Comcast Corp - Class A (CMCSA) — Q1 2024 Earnings Call Transcript

Thank you, operator, and welcome, everyone. Joining us on today's call are Brian Roberts, Mike Cavanagh, Jason Armstrong, and Dave Watson. I will now refer you to Slide 2 of the presentation accompanying this call, which can also be found on our Investor Relations website, and which contains our safe harbor disclaimer. This conference call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call, we will refer to certain non-GAAP financial measures. Please see our 8-K and trending schedule issued earlier this morning for the reconciliations of these non-GAAP financial measures to GAAP. With that, I'll turn the call over to Mike.

Thanks, Marci, and good morning, everyone. Across the company, our team is managing extremely well in a highly competitive and evolving marketplace. We have a clear vision for how we are going to compete now and into the future, combined with a sharp focus on execution. Equally important, our disciplined capital allocation strategy, coupled with our strong balance sheet, puts us in an enviable position relative to our peers to invest organically and aggressively in our six scaled and diverse growth businesses namely: Residential Broadband, Wireless, Business Services, Theme Parks, Studios, and Streaming. These businesses comprise more than 55% of the company's total revenue today, and that proportion will only grow over time. In the first quarter, these businesses generated a high single-digit increase in revenue on a trailing 12-month basis. And when combined with our substantial share repurchase activity, enabled us to deliver double-digit adjusted EPS growth as well as significant growth in free cash flow per share. In fact, since 2018, we grew adjusted EPS over 50% and free cash flow per share nearly 25%. Now for some of the highlights of the first quarter, I'll start with Broadband. The broadband market remains extremely competitive, particularly within the market for more price-conscious consumers. We continue to be intensely focused on segmentation, providing customers with options that meet both their lifestyle and budget. Importantly, we are striking the right balance between ARPU and subscribers, which is clearly reflected in our first quarter results, where despite modest subscriber losses, ARPU grew over 4%, driving mid-single-digit growth in residential broadband revenue to over $6.5 billion. We continue to see extremely encouraging broadband consumption trends across our base of 32 million customers. Usage on our network rose double digits year-over-year, with broadband-only households consuming over 700 gigabytes of data each month, and our broadband customers continue to value faster speeds. Today, over 70% of our residential subscribers receive speeds of 500 megabits per second or higher, and around one-third are getting a gig or more. We believe that consumers' expectations for their broadband experience in terms of speed, reliability, security, and performance will only increase over time. It is extremely important to us that our network upgrades stay well ahead of this demand; our deployment of mid-splits doubled year-over-year and now reach 40% of the footprint. The investments we are making to increase capacity and incorporate multi-gigabit symmetrical speeds everywhere we offer service put us in a great position to capitalize on these very favorable consumer trends. And when combined with our rapid footprint expansion, set us up to gain market share and return to broadband subscriber growth over time. Turning to wireless. We increased our domestic customer lines by 21% year-over-year to nearly 7 million, yet with wireless penetration of our residential broadband customer base still only 11%, we have plenty of room to grow. We continue to see the benefit of bundling broadband and mobile, which decreases churn and improves customer lifetime value. Our customers also benefit by being connected to our WiFi network, which is the largest in the nation. In fact, 90% of all Xfinity Mobile traffic is delivered over WiFi, not cellular, and we are constantly adding new features to further differentiate the experience. The most recent example is our introduction of WiFi Boost, which enables any Xfinity Mobile customer to experience speeds of up to 1 gig whenever they connect to our 23 million hotspots at no additional cost. Across our Connectivity & Platforms business, we're focused on profitably serving each segment of the market from our premium and traditional customers who want fully featured products to more price-driven consumers. With regard to the latter, we are introducing NOW, a new brand and product portfolio targeting the prepaid market that delivers high-quality, low-cost Internet, mobile, and streaming TV products with simple all-in pricing. NOW Internet and mobile will be particularly helpful to those Americans impacted by the end of the ACP, bringing them another option for affordable, reliable connectivity and supplementing our Internet Essentials program, which we offer to eligible households as part of our long-standing commitment to help close the digital divide in America. Turning to Content & Experiences. Let's start with parks. We continue to see strong underlying demand in both Hollywood and Japan, where healthy attendance and per-cap levels were once again driven by the success of Super Nintendo World. Building on our momentum, later this year, we're opening our newest Nintendo-themed land, Donkey Kong Country, which will increase the size of Super Nintendo World in Japan by 70%. Switching gears to Orlando. We started to feel some pressure on attendance levels late in the first quarter, which tends to occur in tandem with the ebbs and flows of new attractions in the market. Right now, we happen to be lapping the multi-year surge in attendance from our opening of new attractions in prior periods, but we remain confident about our longer-term growth opportunities, especially as we look ahead to next year with the opening of Epic Universe. With three new hotels and five immersive worlds featuring more than 50 attractions, entertainment, dining, and shopping experiences, it will be the most technologically advanced park in the world. Together with our three current gates in Orlando, Epic will enable us to offer a full week's vacation experience to even more guests. Moving to Studios. We're incredibly proud of our film team and our recent ranking as the number one global studio by worldwide box office and winner of Academy Awards, including Best Picture for Christopher Nolan's Oppenheimer. On the back of our fantastic performance in 2023, the power of our studios continued this quarter with the theatrical release of Kung Fu Panda 4, which has grossed over $480 million in worldwide box office to date. And we have an exciting slate still ahead. For the third year in a row, we'll release more movies than any other major studio with The Fall Guy, an action thriller starring Ryan Gosling and Emily Blunt coming this May; Despicable Me 4, Illumination's newest installment of this highest grossing animated franchise; as well as our adaptation of Twisters, both debuting in July; and Wicked, one of the most highly anticipated movies of 2024 coming in November. Finally, in media, we are successfully managing the segment as one business across linear and streaming. By providing the tens of millions of traditional pay TV subscribers as well as streamers with choice in how they engage with us, we continue to generate significant audience for our programming. Big events like the Olympics, Sunday Night Football, Big Ten; top entertainment shows like Saturday Night Live and Law & Order, with strong consumer demand for our content, we're well positioned to evolve with the changing market. Our exclusively streamed NFL Wild Card game was a big success this past quarter. We added and then retained even more new Peacock subscribers than we expected. Overall, people are staying with us to engage in a broad range of content, spending 90% of their time on the platform viewing non-sports programming. This includes scripted shows like Ted and reality shows like The Traitors, both of which ranked within Nielsen's streaming top 10. And our award-winning collection of films like Oppenheimer, which premiered exclusively on Peacock in February and was the most watched film across all streaming in its first seven days on the platform. Clearly, Peacock has been on a great trajectory since our launch four years ago, with 34 million paid subscribers having grown 12 million year-over-year at a $10 ARPU. Looking ahead, our content offering provides such a great value proposition that we should have some real pricing power over time. Of course, sports also play an important role in our media business, and that's especially true this year. Following the Kentucky Derby in May, we'll have the Paris Olympics for 17 nights this summer. With more programming hours on the NBC Broadcast Network than any previous Olympics, and over 5,000 hours of live coverage on Peacock, the games are on track to generate the most advertising revenue in history with $1.2 billion in ad sales commitments. Right after the Olympics, we have the return of football with Big Ten, Sunday Night Football, and the NFL's first-ever Friday night opening game from São Paulo, streaming exclusively on Peacock. So wrapping up, I'm really proud of the work that our teams across the company are doing. Together, we're executing at the highest level and positioning ourselves for growth in a challenging and dynamic marketplace. So Jason, over to you.

Thanks, Mike, and good morning, everyone. I'll start with our consolidated results on Slide 4. Total revenue increased 1% to $30.1 billion. And within this, our six major growth drivers generated nearly $17 billion in revenue, well over half of total company revenue and once again have shown steady and consistent growth at a high single-digit rate over the past 12 months. While EBITDA was in line with prior year's level at $9.4 billion, we generated a high level of free cash flow this quarter at $4.5 billion, and we returned $3.6 billion of capital to shareholders, including $2.4 billion in share repurchases. And over the last 12 months, we have reduced our share count by nearly 6%, contributing to our adjusted EPS growth in the quarter of 14%. Now let's go through our business results, starting on Slide 5 with Connectivity & Platforms. Note that our largest foreign exchange exposure is to the British pound, which was up 4% year-over-year. So as usual, in order to highlight the underlying performance of the Connectivity & Platforms business, I will refer to year-over-year growth on a constant currency basis. Revenue for total Connectivity & Platforms was flat at $20.3 billion, reflecting strong growth in connectivity revenues, offset mainly by declines in video revenue. Residential Connectivity revenue grew 7%, driven by 4% growth in domestic broadband, 13% growth in domestic wireless, and 19% growth in international connectivity, while Business Services Connectivity revenue grew 5%. In domestic broadband, our revenue growth was driven by very strong ARPU, which increased 4.2% and came in a bit above our historical range. Our team is doing an excellent job of customer segmentation while balancing rate and volume. And we are encouraged by the positive consumer behavior trends we see in our base of 32 million customers. Bandwidth requirements and engagement are increasing at a rapid clip while the vast majority of our customers are now on speeds of 500 megabits or higher, and adopting advanced tier as a service like xFi complete at a higher rate. But as Mike mentioned, it continues to be a very competitive environment. And we lost 65,000 subscribers in the first quarter, following a loss of 34,000 subscribers in the fourth quarter of 2023. As we sit here right now, we do not see this trend improving in the near term. We expect churn could be elevated given the end of ACP, which is only fully funded through April and partially funded through May. We remain in constant communication with our ACP customers and we'll continue to be diligent in helping this customer segment stay connected through various options. Whether that's our successful Internet Essentials program or our new prepaid NOW offerings, as Mike described. In addition, I want to remind you that the second quarter also tends to experience seasonal headwinds. While it's a competitive market, especially for the price-driven segment, we will continue to compete aggressively, yet in a financially balanced way and expect to drive healthy broadband revenue growth through growth in ARPU, which we expect to remain well within our historical range of 3% to 4% growth even as we manage through the ACP transition. Turning to domestic wireless. Revenue growth of 13% was due to higher service revenue, driven by a 21% year-over-year increase in our customer lines, ending the quarter at 6.9 million in total, including the 289,000 lines we just added in the quarter. We are consistently in the marketplace testing new offers, including some recent pricing plans targeted at multiline customers, the new NOW Mobile product as well as our Buy 1, Get 1 line offer. We continue to see significant opportunity in wireless to increase the penetration of our domestic residential broadband customer base, which currently sits at 11%, and to sell additional lines per account. International connectivity revenue reflects strong growth in broadband revenue, driven by solid ARPU growth as well as growth in wireless due to additional customer lines and also higher ARPU. For business services connectivity, we generated 5% revenue growth driven by higher ARPU in small business and broader growth in both customers and additional solutions for mid-market and enterprise. The SMB market has gotten more competitive but we will aggressively defend our position. And similar to this quarter, we'll grow revenue by increasing ARPU, driven by higher adoption of additional products like Mobile, Security Edge, Connection Pro, and WiFi Pro and through targeted rate opportunities. Meanwhile, our momentum continues to build in mid-market and enterprise as our expanding capabilities in managed services, wide area networking, and cybersecurity have led to increasing customer wins and the expansion of existing relationships. The strong growth in our Connectivity businesses was offset by a decline in video and other revenue. The decline in our video revenue was driven by continued customer losses and slower domestic ARPU growth versus last year, and the lower Other revenue reflects continued customer losses in wireline voice. As I mentioned earlier, Connectivity & Platforms total EBITDA increased 1.3% with a margin of 50 basis points, reflecting a decline in overall expenses driven by the mix shift to our high-margin connectivity businesses, combined with a continued focus on expense management. While margins for our domestic legacy cable business improved even more, our international business was impacted by a reclassification of some expenses from capitalized software to operating expenses, creating a tough comparison to last year. I'll note that absent this change, EBITDA growth in the first quarter would have been about 1 point higher, and our margin improvement would have been about 50 basis points higher. While this change increased our operating expenses this quarter, there was an offsetting decline in Connectivity & Platforms capital, resulting in a neutral impact on net cash flow, which was up 5% this quarter. Breaking out our Connectivity & Platforms EBITDA results further. Residential EBITDA grew 1.1% with margins improving 60 basis points to 38.3%. And Business Services EBITDA growth was lower than our typical mid-single-digit level at 2.6% with margins declining 160 basis points to 56.7%. These results include significant investments in the enterprise space, including in sales and fulfillment that we are making to drive future revenue growth. Business Services generates well over $5 billion in annual EBITDA, which is margin accretive, and we expect it to continue to be a material contributor to overall connectivity and platforms growth this year and over the longer term. Now let's turn to Content & Experiences on Slide 6. Overall, revenue increased 1% to $10.4 billion, and EBITDA decreased 7% to $1.5 billion. Let's take a closer look at the details. Starting with Theme Parks. Revenue increased 2%, while EBITDA decreased 4% for the quarter. These results reflect the negative impact of currency as the Japanese yen is at a 34-year low against the dollar. Adjusting the results to exclude the impact of foreign currency, Parks' revenue would have increased 5% and EBITDA would have been flat compared to last year's first quarter. We had strong underlying growth at our park in Osaka, which continues to benefit from demand for Super Nintendo World. We're also seeing growth in Hollywood despite lapping the opening of Super Nintendo World in that park during the quarter. Beijing results were relatively flat in what is typically a seasonally light quarter, and Orlando results were below last year, but still roughly in line with pre-pandemic levels. We are seeing some pullback from the unprecedented attendance we realized immediately after the pandemic, which we believe is driven by the timing of new attraction openings and some increased competition from other entertainment venues, notably cruises. At Media, which includes our TV Networks and Peacock, revenue increased 4% as Peacock's strong growth of 54% more than offset a low single-digit decline at our linear networks. Distribution revenue growth of 7% was driven by Peacock with subscription revenue growth of 68%, powered by the 55% year-over-year increase in our paid subscriber base to 34 million, including 3 million net adds in the first quarter. We are really pleased with Peacock's trajectory. We started the year with an incredibly successful NFL Wild Card game, which resulted in a nice lift to paid subs. But even more important was how our broad content offering enabled strong consumer acquisition, retention, and engagement. We've had success across a broad range of content during the quarter, including films moving into our Pay-One window like Oppenheimer, the most-watched Pay-One film in Peacock's history; and The Holdovers, as well as successful originals, including Apples Never Fall, Ted, and the second season of The Traitors. Looking ahead, we will continue to be focused on retention, particularly in the second quarter as we look forward to the second half of the year, we will have a substantial amount of acquisition-oriented content lined up. This is consistent with Peacock's historical trends, and this year is expected to be driven by the Olympics this summer and the NFL and Big Ten returning in the fall, in addition to the steady stream of films landing in our Pay-One window, as well as upcoming originals. Finally, domestic advertising revenue was flat in the quarter, reflecting a stable overall market with strong advertising growth at Peacock, offset by lower advertising revenue at our linear networks. Media EBITDA decreased 6%, reflecting the revenue pressure on our linear networks, partially offset by continued year-over-year improvement in Peacock EBITDA losses, even with the addition of the wildcard rights costs. And we expect to see, on average, even better year-over-year improvement for Peacock in the coming quarters. At Studios, the revenue decline of 7% reflects lower content licensing, which was impacted by the timing of deliverables related to our film licensing business, which was partially offset by a modest increase in theatrical revenue, driven by the strong performance of Kung Fu Panda 4 at the box office this quarter. Studio's EBITDA declined 12%, reflecting the difficult comparison to last year's film slate, including the highly successful carryover title, Puss in Boots: The Last Wish, and the timing of licensing deals at film. Now I'll wrap up with free cash flow and capital allocation on Slide 7. As I mentioned previously, we generated $4.5 billion in free cash flow this quarter, and we achieved this even with the significant investments we continue to make to support our growth drivers. Specifically, our $3.3 billion in total capital spending this quarter incorporates our efforts in expanding our footprint and further strengthening our domestic broadband network, scaling our streaming business, and supporting the continued build of our Epic Universe Theme Park ahead of its 2025 opening. And working capital was a $940 million drag for the quarter, a significant improvement over last year, a lot of which is timing related. Turning to return on capital. For the quarter, we returned a total of $3.6 billion to shareholders, an increase of 13% year-over-year. This includes share repurchases of $2.4 billion and dividend payments of $1.2 billion. Putting it all together in the last 12 months, we've returned over $16 billion in capital to shareholders between share repurchases and dividends, reducing our share count by nearly 6%. At the same time, we invested nearly $17 billion back into our businesses in the form of capital and working capital, carefully and consistently balancing reinvesting in our businesses for growth, returning significant capital to shareholders, and doing so with a very strong balance sheet, which facilitates this consistency through a variety of operating environments. Now let me turn it over to Marci for Q&A.

Thanks, Jason. Operator, let's open up the call for Q&A, please.

Two questions maybe for Dave on the Cable side. Could you talk maybe bigger picture about customer segmentation, particularly some of the new efforts around prepaid and the NOW brand as well as some of the speed boost you've done, and just how you think about that impacting the business over time? And then if you're willing to give us a little more on how you are able to deliver ARPU growth within the historical range through the CP transition, just given: obviously, the subsidies going away.

Let me start by discussing our segmentation strategy, which is fundamental to our approach. We primarily focus on premium and traditional broadband customers and have invested in improving our network and services for this segment. We actively compete across all segments, emphasizing the direction of broadband toward greater engagement. Our goal is to provide multi-gig symmetrical service and diverse Internet options. Currently, 70% of our high-speed data-only customers enjoy speeds of 500 megabits per second or more, while one-third of our residential customers benefit from gigabit speeds or higher. It's clear that our strategy is not a one-size-fits-all approach. We recognize there's significant activity at the lower end of the market, where we've been less competitive. Although we have excellent products, particularly in the prepaid sector, we see an opportunity to enhance our effectiveness in that area, which leads us to the NOW initiative. There are three components to NOW: first, prepaid broadband, which we've had for a while but we've improved its value proposition; second, the introduction of prepaid NOW mobile, designed as an alternative to fixed wireless; and third, our focus on providing services without credit checks, contracts, or complicated pricing—a straightforward and competitive offering. While it's still early to assess our progress, we're optimistic about the positioning of the NOW products for customers with limited income. We've also been successful with NOW TV. Collectively, these make up a robust product suite, and I'm confident in this direction. Regarding average revenue per user (ARPU), we've maintained a balance between ARPU growth and volume share for a long time. This quarter showed a strong increase of 4.2%, surpassing the usual range of 3% to 4%. Despite the competitive landscape, we believe we're achieving the right balance of volume and pricing. Our strategy includes moderate rate increases, and our teams have performed well, yielding results that slightly exceeded our expectations. Overall, we continue to tailor our product offerings to meet the needs of each segment, starting with the high-end market. This pricing and packaging approach allows us to compete across the board and adapt to where the market is heading, especially as overall usage continues to rise.

This is Brian. I want to emphasize the point that Dave made. Looking ahead, our company is focused on our technology roadmap and the innovations we are demonstrating. It’s exciting to envision how broadband will impact consumers and businesses over the next 5 to 10 years. It’s almost unimaginable. There's a lot of conversation surrounding AI, but significant developments are occurring in entertainment, sports, and healthcare, along with areas we haven't even discussed yet. Our strategy remains clear. We are implementing our NOW strategy to make it easier for consumers in a prepaid market while maintaining our goal of offering a superior product with excellent service and ongoing innovation. Our investments continue to be consistent and within previously discussed guidelines. We're progressing well with this approach. If I had to highlight one standout figure from this quarter, it would be the double-digit growth in bits per home, which reflects increased usage for activities like gaming and streaming, along with advancements in high definition quality. We're pleased with our team's execution. Jason?

Sure, thank you. To address your question about ARPU and the ACP cycle, I believe the points you raised are all important. Firstly, we continue to see rapid growth in usage, which indicates that consumers are deriving greater value, supporting ARPU growth. Secondly, as Dave mentioned, we are facing significant competition in the value-conscious segment of our customer base. This segmentation helps prevent competitive pressures from affecting other areas of our base, and the team has managed this effectively. Lastly, we have around 1.4 million ACP customers that we need to manage. This scenario is reminiscent of how our business operates, as Dave and his team frequently deal with promotional roll-offs every quarter. The challenge is to transition customers from promotions to new rate plans while retaining them, which is a core aspect of our Cable business strategy.

And Ben, I'll just come in on the back of the question about any changes in how we think about capital allocation. I think Jason and team are carrying on a phenomenal tradition. I've been here now close to 10 years. And I think the idea of taking our well-generated capital across our businesses, and first and foremost, investing them back in the business with a very long-term view of what the future can be, where there's expected return. Whether that's the Parks business, whether that's the broadband network, whether that's streaming, whether it's just broad innovation. I think it's in our DNA at this place to try to figure out ways to invest wisely for the future, while at the same time, maintaining a very strong balance sheet and we like the way the balance sheet is set up. When you go through these long arcs of change across industries with disruption, it allows you to sleep better at night knowing the strength of the balance sheet we have and allows us to continue making those early investments. And then so to do those two things together with the very substantial interest on the part of the management team and the facts that we've done it to just get lots of capital return to shareholders. Not many companies are inclined to manage those three priorities as much as we are. And I can commit that that's where our head is as we look forward to the next 10 years ahead.

I have two questions regarding broadband. First, you mentioned that your wireless business is helping reduce broadband churn. Can you provide more details on that? Specifically, what are the figures associated with the churn reduction when customers bundle broadband and wireless? Additionally, how do you view wireless? Is it a standalone business for you, or is it primarily focused on reducing broadband churn? Also, I think Jason mentioned the margins for the domestic Cable-only business, but I might have missed that. Could you please repeat that number for us?

Let me start with wireless and then pass it to Jason and the team. Wireless is a crucial part of our overall strategy. In response to your question, we have always believed that the main value of wireless is its connection to broadband, enhancing its value. While we do not provide specific details on churn benefits, we can see them. Wireless plays a role in acquisition, base management upgrades, and retention. It presents a key growth opportunity, and our marginal economics are strong for this product. Our approach to the market integrates wireless with broadband and packaging, and it is performing well. We are pleased with our consistency in the marketplace and are excited about our growth potential, as we have only about 11% penetration with approximately 7 million lines. I am optimistic about the opportunities ahead of us as we continue to evolve our strategy around how we connect wireless with broadband.

Craig, so on margins, we said overall connectivity and platforms margins were up 50 basis points and said domestic was an even greater increase. The domestic was up 70 basis points year-over-year, sort of continuing the formula of a mix shift in our business to higher-margin businesses. Our connectivity businesses are growing faster than our nongrowth video businesses. So that's a margin favorable trade-off for us, as we said historically, and then operating efficiencies in the business. I think we gave a stat last call that I'd reiterate; we've taken 50% of our truck rolls out of the system in the last six years. We've taken 40% of customer interactions out of the system in the last six years. So a lot of good progress on expense efficiency. But Craig, the domestic margin's up 70 basis points.

I have a question on NBCU and also on Comcast Cable. On the Theme Parks, which is clearly one of your growth pillars, can you give us the investment levels you expect over the next five years? Obviously, Epic will be in there, so it will be a little elevated. But you have other new parks, and you're also investing in the existing parks. And how different is the return on invested capital for Theme Parks versus your other businesses? And then one more on NBCU; are there other areas that NBCU should or you're thinking about investing in like video games? And then on Cable, on Comcast Cable. Just a question on your programming expense or programming contracts. Presumably, you have MSMs; I think you've always had them. How should we think about the impact on Comcast Cable programming expenses as some major programming contracts come up with other distributors?

Jessica, it's Mike. So on parks, as we've said, this is a year in 2024, where CapEx in parks and at NBCUniversal overall will sustain at the level it was in '23. So it will remain elevated. In '25, when we open Epic, it will begin to step down. And then after that, it will return to a more normal level with adjustments for the Hollywood Hard Nights and the Kids park in Frisco, Texas that we've talked about. But those, as we've said, are not of the same size and scale as a large park like Epic, but we do have a bigger footprint of parks than we did, say, five years ago. So you're right; part of the capital equation for parks is to continue to invest in new attractions within existing parks. So again, once we get to '26, you'll see us easing into a new steady state that does include continued experimentation with some of our alternative concepts. And then certainly, we hope over the longer term to come up with some ideas for bigger deployments of capital, but that's what we have in our plans as we sit here right now. But we love the business. And to the question of returns, we think the returns are very strong. We take a careful look at that every time we're greenlighting a new park. And I think we like the stability of the long-term nature of the return. It's us and one other great company that are world leaders in that level of park experience. The response to our parks has been phenomenal coming out of COVID. And so we see that being a place, live entertainment at the level we're talking about, being just a strong pillar of the media and entertainment side of the company for a long time ahead. And then in terms of other areas, I think the success that we've had across parks and experiences leads us to plenty of opportunities to think about gaming and other areas around live entertainment that go around and cross between our businesses. So we experiment with things and we look, and it's our job to see if there are great opportunities to do that, but nothing to report today.

Jessica, regarding your question about renewals, we handle each situation individually. However, we assess them based on three main factors: the overall cost in relation to the content, the flexibility needed in a rapidly changing environment, and the consumer value. We're aware of the significant shift occurring between linear and streaming, and we believe we can play a unique role in creating mutually beneficial opportunities for content providers and distribution. Our platform is well-suited to manage all forms of video, including linear channels, on-demand, DVR, and streaming. We've been preparing for streaming packaging for some time now, enabling us to adapt as these changes arise. Our consistent objective is to identify mutually beneficial opportunities in every renewal assessment.

Two, if I could; maybe first for Jason. Just finishing up on ACP. Given the strong start you guys had to the year and the strong ARPU, do you guys think that you can keep domestic cable EBITDA flat to up for the year even with ACP going away? That's first. And then maybe for Dave, the wireless companies are definitely talking at sort of bigger game on fixed wireless in the business market. I know you guys had some sort of strong comments in the prepared remarks about the business market. But are you starting to see some increasing competition leak in at the low end because of fixed wireless?

Yes, John. Let me address the domestic Cable EBITDA and C&P EBITDA for the year. As you pointed out, it's a competitive market with ACP coming up. Specifically regarding broadband, we've noticed some pressure on volume, but we achieved 4.2% ARPU growth this quarter, and we expect to maintain an outlook of 3% to 4% for the year. We still believe there are favorable conditions for broadband revenue growth. This quarter, we saw 3.9% growth, and our business services and wireless sectors are expanding, which helps offset declines in video and other revenues. Overall, this creates a positive shift in our margins. It’s important to emphasize the ongoing expense initiatives within the company and our disciplined approach to reducing volumes, which is also providing a helpful boost. While I can't provide specific guidance for EBITDA growth, I can share our confidence in the underlying components.

John, regarding Jason's point about ACP, it’s important to note that we've been analyzing the market segments for over a decade, and our platform, Internet Essentials, has been a leader throughout that time. We're experienced with this segmentation and promotional roles, especially during significant moments. Consequently, we feel confident that the historical ARPU range of 3% to 4% remains viable. As for business services, there’s no denying that the SMB market has become more competitive, especially with the addition of three fixed wireless competitors. This saturation is impacting our results specifically in the SMB sector. Our strategy has consistently focused on both maintaining market share and ensuring strong rates, backed by a robust lineup of products. We have distinct segments within Business Services, including mid-market and enterprise, which help mitigate some of the challenges we're facing. It's crucial to emphasize that as competitive pressures increase, the reliability and availability of our products are vital for SMBs. Businesses need 24/7 connectivity that they can rely on. Moving forward, we will prioritize enhancing our offerings and providing features that benefit our business clients while ensuring they understand that our reliability sets us apart from fixed wireless solutions.

And just Brian. Just as we discussed in the residential market, the long-term opportunity that we are only beginning to tap into is in large enterprises and medium-sized businesses. When you consider cybersecurity and other aspects of data reliability along with consumption behavior of businesses, think about your own experiences and where that might lead to the adoption of new tools and video and other technologies. You want to have the best network. We have an exciting team and a solid roadmap in that area. So once again, we are addressing challenges in one segment while recognizing great opportunities in others, and long-term, we are optimistic about our situation.

Maybe first just on broadband trends. I think you've been pursuing a line extension strategy for at least 18 months and that will continue. So is it correct to assume that your gross adds on broadband are starting to pick up just as you add more passings in the market? And if that's true, can you give us any color on within the deactivations where they're headed? I think you've always said that you view fiber as the bigger competitive threat. And so does that kind of help us understand what's going on between gross adds and net adds?

Steven, this is Dave. I'll begin with our footprint and then discuss our views on competition. Regarding overall footprint expansion, most of our new passings each quarter are fill-ins within our existing footprint, while the rest of the growth primarily comes from our organic expansion into nearby areas, with some government-subsidized builds representing a smaller but growing portion. We are considering three different components in this process. Although it is still early, we are very disciplined in evaluating the risk-adjusted returns of each of these network builds on an individual basis. Generally, the edge-outs will increase and often occur in areas adjacent to the geographic markets we currently serve. Looking forward, we anticipate these edge-out projects will continue to contribute to our overall growth in passings. While we don’t disclose specific numbers on this, I can say that we expect to achieve strong penetration levels in a few years through these edge-out projects. The ramp-ups happen relatively quickly, and we are satisfied with the returns, following a disciplined process focused on those returns. When it comes to competition, it is a highly competitive environment that has remained consistent over the last few years. The intensity has increased, especially with three fixed wireless competitors entering the market around the same time, and currently, about half of our footprint faces some form of fiber competition, making the competitive landscape quite intense. However, we have adapted to this situation, having faced fiber competition for over 15 years. We have made necessary adjustments and feel we have performed well, following the long-term plan that Brian has outlined, which focuses on building a superior network with better products and not merely chasing volume for its own sake.

We are very pleased to report that we have reached 33.5 million subscribers after 3.5 years with Peacock. We are gaining traction with our approach to offering a service that combines entertainment and sports, which reflects our strengths at NBCUniversal. In this quarter, we saw a significant increase in subscribers from the Wild Card game, exceeding our expectations, along with impressive retention rates. The power of sports to attract audiences remains strong. Following this, we achieved record viewership across all segments of our non-sports content. We launched our largest original production, Ted, which became the most successful original we have ever released, along with our reality series Traitors 2, both of which ranked in Nielsen's Top 10 streaming earlier this year. This shows the portfolio's elements working well together. Our movie studio also contributes to our strength with titles like Oppenheimer and Holdovers, along with upcoming releases like Kung Fu Panda 4. We plan to take a comprehensive approach including sports, originals, next-day airing of NBC content, our library, and our Pay-1 movies, all of which we believe offer some of the best value in streaming. Looking ahead, we will continue to focus on retaining our subscriber growth. The second quarter may have a lighter content schedule, but we anticipate exciting events like the Olympics and the return of the NFL, along with a robust movie lineup, including Fall Guy, Twisters, and Despicable Me 4. We are optimistic about our progress and remain committed to leveraging NBCUniversal's strengths as we move into the digital future. This is one of our key growth drivers, and I appreciate the opportunity to share this update.

Thanks, Steve. Operator, we have time for one last question.

I have a question for both Dave and Jason. Dave, could you provide your insights on the current trends in the broadband market, especially considering the increased competitive intensity? It appears that the advertising activity for the quarter is at about half of the usual industry levels for the first quarter, and it seems that all advertisements are down. Do you have any thoughts on what could be causing this? Jason, regarding the segmentation strategy, you targeted the lower end of the market with some offers last year but later scaled back due to concerns about cannibalization. How is the NOW initiative structured differently to avoid that issue?

Let me start by discussing the entire broadband market. Overall, the broadband market is still experiencing growth, albeit at a slower rate compared to previous years. However, we anticipate a healthy number of net additions in 2024 and beyond. It's important to view this in the context of maintaining solid relationships and being mindful of market trends and usage. The utility of broadband services continues to rise. Our data shows that usage is up significantly, with broadband-only subscribers consuming over 700 gigabytes of data monthly. More than 70% of our subscribers are on speed tiers of 50 megabits per second or higher, and nearly one-third are utilizing 1-gigabit speeds. These trends are encouraging for our long-term outlook and reinforce our confidence as we invest in enhancing our network and improving customer experience, as Brian has mentioned. The competitive landscape remains strong, as we have previously noted.

So on NOW, what's interesting and exciting is that it's a dedicated flanker brand strategy. In the past, we had prepaid offers that were mixed into our existing portfolio, but this approach is more focused and branded. The branding has been successful in our U.K. market for Sky, which is where the brand name originated. We expect it to resonate well. I would point out that we have a 100 meg offer for $30, which includes taxes, fees, and equipment. Additionally, there's a $45 offering for 200 megs, also inclusive, and it's very competitive compared to fixed wireless. That offering might be slightly higher but doesn’t provide the same reliability and coverage as we do.

Yes, just to build on that, we've been providing prepaid broadband for several years and felt the need to refresh and update it to remain competitive. The prepaid mobile offering is new, as is NOW TV, but we are taking a segmented approach. It's all about pricing, which is straightforward. There are no contracts or credit checks; customers can easily sign up, pause, or cancel their service online at any time. It's a simple product with fewer features as we maintain our focus on high-end, fully featured offerings, and we will continue to do that.

Thanks, Jonathan, and we want to thank everyone on the call for joining us this morning.