double and triple play relationships as customers continue to find value in the bundle and are increasingly taking multiple services from us. At the end of the quarter, 69% of our customers subscribed to at least two products and 37% subscribed to three products, compared to 36% at the end of last year’s second quarter. Moving on to the individual products, as Brian mentioned, video delivered great results. We improved video net losses by $75,000 year-over-year to $69,000. This impressive performance was driven by better customer retention as we focused on improving the customer experience and delivering innovative products. The investment we have made in our cloud-based X1 platform is paying off, as the positive customer benefits make their way into a larger portion of the base. Our X1 net additions continued to accelerate this quarter, increasing more than 10% from the first quarter and up nearly 35% compared to last year. X1 accounted for about 50% of our second quarter video connects and X1 customers now represent nearly a third of our total triple play customers. Our high-speed data service continues to gain share as we differentiate our product through speed upgrades and the deployment of wireless gateways. Not only do these gateways provide our customers with the fastest in-home Wi-Fi, they are also fueling our impressive growth in Wi-Fi hotspots, which now number more than 10 million. We added 180,000 new data customers in the second quarter and 587,000 customers year-to-date, which matches last year’s first half total. In addition, voice remains a valuable component of the bundle, as our voice customer base grew by 49,000 in the second quarter. This slowdown in voice net additions primarily reflects our focus on double play this year compared to prior year results that had stronger triple play additions. As we look at our revenue categories, video revenue increased 3.7% reflecting an increasing number of customers taking advance services and modest rate adjustments, as well as an increase in pay-per-view revenue due to the Mayweather-Pacquiao fight in the quarter. High-speed internet revenue increased 10% in the quarter, making it again the leading contributor to cable revenue growth driven by continued growth in our customer base, rate adjustments, and an increasing number of customers taking higher speed services. At the end of the quarter, 69% of our residential high-speed Internet customers received speeds of 50 megabits per second or greater. Voice revenue declined by 2.1% in the second quarter, as growth in our customer base was offset by a modest decline in ARPU. Our business services division continued to help fuel cable growth this quarter, with revenue increasing 20.4% to $1.2 billion. Our performance in the small end of the market continues to be especially strong with growth driven by an expanding customer base and rate adjustments. At the same time, the contribution from mid-sized businesses continues to increase. There is a tremendous opportunity for growth in this segment as we have captured only a 25% share of the small end of the market and less than 10% of the mid-sized segment. Cable Advertising revenue decreased 0.9% during the second quarter, reflecting lower political revenue. Excluding political, our core cable advertising revenue increased 2.5%. Now let’s turn to slide six. Second quarter cable communications operating cash flow increased 5.1% to $4.8 billion, resulting in a margin of 40.9% compared to 41.4% in the second quarter of 2014 primarily driven by higher programming cost, additional expenses related to the deployment of X1 to our customers and the investments we are making to improve the customer experience. Second quarter program expenses increased 9.6%, reflecting higher sports programming cost and increases in retransmission consent fees as well as an impact from the pay-per-view fight in the quarter. Excluding the impact of pay-per-view fights in both years, our programming expense growth would have been approximately 150 basis points lower. We continue to expect program expense growth for the full year 2015 to grow at a similar level to 2014’s growth of about 8%. Technical and product support expenses increased 6% in the second quarter, as we continue to accelerate the deployment of the X1 platform and invest in the customer experience. As Brian said earlier in the call, we are committed to transforming the customer experience and it is our number one priority this year. As a result, this means we will incur modestly higher expenses as we’re hiring additional technicians and service personnel, strengthening our dispatch teams and operations and investing in training, tools and technology, including a new cloud-based customer platform that gives our employees a better view of our customer accounts so they serve them better and faster. We’re already starting to see these additional investments pay off as the metrics we use to evaluate our service levels are all improving. Things like our on-time metric, how quickly we answer calls, how successful we are at onboarding new customers, all have shown real improvement. We firmly believe that these investments in the customer experience will pay off for us over time as we do a better job maintaining and deepening our customer relationships. Overall, Cable’s second quarter and year-to-date results prove that we are executing well and competing effectively, with innovative products and services that provide a great value to our customers. We are focused on improving the customer experience, having best-in-class products and continuing to deliver strong financial and customer results. Now let’s move on to NBCUniversal’s results, which are presented on slide seven. NBCUniversal delivered strong results in the second quarter, as revenue increased 20.2% and operating cash flow increased 19.4%. Cable networks generated revenue of $2.5 billion in the second quarter, a decrease of 1% driven by a 26% decline in content licensing and other revenue and a 3% decline in advertising revenue, that was partially offset by a 5.6% increase in distribution revenue. Cable networks operating cash flow declined 4.6% to $872 million in the second quarter, reflecting lower revenue and modest increases in operating and administrative expenses. In regards to our Broadcast Television segment, revenue was essentially flat at $1.8 billion in the second quarter, as a 7% decline in content licensing revenue was offset by increased retransmission consent fees and a slight increase in advertising revenue. Stable revenue and a modest increase in operating cost in the second quarter led operating cash flow to decline 3.7% to $231 million. Moving to filmed entertainment, second quarter revenue nearly doubled to $2.3 billion driven by higher theatrical revenue from the strong performances of Furious 7 and Jurassic World, which both saw tremendous success at the box office. As Brian said earlier, these were two of the biggest films in Universal’s history, so we had an exceptionally strong quarter. Second quarter operating cash flow increased $227 million to $422 million, driven by the significant revenue increase, partially offset by an increase in the amortization of film costs and higher advertising marketing and promotion expense to support the larger film slate. The momentum at our Theme Parks continued this quarter, as revenue increased 25.7% to $773 million, and operating cash flow grew 44.9% to $354 million, reflecting strong attendance and per capita spending, driven by the continued success of Harry Potter Diagon Alley in Orlando, which opened in July of last year. This new attraction has been a real success since its opening, driving double-digit increases in park-to-park ticket sales, record attendance levels and per capita spending. While we believe the momentum at Harry Potter will continue, the growth rates will likely slow as we have now passed the anniversary of the Diagon Alley opening. In Hollywood, Fast and Furious SuperCharge opened strong on June 25th with double-digit attendance growth ever since. Let's move to slide eight to review our consolidated and segment capital expenditures. Consolidated capital expenditures continue to track our investment plan and increased 9.6% to $2 billion compared to the second quarter of 2014 driven by increased investments at cable. At cable communications, second quarter capital expenditures increased to $183 million or 12.3% to $1.7 billion, equal to 14.3% of cable revenue versus 13.5% in the second quarter of 2014. The increase was primarily driven by higher spending on CPE to support the aggressive deployment of our X1 platform and wireless gateways, our continued investment in network infrastructure to increase network capacity, additional investment as we continue our cloud-based initiatives as well as our expansion in business services. Year-to-date cable communications capital expenditures have increased 18.3% to $3.1 billion, representing 13.5% of cable revenue. We continue to expect that for the full year of 2015, our cable capital intensity will be approximately 14.5% of cable revenue, compared to 13.9% in 2014. We are focused on investing in the business where we think there are attractive financial and strategic returns. All of these initiatives are great examples of this growth-oriented investment strategy, and X1 is no exception. We continue to be very pleased with the results of X1 and its success underscores our confidence in accelerating the rollout. We have accelerated our X1 net additions quarter-after-quarter and the positive customer results have continued. More customers are subscribing to DBRs and additional outlets, increasing video-on-demand usage and we continue to see reduced churn levels among these customers. Second quarter capital expenditures at NBCU decreased 8.5% to $272 million, primarily reflecting decreased investments in facilities, partially offset by higher spending at Theme Parks, as we build new attractions including Harry Potter in Hollywood and King Kong in Orlando. As we mentioned at the beginning of the year, we expect that NBCUniversal's 2015 capital expenditures will remain relatively stable at 2014's level with over half directed to our Theme Park segment as the investments we are making in our parks are clearly generating strong returns as they drive increased attendance and per capita spending. Turning to slide nine, as I mentioned earlier, we generated consolidated free cash flow of $1.5 billion in the second quarter, an increase of 30%. For the first half of the year, we generated $4.7 billion in free cash flow, an increase of 17.7% over the first half of 2014. The increases for both the quarter and the year-to-date results reflect growth in consolidated operating cash flow and improvements in working capital, that were partially offset by higher capital expenditures and cash taxes. In the second quarter, we returned $2.2 billion of capital to our shareholders, an increase of 65.8% compared to the second quarter of 2014, including share repurchases totaling $1.6 billion and dividend payments totaling $628 million. In the first six months of 2015 we've returned $4.8 billion of capital to shareholders, representing an increase of 84.5% compared to last year, including share repurchases totaling $3.6 billion and dividend payments totaling $1.2 billion. Recapping our return of capital plans for 2015, we plan to buy back $6.75 billion of our shares, which includes the original $4.25 billion we announced at the beginning of the year, plus the additional $2.5 billion announced with our first quarter earnings release. As we hit at that point, this should place us at roughly two times leverage at year end. And as always, we will discuss next year's return of capital plans when we release fourth quarter earnings after the process of reviewing our business plans is complete. My priorities are to make sure our businesses are being fed the capital they need for strong and profitable growth and to make sure that we have strategic flexibility from a financial perspective, and to prudently maximize our return of cash to shareholders. Overall, we have had a really strong first half of the year in both cable and NBCUniversal. We are pleased with the financial and operational progress we've made in all of our businesses and we are focused on continuing that momentum throughout the year. We believe that our disciplined investments, along with our focus on execution will continue to generate healthy growth and yield positive results. Before I turn in the call over to Jason for Q&A, I would like to say how great it is to be here. Comcast is a fantastic company with a portfolio of leading businesses, that have tremendous opportunities ahead. Brian, Steve, Neil and David are a great leadership team, and in my short time here I have found that all levels of this company are filled with smart energetic people with high integrity. I'm very happy to be part of this team. Over to you, Jason.

Thanks, Mike. We will now move to our question-and-answers. I'll remind you Brian, Mike, Michael and Steve are in the room with us today and Neil is traveling, but he has dialed in and is available for questions. So with that, Brent, we'll turn it over for you to Q&A.

Thanks and good morning. I have two questions. Neil, can you give us a little more insight into the churn trends? The customer adds this quarter were really strong, I can't remember the last time you guys added customers in the second quarter. So when you look at the voluntary and involuntary, look at the investments you are making in customer service. Can you just help us to think about what's driving the churn down and what's the opportunity is from here to take that down further, and I'll just give Steve my question which is, there has been some press coverage on your upfront, I wonder if you could give us some details on how the upfront went from your perspective across your properties? Thanks.

Hi, Ben, it’s Neil. I think the churn has been a key driver of Q2 results. But over the last year and a half the churn numbers improved every month year-over-year and part of it is driven by the X1 deployment where we're seeing about 30% less voluntary churn. Part of it is driven by the fact that we're getting a higher percentage of our customers on contract. It's more than double year-over-year and I think we're getting better quality customers and retaining them longer is the real story. How far can that go remains to be seen. We're going to keep on driving our X1, we are targeting our segments better, we're doing better on non-pay disconnect, we are just I think managing the customer relationship more effectively and I think because all the work we're putting into customer experience is paying off. Each initiative is kind of additive and it's really affecting the churn number over time.

In terms of the upfront, I think we had a great upfront because it was a challenging time for the industry and we ended up with our volume up. We gained share. We talked a lot about the monetization gap. We closed some more of the monetization gap for really the second time in a row and despite the fact that I think overall industry volume was down, ours was up and our CPMs were right at the top for both NBC and the big cable networks. So we feel very pleased and part of it is because of the way we manage our advertising business. Linda Yaccarino has the responsibility for all advertising, every single one of our channels and we have around 20% of viewership. So that gives us a tremendous portfolio approach to the market and allows us to outperform and hopefully we'll continue to do that.

Thank you both.

Maybe another question for Neil. I mean, Neil, does the lower churn you are seeing in video and all the runway you still have with the X1 deployment, does that give you sort of better visibility and a return to sub growth in terms of on the video side? And then it looks like a lot of the growth is coming more from double play than it has from triple play in the past, has there been a change in marketing or your approach to focus more on doubles than triples? Thanks.

Well, our goal is always to improve year-over-year customer metrics which we've done for the last four years in a row on the video side. I think the churn and the X1 deployment does give me optimism that we can continue to improve the voluntary churn number. I think going forward we're going to continue to drive out X1 at an accelerated rate. It does impact CapEx. And the second part to your question, John was what?

It was about the double plays versus triple plays. It looks like more of the growth is coming from double plays and I was just wondering if there was a change in your approach from a marketing standpoint?

This quarter, we shifted towards more double plays instead of triple plays, which I believe impacted our phone services. For broadband in the first half of the year, our performance aligns with what we achieved in the same period last year. We do not see any significant macro changes in our strategy, although quarterly results can fluctuate. Regarding churn, I'm optimistic about our innovation roadmap with X1, enhancements in customer experience, the Stream product, EA games, and other initiatives in development. Each quarter shows improvement, and we are pleased to report that this was our best second quarter for video in nine years.

Okay, thanks Brian.

Thanks John, next question please.

Thank you. I have two questions. One is for Brian, and I want to express my condolences to you and your family on the passing of Ralph Roberts, Comcast Founder and your father. Ralph was an incredible person and a great leader. For Mike, I wish you good luck as you become an important part of the company and its initiatives. Now, on to my questions: one for Cable and one for NBCUniversal. For Cable, with the renewed focus on customer service and the customer experience, it feels quite different from the past. Can you share how your vision has changed and how you assess effectiveness? You mentioned churn; is there anything else we should monitor and over what timeframe? Regarding NBCUniversal, the fulfillment aspect is remarkable. It seems like Parks has a significant growth opportunity. Could you talk about some of your attractions and hotel plans in film? Are there any changes in your strategy, and how do you anticipate performance looking ahead?

Thank you, Jessica, for the kind words. The Cable customer experience represents a significant cultural shift for us. We've discussed this for some time, and now we have a greater opportunity to concentrate on it. Technology can support us, especially with tools like TechTracker, enabling customers to self-diagnose and reset their modems. We're excited about the team we're developing around these innovations, leveraging the cloud for X1 and aiming to apply the same principles to enhance the customer experience. It begins with our employees; we are retraining everyone, including myself, to view everything from the customer's perspective rather than the company's. We are implementing various new incentives, and it is important to monitor churn and the quality of our customers. We are focused on customer lifetime value, and we're enthusiastic about X1 and its future growth. We're currently processing 30,000 units daily but believe we can achieve even more. The voice remote control is receiving excellent feedback, and we plan to distribute 6 million of them this year, along with enhancing the overall Wi-Fi experience. I won't go on too long, Steve, what about Theme Parks and film?

So obviously the headline from the NBCUniversal side of the company of the quarter was film, but in many ways Theme Parks had as good or even better quarter than the film business. So our total operating cash flow for Theme Parks grew about 45%, which I’ve never seen. I mean that’s just a huge-huge number for a business this size. Five years ago we made about $400 million in the Theme Park business. We probably added a $1 billion to that. This year’s results are probably over a $1 billion higher than that $400 million. The year is not over but the way we’re tracking and we see this as a major growth driver for the company for five, 10, 15, 20 years. We're basically adding more attractions than we had historically added. We just did, a year ago we did Harry Potter 2 Diagon Alley in Orlando, which has fueled a lot of the growth there. We have Harry Potter coming to Hollywood next spring, which I think is going to be a tremendous sea change, about how people think about that park in the Los Angeles market. So basically on both coasts about one major new attraction a year. We have King Kong coming next year in Florida, which is a fantastic creatively a fantastic attraction. We have a big water park coming in 2017. So you will see us on both coasts continue to add. And then we're also adding to our hotel stock. We looked in Florida, when we first got here and we had 2,400 hotel rooms. We did a study as to how many hotel rooms we should have given the strategic importance of keeping people onsite to increase length of stay. At the time we had 2,400 hotels, and the study said we could easily digest 10,000. So we've added a couple thousand hotel rooms. We're going to be adding hotel rooms next year and what's happening is we're seeing the combination of better attractions, which give people a reason to come and then when they come, more hotel rooms, which keep people longer. That kind of attraction is embedded in that kind of growth rate you're seeing. Orlando grew 21% in terms of attendance during the quarter, which is just a phenomenal result, and Tom Williams, who runs our theme park business is fantastic, Mark Woodbury is in charge of the creative side of that business is doing great things and we haven’t even talked about China or other parts of the world where we are also very excited about the growth opportunity. So, theme parks when you think of NBCUniversal saw 20% to 25% of our operating cash flow, but it's a great global business and we think there's lots of green lights as you look down the highway.

Thanks Jessica. Next question please.

Yes, hi. First, Brian let me reiterate what Jessica said, condolences on the passing of your father but also I think it is great to celebrate just what a spectacular thing he’s left behind and how many people he touched, and so it's nice to remember him. I wanted to ask Neil a question about fiber. AT&T has now made some commitments to significantly expand their footprint. I think you talked about your Gigabit Pro. Can you talk about how you think about fiber to the home and your Gigabit Pro service versus DOCSIS 3.1 and how the competitive market will shape your thinking in the architecture that you use?

Well, I think we've competed with both AT&T and DirecTV for a number of years. We feel very good about our broadband network and then, as Brian mentioned in his comments, we will be rolling out for market trial DOCSIS 3.1 in Q4. We continue to pull fiber deeper as we roll out our business services network and that strengthens the residential network as well. I think we will be ready to complete our fiber, as we think about new households, we pull fiber directly to the new households, we are in the beginning of the development and we're also pulling fiber to the premise in some of the large MDU complexes. So we feel good about our network going forward, we continue to increase.

Do you think that your DOCSIS 3.1, I think the industry has talked about Gigabit per second speeds being attainable with DOCSIS 3.1. Is your latest view that is likely to be the case or is that probably or is that potentially too high an expectation?

I would like to express my thoughts. Thank you for the positive feedback. I believe we have an outstanding product. When considering our comprehensive triple play offerings, much of it revolves around broadband and Wi-Fi, including infotainment Wi-Fi. It is crucial that we maintain a strong network and offer superior products, which is central to our mission. We have fully implemented DOCSIS 3.1 and encrypted our entire system. By reclaiming bandwidth, improving broadband, splitting nodes, pulling fiber deeper, and utilizing DOCSIS 3.1, we anticipate a significant advancement in performance. We already offer a two-gigabit product for our business services, which also overlaps with residential services as we expand fiber reach. This is a priority for us. We have an exciting roadmap ahead that focuses on continuous improvements rather than major overhauls. We have already increased speeds 13 times and plan to continue this trend, positioning ourselves strongly for the future. However, we acknowledge the competitive nature of the market and are constantly learning to enhance our competitiveness, and we are ready to compete moving forward.

Thanks Brian.

Next question please.

Hi, guys. Thanks. Brian, I wonder if you could expand on the stream products and how that’s going to fit into the business. And you’ve talked about churn a couple of times, as you’ve seen churn in the business, has there been any change in the number of people who are leaving for economic versus competitive reasons, and is there any indication that they’re leaving for the over-the-top competitive products out there? Thanks.

There’s a mix of everything in the real world, and we're handling millions of units each quarter. However, we’re encouraged by these results and by the improvement we've seen not just this quarter but over several years. The stream product extends from a couple of initiatives. We have a university product that is performing well and attracting younger consumers. Additionally, our broadband service has surpassed our video customer numbers, and we’re exploring how to sell broadband to customers and then introduce them to video, whether they are university students or individuals seeking different offerings, perhaps starting without a set-top box but utilizing their mobile devices. This year, we are targeting a couple of markets; while we may not see significant results immediately, it’s exciting to offer a broad range of products and to have a foundation for upselling consumers. We've seen great success in upselling with our Internet plugs and similar experiences when there is a good relationship with the consumer. Our technical and customer experience teams are enthusiastic about this product, as it will function smoothly. Customers will simply turn on their device and have access to the video and authentication—everything we’ve discussed—and being able to introduce new customers through their mobile devices will enhance ease and speed in building relationships with us. We are also using this to improve the onboarding experience and enable seamless upselling. There are many reasons to be optimistic about this product, which is part of our overall strategy to provide a wide range of offerings, representing a significant shift from where we were several years ago.

Yeah. I’ll just add Brian that this is a great example of how our cloud-based technology is enabling us to innovate at a faster pace and target specific segments such as you mentioned.

Thanks guys.

Thanks Phil. Operator, next question please.

Thanks. I’ve two questions. First for Mike Cavanagh, obviously you’ve only been there two months. If you can give us any thoughts about, if there any differences in your philosophical view on capital allocation and the like, a very broad question, if there is any change you think that could be incorporated? And then for Neil, you have a bunch of trials going on, on usage-based pricing down south, any color on how that’s working, is that something that we can expect to be introduced across the footprint anytime soon? Thank you.

Thanks Vijay, it's Mike. As you mentioned, it's still early days, but we will finish the year with two times leverage. This situation aligns with my earlier comments about wanting financial flexibility in our balance sheet. We plan to return $6.75 billion in capital this year through dividends and share buybacks, which is consistent with what we previously indicated. Historically, I've found it essential to focus on business plans and future opportunities, and we will do so in the upcoming months. This will enable me to provide insights when we reconvene early next year to discuss our plans for the following year and beyond. I believe our top priority is to ensure our businesses receive all the capital necessary to thrive in the marketplace and grow profitably. We will concentrate on that as our primary focus. Additionally, we are committed to returning capital to shareholders as we have been doing and will maintain flexibility in our balance sheet to support continuous investments and manage our business through various economic cycles and challenges while also seeking opportunities to benefit our shareholders.

Vijay, concerning the usage-based pricing trials, we actually do have a few trials going on in different markets. The responses have been neutral to slightly positive. We don't have any plans on expanding that to other markets or bases anytime soon.

Great, thank you.

Thanks Vijay. Next question please.

Thanks for taking the question. You mentioned earlier some of the investments you're making in customer experience and how that's already starting to payoff and also sounds like you continue to plan on investing in those areas. If you could just help us out from thinking about it from a margin standpoint. How much longer do you expect some of these spending initiatives to continue? And then as we look into '16 and beyond, how we come to know that you are getting a return on those investments? Is it something we should look for to turn, or add to or some other areas in the performance of cable? Thanks.

It's Mike Cavanagh. I talked about our X1 broadband capacity, gateways, business services, and customer experience. Investment in customer experience usually has a delay before we see returns, but we're assessing the success of each initiative. Notably, there has been a 15% decrease in customers needing to call and speak with agents, indicating we're addressing issues effectively. Additionally, the number of customers requiring repeat technical service within 30 days has dropped by 9%. This reduction in waiting times is contributing to improved customer satisfaction. We're rigorously testing these investments, with a pilot program in Portland, Oregon to evaluate initiatives before broader implementation. We plan to keep investing and expect to see returns. Ultimately, we aim to excel in both our products and services, with a focus on making our service a standout aspect of our offerings.

Yeah, it’s Mike. I’ll just jump in. Year-to-date, our cable margin is at 40.2%, which is an increase of 20 basis points from last year, and we are stable compared to last year. We take pride in successfully completing these initiatives while maintaining margin stability. It's evident from the numbers that the improvements in service and product quality are contributing to reduced churn and increased customer lifetime value.

Great, thank you.

Thanks, Brett. Operator, next question please.

Thanks, I have two questions. The first, your stream product, it looks like it's one of the only one actually including live broadcast. Just curious if you're talking to the stations and if so, how those negotiations are going. And then secondly, when we look at the numbers your Q2 video, so much better, your voice I think less than expected. We've always thought that the more products you sell the stickier the subs, that you're focusing a little bit more on double play. How do you know that your subs today are sticky as your subs have been?

Marci, it's Neil. On the stream product we didn't have to pay any additional programming rights for this product, Stream’s a title six service that's delivered to you, that customer’s enabled gateway and it's covered under our existing contracts. It's not an OTC service. Concerning the voice number, we did focus a little bit more on double-play this quarter which also reduced the churn. But it's always a blend of what's the right offer is for the right customer base at any time and kind of as Mike mentioned, our double-play customers grew to 69% and our triple-play are also up to 37%. So we are increasing both. It's just a matter of balancing the mix.

Thank you.

Thanks, Marci. We are almost up on an hour here. So we'll take this last question.

Thank you. I have a couple of questions. First, regarding the deal between Comcast and NBC, which is up for renewal next year, I would like to know your thoughts on this and how negotiations are conducted within the organization. Secondly, concerning the streaming product, since it's not primarily an OTP product, does this affect your agreements with programmers in general? Thank you.

Neil, I can take that question and wrap up the call. Feel free to jump in if I miss anything. I believe there may be some inaccuracies regarding the NBC Comcast timing, but I won’t delve into further details on that. One highlight is the impressive collaboration across our company, which I want to emphasize. Our combined portfolio of outstanding companies has yielded excellent results in the first half of the year, particularly in the second quarter. We are very satisfied with our performance across the board, including NBCUniversal and our cable broadband video results. I'm excited about our product innovations, such as Stream, and our achievement in nearly doubling cash flow with NBCUniversal since the 2009 acquisition, which is a significant milestone. We aim to lead innovation in the cable industry while supporting content companies to work in harmony. We're refocusing on enhancing customer service experience, which will take time to yield results, but we are committed to this path. I also want to mention that the transition with our Chief Financial Officer has proceeded very smoothly without interruption. We are enthusiastic about Michael's new role and our efforts to create value for shareholders through innovative opportunities. We are prioritizing profitable growth, returning capital to shareholders, and maintaining a strong and sustainable company, a commitment we've upheld since Ralph founded the company 51 years ago. Thank you all for your support, and we look forward to updating you in the third quarter.

Thanks, Brian, thanks everyone for joining us. Brent, back to you.