Comcast Corp - Class A (CMCSA) — Q1 2022 Earnings Call Transcript

Thank you, operator, and welcome, everyone. Joining me on this morning's call are Brian Roberts, Mike Cavanagh, Dave Watson, Jeff Shell and Dana Strong. Brian and Mike will make formal remarks, while Dave, Jeff and Dana will also be available for Q&A. Let me now refer you to Slide 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, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K and trending schedules for the reconciliations of these non-GAAP financial measures to GAAP. With that, let me turn the call over to Brian Roberts for his comments. Brian?

Thanks, Marci, and good morning, everyone. 2022 is off to a great start. Each of our businesses posted healthy growth in adjusted EBITDA, contributing to a double-digit increase in adjusted EPS as well as significant free cash flow generation in the quarter. And we achieved all of this while continuing to invest in our businesses for the long term, while also increasing our return of capital to shareholders. Our company has been at the forefront of innovation in connectivity and also in content. We have built a leading global technology platform, which today delivers 5 billion entertainment streams a week and 40 million voice commands a day across Comcast, Sky and our current syndication partners. Yesterday's announcement highlights the value of what we've created. As you probably are aware, we formed a joint venture with Charter to offer our award-winning, voice-controlled streaming platform across the United States, starting with Flex and XClass TV, and to further develop this technology. Not only will we bring these products to millions of more customers, but we'll open the door to brand-new revenue opportunities. And when you combine Charter's footprint with our current syndication partners in both the U.S. and Canada, our retail distribution through Walmart and Sky, which essentially runs off the same technology, we now have a truly global platform. This joint venture is a win-win. Consumers will get our proven world-class user and search experiences, simple content navigation, and more choice in the streaming marketplace. App developers, retailers, and hardware manufacturers will have access to one platform and one set of standards to quickly deploy their offerings across the U.S. And we'll be able to share in the investment and innovate alongside a partner we know well. Comcast and Charter have a track record of coming together to bring new products and technologies to consumers. Most notably, our mobile operating partnership from 2018 enabled both companies to bring greater value and a better experience that people love. The result is a more competitive wireless marketplace, and the service that we provide has been rated number one in customer satisfaction against all other mobile providers. Peacock also benefits from this joint venture as it will be deeply integrated into the platform the way it is on X1 and Flex today, which will help expand Peacock's customer base more quickly and drive higher engagement resulting in greater monetization for NBCUniversal. And we are doing all of this in the context of the investments we have already made in our technology and within the guidelines we've provided on our last earnings call with respect to our plans for programming investment. So let's come back to our achievements in the first quarter. Starting with broadband, we measured our success based on customer and financial metrics. And while we continue to compete aggressively in the current environment, we are striking what I believe to be the right balance between customer acquisition and long-term profitable growth. You can see with our first quarter results, where we added 194,000 customer relationships and 262,000 broadband subscribers, while on the financial side, Cable generated 5% revenue and 6.5% adjusted EBITDA growth, with 44% adjusted EBITDA margins. Our distinct competitive advantage stems from our network, which has a level of flexibility that enables fast innovation and will be further enhanced through virtualization, an important stepping stone in our ultimate evolution to DOCSIS 4.0. Our path to ubiquitous, multi-gig, symmetrical speed is well underway. And in the next several years, when you collectively include Charter and Cox, the cable industry will be positioned to offer multi-gig, symmetrical speeds to over 100 million homes throughout the United States over essentially the same DOCSIS 4.0 infrastructure. None of our competitors can say the same thing. For years, we focused on not only having a modern high-capacity network, but importantly, we've also focused on providing our customers with cutting-edge technology in their homes to ensure that they have the best experience, which is a combination of fast speeds, whole home coverage, cybersecurity and control, together with fantastic streaming capabilities. During the quarter, we performed a number of successful tests on 10G equipment, and we launched our newest and most powerful xFi gateway, which increases bandwidth in the home by three times and is the only modem that can support multi-gig symmetrical speeds to date. We're also enhancing the value of Xfinity broadband by bundling with mobile, offering our customers the convenience of one relationship for all their connectivity at a tremendous value. This contributed to even further improvement in broadband retention and our best quarter ever for Xfinity Mobile in terms of line net additions. We have a great wireless business, an MVNO partner in Verizon and have opportunities to further improve our economics at Xfinity Mobile longer term. For example, our testing of deploying spectrum to potentially offload wireless traffic is progressing nicely. During the quarter, we turned up our first 5G radios, and we'll be launching an employee field test in June. Stepping back, the underlying theme in all of this and the core of our strategy is that we put the customer first, which drives our strong financial results. The investments we have made and continue to make are expressly meant to enhance the experience of every person that is connected to our products and services. To that end, we just had the highest level of customer satisfaction we have ever seen for our first quarter. And we maintained our positive trend in reducing both agent handle interactions and truck rolls, which declined 19% and 17%, respectively. So let's switch to NBC Universal. We had a lot of exciting things happen during the first quarter. For the first time in our history, we aired both the Super Bowl and the Olympics in the same week, affirming our expertise in production. During that period, I went to our facility in Stanford, Connecticut. I have to say, I was so impressed by the hard work of the entire team working 24/7 around the clock, collaborating with Beijing while being in Connecticut, providing a seamless broadcast for the Olympics. We sent some of our equipment to China when we thought our broadcast operations would be there. And on the fly, we had to figure out new ways to air this special event without our consumers knowing that was happening. Amazing how well the team managed the complexity and delivered an unbelievably high-quality product to hundreds of millions of viewers. And I think this will help innovate sports productions for years to come. We learned a lot about streaming from the last Olympics. And so when it came to Beijing, we provided a much improved experience on Peacock, which shared every single event for the first time, driving significant engagement. Really was an exceptional quarter overall for Peacock, with other big sporting events and content launches, including the Super Bowl, the debut of Bel Air, our most successful original to date, and the day and date release of Marry Me. Importantly, retention on our service after airing all of this special content in such a concentrated period of time was well above our expectation. We added 4 million paid subscribers to end the first quarter with over 13 million paid subscribers and 28 million monthly active accounts in the U.S. And we've seen a 25% increase in hours of engagement year-over-year. Given the natural ebbs and flows of our content slate, we do not anticipate seeing this type of growth every quarter. We just expanded our total paid subscribers by over 40%. So we expect more modest subscriber gains until we get to the back half of this year. Our fourth quarter should be fantastic for sporting events such as Sunday Night Football, Premier League and the World Cup; a pay one availability of top universal titles like Minions, Rise Crew and Jurassic World Dominion; original series such as Vampire Academy; and for the first time, starting this fall, Peacock will be the exclusive home of the next-day NBC broadcast. Our streaming strategy is differentiated and unique because Peacock is a natural extension of our existing video businesses with two revenue streams and full integration across every aspect, whether it's programming, cross-promotion or advertising. Peacock builds audiences, extends our reach and creates new consumer experiences within our ecosystem, which should enable video to be a major long-term growth driver for NBCUniversal. Finally, the business we haven't talked enough about is Theme Parks, where the recovery continues to be fantastic. I'm particularly excited about the new attractions that we opened during the pandemic that many of our guests are now able to experience for the first time, like Super Nintendo World in Japan; the amazing VelociCoaster in Orlando; Pets in Hollywood; and of course, Universal Beijing. Our investments are significantly expanding the potential of our Theme Parks business, which will remain an important and exciting growth engine for years to come. So Comcast is truly in a unique position of growing EBITDA, generating a robust level of free cash flow while making important organic investments in long-term growth initiatives and also increasing our return of capital to shareholders, which totaled $4.2 billion this quarter through a combination of $3 billion in buybacks and $1.2 billion in dividends, the largest return of capital for any quarter in our history. So off to a great start in the first quarter, and I'd like to now hand it over to Mike.

Thanks, Brian, and good morning, everyone. I'll begin on Slide 4 with our first quarter consolidated 2022 financial results. Revenue increased 14% to $31 billion; adjusted EBITDA increased 9% to $9.2 billion; adjusted EPS increased 13% to $0.86 per share; and finally, we generated $4.8 billion of free cash flow. Now let's turn to our business segment results, starting with Cable Communications on Slide 5. Cable revenue increased 4.7% to $16.5 billion; adjusted EBITDA increased 6.5% to $7.3 billion; and net cash flow grew 8.3% to $5.6 billion. We grew customer relationships by 913,000 over the past 12 months with 194,000 net additions in the first quarter. Overall, customer growth was driven by broadband, where we added 1.1 million net new residential and business customers over the past 12 months and 262,000 in the first quarter. This quarter's results reflect continued low move-related activity compared to historical levels as well as an uptick in the level of competitive activity resulting in lower connect volumes. At the same time, we continue to experience very high levels of customer retention, with this quarter's results yielding the lowest churn rate for any quarter on record. In fact, we had fewer customers disconnect this quarter than the first quarter of 2019 despite a customer base that is almost 17% larger. Throughout the pandemic, we have offered a variety of programs to help our customers stay connected. Some of our customers that participated received our services for free and therefore, were not included in our subscriber totals. At year-end, we ended these COVID-related programs, triggering a benefit in the first quarter. We estimate this change accounted for about one-third of our first quarter net additions, with such benefit contained to the first quarter. Moving to the financials. Cable's revenue growth of 4.7% was driven by broadband, business services, wireless and advertising revenue, partially offset by lower video and voice revenue. Broadband revenue increased 8%, driven by strong customer additions over the past 12 months and nearly 4% growth in average revenue per customer in the quarter. Business Services revenue increased 10.6% or approximately 6%, excluding the acquisition of Masergy, which closed at the beginning of last year's fourth quarter. This healthy organic growth was driven by increases in both average rates per customer and in our customer base, which grew by 61,000 over the past 12 months with 9,000 additions in the first quarter. Moving to wireless. Revenue increased 32%, mainly driven by service revenue, which was fueled by growth in customer lines. Overall, we added 1.2 million lines over the past 12 months, including 318,000 lines in the quarter, which, for the fifth consecutive quarter, was our best result since launching this business in 2017. Advertising revenue increased 8.6%, reflecting higher political and double-digit growth in Zumo and advanced advertising. For video, revenue declined 1.5%, driven by customer net losses totaling 1.7 million over the past 12 months, including 512,000 in the quarter, partially offset by higher average revenue per customer due to a residential rate increase at the beginning of this year. Last, voice revenue declined 9.8%, primarily reflecting customer losses totaling 725,000 over the past 12 months, including 282,000 net losses in the quarter and reflects our shift to more converged broadband mobile offers. Turning to expenses. Cable Communications' first quarter expenses increased 3.3%. Programming expenses decreased 1.1%, reflecting a decline in video customers, partially offset by higher rates. Non-programming expenses increased 6.3%, reflecting investments in our growth businesses, including broadband, wireless and business services; expenses related to our recent acquisition of Masergy; as well as an increase in other expenses, primarily due to bad debt returning to more normalized levels. These higher costs were partially offset by a decline in customer service expenses, reflecting lower activity levels in the business as well as improvement in customer experience initiatives. Cable Communications' EBITDA increased 6.5% to $7.3 billion for the quarter and Cable EBITDA margin reached 44%, reflecting 80 basis points of year-over-year improvement. We believe we are striking the right balance by continuing to invest in our growth businesses, which are driving the top line and proving to be a great return for us, while at the same time, continuing to increase our operating efficiency and remove unnecessary costs. Now let's turn to Slide 6 for NBCUniversal. Starting with total NBCUniversal results, revenue increased 47% to $10.3 billion, and EBITDA increased 7.4% to $1.6 billion. Media revenue increased 36% to $6.9 billion, including Peacock revenue, which grew more than 5 times year-over-year to $472 million in the quarter. As Brian noted earlier, we aired both the Olympics and Super Bowl, which together contributed an incremental $1.5 billion to Media revenue. Excluding these events, Media revenue increased 6.9% driven by both higher distribution and advertising revenue. Distribution revenue, excluding the contribution from the Olympics, increased 8.5%, reflecting growth at Peacock driven by increases in paid subscribers as well as our networks, reflecting higher contractual rates, partially offset by linear subscriber declines. Advertising revenue, excluding contributions from the Olympics and Super Bowl, increased 4%, reflecting higher pricing and a growing contribution from Peacock, which was partially offset by linear ratings declines. Media EBITDA decreased 21% to $1.2 billion in the first quarter, including a $456 million EBITDA loss at Peacock. Excluding Peacock, Media EBITDA decreased 7.7%, reflecting higher programming and production costs associated with our broadcast of the Beijing Olympics and Super Bowl as well as higher costs driven by the return of our full primetime schedule compared to last year when our schedule was impacted by COVID-19. We continue to expect Peacock's EBITDA loss will be roughly $2.5 billion for the year. However, taking into consideration the timing of content launches, consistent with what Brian mentioned, we would expect losses to be higher in the second half of the year. Moving next to Studios. Revenues increased 15% to $2.8 billion, driven by higher content licensing and theatrical revenue, but EBITDA declined 51% to $245 million. The decline in EBITDA primarily reflects a difficult comparison to last year's first quarter, which benefited from a licensing deal with Peacock, including exclusive streaming rights for The Office with an offsetting adjustment reflected in NBCUniversal's eliminations. The remainder of the EBITDA decline reflects higher marketing costs ahead of numerous film releases planned for the second quarter, including Jurassic World Dominion, Ambulance and Bad Guys. Last, at Theme Parks, revenue increased by $941 million to $1.6 billion, and we generated EBITDA of $451 million, reflecting improved results at each of our parks compared to last year when Orlando and Japan were operating at limited capacity, and Hollywood was closed due to COVID-19. We continue to see exceptional demand at our domestic parks; attendance was back to prepandemic levels, and we had strong growth in per caps with Orlando generating its highest EBITDA on record for a first quarter. COVID impacts in the quarter were more pronounced internationally. Universal Studios Japan's results were impacted by capacity restrictions, which were in place for most of the first quarter. These restrictions were lifted at the end of March. And over the last month, we have seen a very strong rebound with attendance currently above pre-pandemic levels. At Universal Beijing, which opened in September of last year, demand from our guests was high, but overall attendance was impacted by COVID and related travel restrictions. Despite that, Beijing only contributed a slight EBITDA loss in the quarter. Now let's turn to Slide 7 for Sky, which I will speak to on a constant currency basis. For the first quarter, Sky revenue of $4.8 billion was consistent with the same period last year as solid growth in the U.K. was offset by our results in Italy, where we continue to transition through the reset in our Syria broadcast rights, which we won't begin to lap until the back half of this year. Direct-to-consumer revenue was also consistent year-over-year, reflecting growth in the U.K., where we continue to have healthy customer additions and grew direct-to-consumer revenue by mid-single digits driven by an increase in video revenue, including higher revenue from pubs and clubs, streaming and premium TV as well as healthy increases in broadband and wireless revenue. This growth in the U.K. was mainly offset by lower revenue in Italy, where we continue to experience both customer losses and lower direct-to-consumer revenue, primarily due to the reset in our Syria broadcast rights. Rounding out the rest of revenue at Sky, content revenue declined 14%, driven by the reset and sports licensing agreements in Italy and Germany. And advertising revenue increased 7.9% and with healthy growth in the U.K., partially offset by a decline in Italy. Turning to EBITDA. Sky's EBITDA increased 71% to $622 million driven by our strong performance in the U.K. and improved results in Italy and Germany, where we benefited from lower sports programming costs due to resets in our sports rights. Next, I'll discuss free cash flow and capital allocation on Slide 8. As I mentioned earlier, we generated $4.8 billion in free cash flow this quarter. Consolidated total capital increased 1.1%, reflecting increases at NBCU due to ramping construction at Epic Universe, a decrease at Sky and a relatively flat capital spending at Cable due to timing. For the year, we continue to expect Cable CapEx intensity to stay around 11% as we increase investment in our broadband network, and NBCUniversal CapEx related to the construction of EPIC universe to be up around $1 billion year-over-year. Turning to capital allocation. As of today, we have repurchased $4 billion worth of our shares year-to-date, including $3 billion in the first quarter. In addition, dividend payments totaled $1.2 billion for a total return of capital in the first quarter of $4.2 billion. And before I wrap up, I also want to spend a minute on the macro environment since inflation and interest rates are topical right now. There are certain areas of expense across each of our businesses that are impacted by inflation. Like other companies in our space, we're not entirely insulated from that. However, the overall impact to our financials has been limited. Overall energy costs make up about 1% of our total company's operating expenses. Also, we are more than offsetting any pressure on wages and other areas of expense through the continuing efforts to implement operational efficiencies, helping us protect the healthy margins across our businesses. Lastly, our balance sheet is very well positioned with about 95% of our debt based on fixed rates, a debt portfolio with a weighted average time to maturity of approximately 18 years and a weighted average interest rate of 3.47%. We ended the quarter with net leverage at 2.3x and still expect to remain around 2.4x leverage going forward. So with that, thanks for joining us on the call this morning. I'll turn it back to Marci, who will lead the question-and-answer portion of the call.

Thanks, Mike. Operator, let's open the call for questions, please.

Brian, could you talk a little bit about your decision to create this joint venture with Charter versus sort of going at it, just Comcast alone? It seems like aggregation is a huge opportunity, but JVs can be tricky to operate. How do you set it up for success? And is there a way to frame the benefit to Comcast over the next couple of years as this JV sort of goes to market more aggressively next year? And then, Dave, on broadband, I think this is the first quarter you sort of highlighted incremental competitive pressure on gross adds. Was there a change in the quarter? And can you just talk about sort of how you're thinking about customer segmentation, if there's any change to your appetite to take rate in order to sort of manage through the competitive environment.

Let me begin by thanking Ben. First, I believe that collaborating with Charter is beneficial because they bring excellent markets where we currently do not operate. From the perspective of those looking to utilize the platform we are jointly developing, whether they are hardware or software companies or something entirely new, they will desire national reach and potentially an international platform. This represents our competitive landscape, and enabling businesses to leverage these platforms will create value for both our shareholders and Charter's shareholders. We have previously partnered successfully with Charter. In response to your question about joint ventures versus going solo, there are advantages and disadvantages; however, when a partner offers something we lack, it becomes a distinct advantage. We have already successfully launched our Mobile business together, which has shown impressive growth, especially this quarter with the best net addition results. In the realm of business services, as we target larger enterprises, it has been essential to offer comprehensive solutions. We have achieved this with Charter and other partners. The advertising space also benefits from local and national joint ventures that enhance our offerings to advertisers. Our history demonstrates our ability to foster growth effectively. Furthermore, looking beyond the past couple of years, one significant aspect of our industry over the decades has been our capacity to continually reinvent ourselves. It is crucial to identify new growth avenues. Our ongoing innovation at Comcast, coupled with Sky's global reach, positions us to invest and discover new revenue sources in the future. These are essential steps we need to take now to reap the rewards later. Dave?

Just a quick comment on that. I think we are really excited about this partnership and the opportunity to leverage over a decade of innovation in our tech platform. We’re already performing very well. To provide some perspective, when we combine everything we do with Sky across our entire portfolio, we achieve 5 billion streams a week of streaming content. Additionally, we process 40 million voice commands a day through our remote. We have a fantastic platform and, as Brian mentioned, a great partner to collaborate with. I believe the scale is significant, and we are optimistic about the future. Regarding competition, we have been operating in a competitive landscape, facing various service providers for quite some time. We expected this as new players launched, and we have clear visibility on market expansions. Over the past 15 years, we have navigated various cycles, from competing on price with DSL and similar service providers to fiber launches. Currently, while there has been a noticeable increase in competition due to new launches of fiber and fixed wireless services, the key point is that our churn rates are at record lows. This has been consistent over a long period, and this last quarter has seen the lowest churn of any quarter ever. That said, we take competition seriously, especially given the considerable footprint growth in the past year, particularly with fixed wireless and fiber. We have developed a comprehensive strategy over time, segmenting the marketplace to compete at a very detailed level during new launches. We are also proactively advancing our mobile offerings. Our broadband is strong, and our pricing strategy reflects this segmented approach, with a focus on various tiers of quality broadband. We are committed to providing a consistent, high-quality network without trade-offs concerning time, geography, or peak moments. While there has indeed been an increase in competitive activity, and we recognize this, we maintain that the primary challenges come from macro factors that can impact move activity. In fact, we noticed that the change of address activity in our footprint was lower in March compared to February. Therefore, we see these macro issues as the main concerns at this moment, but we feel well-positioned to compete, and we plan to do so aggressively.

I've got one for Dave, one for Jeff. Dave, how do you see wireless pricing and execution evolving? You're offering a pretty good deal for customers, even though your phone subsidies aren't as great as the big three? But as you scale the business as you start to offload traffic, you're going to have more room, which you either drop to the bottom line or invest in scaling wireless more quickly. And given the broadband pressures you all discussed on the call, I'm just curious whether you think you get more aggressive investing in customer growth? And is there more ways for you to ramp customer growth even from these high levels? Or should we think about it more as driving profitability for the division? And then Jeff, sort of the obvious question, just any streaming strategy, we think, post Netflix.

Let me start with Mobile. It was a great quarter with another record in mobile lines. We firmly believe that our strategy and focus on accelerating growth in wireless is working. Over the past couple of years, we have adjusted our approach, including expanding the MVNO agreement, which has been beneficial. We're fully integrating Mobile into all aspects of our cable operations. Our marketing efforts are increasing, and we're actively promoting Mobile to attract new customers and engage our existing base. Every sales channel is now activated. This year, we will keep making adjustments with Mobile, utilizing our new unlimited pricing effectively alongside our by-the-gig options. Combining broadband with Mobile adds more value for customers. We believe that this converged packaging approach, which emphasizes service value, is crucial. We regularly introduce offers, including promotional deals with gift cards and handset incentives, but our main focus is not solely on the handset. We're also successfully promoting Bring Your Own Device and have launched small business and business services, indicating significant growth potential in Mobile. Regarding the future onload opportunity, we have a solid network, and our MVNO partnership with Verizon is functioning well. For most of our coverage area, a capital-light approach to wireless is the right strategy. We remain opportunistic and are conducting technical trials, utilizing our spectrum for offload traffic in densely populated areas where it makes financial sense. Our first 5G radios were operational at the beginning of February, and trials are currently in progress. We'll be ready to act when the time is right. Overall, we are in a strong position with considerable upside potential. Jeff?

Thanks, Dave. Doug. So we've said from the beginning since we launched Peacock that we're taking a different approach than most of the other people in the streaming business. We don't view Peacock really as a separate distinct business. We think it's an extension of our existing TV business, and we manage it that way. That's how we set up our business. That's how we program it. That's how we sell advertising across both linear and Peacock. And I think that, that strategy is working. We had an exceptional quarter this quarter. We're very pleased with how we're ramping. We're pleased how we're ramping revenue. We're pleased with that. We're ramping paid subs. We're very pleased with engagement, which was up this quarter. It's going to be obviously choppy depending on what programming comes in, what time. But I think our business model is clearly the right business model. Our approach, by the way, internationally, we're taking a different approach too, much more measured approach. We're focusing on Sky markets. And in non-Sky markets, we're looking for partnerships and unique ways to enter the market. So our business strategy is great for us. It's working. We're happy with the quarter. We're happy with how the business is scaling. And I think the noise in the rest of the streaming business really, if anything, just validates where we're going. I would also say that we've shown, as we ramp the business, that we're willing to be flexible and change our business model. As we see things evolve, we've shifted more towards a paid AVOD model when we saw that success early on. So obviously, as things change in the streaming market, we'll continue to evaluate and shift. But right now, we're really happy with our business model and how we're performing.

A follow-up and a question, if I can. So first, can you talk about anything to help us with recent trends in broadband and your thoughts on seasonality going forward into what used to be a weaker second quarter? I'm curious how many free customers didn't convert at the end of '21? And could that be part of what's been feeding the fixed wireless ecosystem? And then second on leverage, not to be nitpicky, but leverages has continued down now 2.3x. You said you did $1 billion in April. But at this level on the stock, does it make sense to really accelerate that?

I’d like to add to what Dave mentioned about competition and our market strategy. Looking back, we should consider a healthy normalized level of new subscribers for the first quarter at around 180,000. During this period, we experienced a transition in the number of subscribers added, particularly as we concluded our COVID initiatives where some individuals joined for free. Throughout the COVID period, we maintained a conservative yet appropriate approach in counting subscribers. For anyone brought in under a COVID relief program, aimed at keeping them connected, we made it clear that we would not count them until they transitioned from a free program to a paid one. This consistent approach remained throughout the COVID phase and continued until the conclusion of those programs last quarter. For this current quarter, any individuals who came in for free have now started paying. Therefore, I don’t anticipate any negative effects moving forward; the situation will naturally resolve in this first quarter. I want to emphasize the quality of our strategy, which is reflected in the record low churn we’ve achieved, as well as the growth in ARPU before, during, and after COVID. Ultimately, the COVID promotions have ended, and the positive one-time effect we saw in this quarter represents our return to normal subscriber counting practices.

Let me reiterate what Mike expressed perfectly. One additional point to consider is that we have consistently segmented the marketplace and have offered great options in various segments, including low-income constrained areas, for an extended period. We are always comfortable working with customers. If there are any roll-offs or similar situations, we have experience in managing those. Regarding seasonality, we expect ongoing normalization, particularly in places like Florida where we're noticing that people are leaving a bit earlier. This won't be an abrupt change in seasonality; rather, we believe it will gradually return to normal trends along with student activity. That's all from me. Mike, would you like to add anything?

We are pleased as we approach the one-year mark since we returned our leverage to the desired level, aligning with our ratings commitments and strengthening our balance sheet. This quarter, with buybacks totaling $3 billion and dividends amounting to $1.2 billion, we achieved a record capital return in the company’s history. As we look ahead, our strategy will be informed by our leverage position. The slight decrease we’ve observed should not be a concern, as there are many variables at play in our forecasts. We aim to maintain leverage around 2.4, which could fluctuate between 2.3 and 2.5. This target is also influenced by our stock performance, which provides us with additional capacity. We accelerated our buybacks toward the end of the last quarter and have continued at that pace, executing another $1 billion in the second quarter so far.

So the one thing I would just add is something that I'm proud of. If you look at one of our goals, it is to grow our businesses. Every one of our businesses just reported on thinking about the future through investment. Whether it's the joint venture, broadband investments, Peacock investments, activities at Sky, stock buybacks, or increasing the dividend, we are executing all of these strategies simultaneously. I believe that is what sets us apart.

Brian, you mentioned that the company needs to reinvent itself, which you have done consistently over the years. Regarding video, how do you see its evolution for the company? If you take a holistic view, the legacy business is shrinking at an unprecedented rate, and the competitive landscape is changing significantly. How do you plan to reposition your assets, whether from cable to content? Should you enhance your presence in news, sports, and international segments? Jeff, regarding international visitation, I believe it is still quite low. What is the typical rate and what is it currently?

Well, let me begin, Jessica. It’s great to hear from you. I believe we have handled the changes in video quite effectively. On one hand, part of NBC's media results show that the decline is actually less because there are new ways for people to access video. On the Cable side, we achieved our highest margins and our best quarter in EBITDA and revenues. The companies continue to grow because we shifted our strategy. Our customer satisfaction scores are at all-time highs. We are providing customers with choices and have managed to position ourselves uniquely, so we’re not forcing something onto customers that could be challenging. This strategy has proven successful for us. Looking ahead, we see aggregation as a real opportunity for customers who now have so many options. They want quick and seamless access to the content they desire along with a service that simplifies their experience. Viewing patterns are changing, and we discussed before the call one of our NBC shows on Peacock, related to Dateline. Initially, using traditional television ratings, you might reach one conclusion, but as the show grew with on-demand availability through Peacock and NBC Dateline Specials, it has become quite successful. Having a company capable of operating across all these platforms has positioned NBCUniversal well. We aim to use these examples to explore opportunities in our new partnership with Charter and throughout the NBC portfolio, striving to innovate and remain relevant to both new and existing generations of television viewers. Additionally, considering what Sky is doing with Sky Glass and its integration directly into televisions without the need for a box, we see potential for XClass. It’s an exciting roadmap ahead, and I believe our company is well-equipped to navigate these changes.

Yes, Jessica. Our Theme Park business is performing exceptionally well. However, international visitation to our domestic parks is currently less than half of what it typically is at this time of year for Orlando and California. Despite this, our future bookings for the summer are at historic highs. Additionally, while Japan doesn't experience the same level of international visitors as Orlando, it still has some international visitation and is nearing pre-pandemic levels in Osaka, even without a significant influx of international guests. We're very optimistic about the future of our Theme Parks. It's worth noting that we have continued to invest in our attractions throughout the pandemic, so international visitors who have postponed their trips will have plenty to experience once travel resumes. This gives us greater confidence moving forward.

I want to continue discussing broadband for a moment. You mentioned that the run rate, without the conversion of free customers, would have been around 1.80. Can you elaborate on the market growth aspect of that, including new household formation? Specifically, what trends are you observing in your edge-outs and how quickly can you extend these edge-outs to expand your footprint? Additionally, what do you believe is the minimum baseline for your broadband growth rate moving forward?

Yes. Craig, this is Dave. Regarding household formations, we are focused on the change of address data, which has been declining, particularly in our area as of March. This trend affects household formation, making it a relevant point for our footprint. We're concentrating on our growth opportunities, which include expanding within our traditional cable markets, targeting residential, single-family units, multi-dwelling units (MDUs), and some commercial sectors. While there have been some new construction starts and pauses, we believe that this area will gradually recover. The second area involves proactive builds, which we refer to as hyper builds, mostly concentrated on commercial projects but also including some MDUs and residential opportunities. Thirdly, we are focusing on rural edge-outs. We see significant opportunities here and are actively evaluating various potential projects, taking advantage of federal and state subsidies. We have submitted many applications for these programs as they present an economical way to expand our services into new areas. It’s early in these initiatives, but we are already seeing some success. Our aim is to be a trusted partner for communities, and while competition for these subsidies will be fierce, we plan to expand our services. Last year, we added just over 800,000 new passings, and we are prepared to aim for at least that number again, with hopes for even greater growth.

I'm actually going to follow up on the comments that Jeff was making earlier on the parks. You noted that you're seeing great performance in Orlando and per cap up considerably. First, I was wondering if you might be willing to quantify that, the extent to which your per caps are stronger now relative to where they had been prior to the pandemic. And then bigger picture, Disney has spent a lot of time talking about steps they've taken over the last 2 years to position their parks business to have a higher yield as we fully emerge from the pandemic. I was hoping maybe you could just elaborate a bit on some of the things you've done. You mentioned you've invested in new attractions. But are there other steps you've taken over the last 2 years or so that would lead you to believe that this improvement in per caps has a degree of durability to it, such that you will indeed be operating a higher-yielding business yourself whenever we're fully out of this?

Thank you, Brett. I didn't mention per caps earlier, but they are up compared to before the pandemic. I was discussing attendance and its mix. During the pandemic, we invested in our Theme Parks by adding significant attractions in all locations without slowing down much. The VelociCoaster in Orlando has been incredibly successful, and we introduced Nintendo in Japan, which is performing well. We're excited to bring that experience to Hollywood next year and later to Orlando. Additionally, we added a pet attraction in Hollywood. Our biggest project is the new park, Epic Universe, in Orlando, which will extend our visitors' stay and feature the previously mentioned Nintendo land along with other key attractions. So yes, our per caps are up, and while we have reduced some costs in the business, the primary focus has been on continued investment as we are optimistic about future growth in that sector.

Maybe two quick ones. First for Brian, with many dislocations in the market, a lot of media stocks have been under pressure, especially recently. Can you share your perspective on M&A opportunities? As mentioned earlier, your team has always taken the chance to reposition the company when needed. Do you see more accretive, value-creating opportunities in the market now compared to six months ago? That's the first question. For Jeff, regarding Peacock, is the slowdown in net additions you've mentioned just a result of coming off the Super Bowl and the Olympics? Also, how does the strategy of broadcasting NBC content on Peacock the next day affect your retransmission agreements?

Thank you, John. I don't think there's anything new to update today. We're here to focus on a strong quarter and a good start to the year. Our strategy, which Jeff articulated well, has been in place for several years, and we have plenty of opportunities around the world that we are focusing on. While we are always considering new factors and changes, the primary focus remains. For instance, regarding your last point about the Olympics, despite the challenges and unmet expectations due to various political circumstances, our team and storytelling capabilities stand out. This company has a unique ability to present such events using new technologies, which positions us advantageously. Jeff?

Yes. To provide more insight into Peacock, our four primary programming focus areas are sports, movies, leveraging the strength of our movie studio, linear programming, as Brian discussed, and original content. The first quarter marked the first time we fully integrated these elements. We had the Super Bowl and the Olympics occurring in the same week, and we capitalized on that audience by releasing the movie "Marry Me" on Valentine's Day during that time. This all resulted in three segments. What was particularly encouraging is that we not only added the four million paid subscribers that we mentioned, but we also retained those subscribers as indicated in the quarter-end numbers. Additionally, we utilized that audience to promote our first high-priority original, "Bel Air," which turned out to be our first significant hit in that category. The final element of our programming strategy, which we have yet to fully implement, is next-day programming from NBC and our other networks like Bravo. This content is currently available on Hulu due to our agreement with them, but as part of our termination at the end of last year, we will be bringing all that programming back to Peacock starting in September. There will be no impact on retransmission since it’s the same content that's already available. However, instead of going to Hulu to watch shows like "The Voice" or "Real Housewives" the next day, viewers will be able to watch them exclusively on Peacock starting in September, and we are quite excited about that.

Thanks, John, and that will end our first quarter 2022 earnings call. I want to thank everyone for joining us.