Comcast Corporation (CMCSA) Earnings Call Transcript & Summary

Good morning and welcome to the Comcast Corporation 2021 Annual Meeting of Shareholders. I would now like to turn the meeting over to Mr. Brian L. Roberts, Chairman and CEO of Comcast.

Thank you, operator, and welcome, everyone, to Comcast's 2021 Annual Meeting of Shareholders. I will serve as Chairman of this meeting. I declare that this meeting is duly convened, properly organized and competent to transact business. The polls are open and will close as soon as the official business portion of the meeting has been completed without further notice. So we encourage any shareholders to vote now if they have not yet done so. The agenda and rules of the conduct that will govern this meeting are posted on the meeting website. Joining me today are Tom Reid, Chief Legal Officer and Secretary; Mike Cavanagh, our Chief Financial Officer; Dave Watson, CEO of Comcast Cable; Jeff Shell, CEO of NBCUniversal; Dana Strong, CEO of Sky; Adam Miller, our Chief Administrative Officer; Marci Ryvicker, our Head of Investor Relations; Jen Khoury, Chief Communications Officer; Liz Wideman, Senior Deputy General Counsel and Assistant Secretary; and other members of our senior management team. Also attending the meeting are our Board of Directors and the audit partner of Deloitte & Touche, our independent auditors. Tom Reid will be the moderator and secretary of the meeting. Tom?

Thank you, Brian. This meeting has been called pursuant to a notice dated April 23 sent to all shareholders of record as of the close of business on April 5. Jim Raitt of American Election Services has been appointed as judge of election to conduct the votes at this meeting and any adjournment or postponement. He has delivered to me his oath of office and has advised that, based on proxies presented prior to the meeting, a quorum exists for each matter to be voted upon. Twice during the meeting, we will entertain questions and comments from shareholders. First, we will address questions and comments related to specific company and shareholder proposals under consideration during the official business of the meeting, if the question specifies that it relates to a proposal. Later on in the meeting, we will address general questions and comments about our company. Shareholders should carefully read the rules of conduct before submitting a question. [Operator Instructions] We plan on completing this meeting by 10 a.m. We may make forward-looking statements and present certain non-GAAP numbers during this meeting. Please refer to the rules of conduct for additional information. We will now proceed to the business of the meeting. We will consider 3 company proposals and one shareholder proposal. The first 3 proposals are company proposals that the Board has recommended that shareholders vote in favor of. These proposals and the reasons for the Board's for recommendations are set forth in the proxy statement. The proposals are: the election of directors, the advisory vote to the approve executive compensation and the ratification of Deloitte & Touche as our independent auditors for 2021. The company proposals are now properly before the meeting for consideration and action. The next item of business is a shareholder proposal to conduct an independent investigation and report on risks posed by failing to prevent sexual harassment. This proposal and the statements for and against its adoption are set forth in the proxy statement. The Board has recommended that shareholders vote against this proposal. Operator, do we have a motion from Arjuna Capital or its duly authorized representative to present the proposal?

On the line is Natasha Lamb from Arjuna Capital, who will now present the proposal. Please go ahead.

Thank you. Good morning. Can you hear me?

Yes.

Yes, we can hear you.

Okay. Thank you. My name is Natasha Lamb, and I move proposal #4 on behalf of Arjuna Capital and our clients asking Comcast NBC's Board to conduct an independent investigation on the risks posed by the company's failures to prevent workplace sexual harassment. Comcast and its subsidiaries are under intense public scrutiny for an alleged failure to protect employees and hold those culpable accountable. This is the second year we've brought this proposal to the annual meeting, and while we have seen some incremental progress, it's clear that problems continue. In 2017, NBC attracted global attention when it fired Today host Matt Lauer for ongoing sexual harassment of employees. Numerous allegations were also made against on-air talent, Simon Cowell and Chris Matthews as well as managers at call centers. These kinds of allegations continue today. Last August, after a Hollywood Reporter exposé, NBCUniversal fired Paul Telegdy, who is accused by 30 past and present employees of presiding over a toxic environment and making sexual comments about the physical appearance of network talent. This March, The Washington Post reported on a former anchor and reporter for the NBC-owned the Golf Channel, who filed a complaint in 2020 alleging discrimination and retaliation. 16 current and former employees interviewed also described sexism, misogyny and harassment. And just this May, Comcast-owned broadcaster Sky canceled the series Bulletproof following The Guardian's investigation into sexual misconduct allegations against Noel Clarke. So here we are again, expressing concern. On a positive note, last year, Comcast ousted NBC News head Andy Lack and replaced NBCUniversal Chief, Stephen Burke, a strong backer of Lack. Comcast has also added some Board oversight by updating its charter to oversee harassment and discrimination. Good. But just getting rid of a few high-profile problem cases and updating a Board charter does not solve the problem. We need to be sure that this pervasive and persistent corporate culture problem is analyzed and remedied. In the case of workplace sexual harassment, sunlight is the best disinfectant, and that is what investors expect from an independent investigation. The risk of an action on workplace harassment is considerable. Google committed $310 million to settle a shareholder lawsuit alleging the Board mishandled sexual conduct by executives. The market capitalization of Wynn Resorts dropped $3 billion the 2 days following harassment allegations against CEO, Steve Wynn. 21st Century Fox agreed to a $90 million settlement with shareholders, alleging that directors failed to hold accountable senior executives who perpetrated -- or who perpetuated sexual harassment. To avoid legal and reputational risk, Comcast must create a culture of accountability and transparency to protect employees from harassment. Thank you for your time and consideration.

Thank you. We will now respond to questions on any of the proposals. We have one right now relating to the advisory vote on say-on-pay. And it's from the Carpenter Funds and is addressed to our Chairman, Brian Roberts. The Carpenter Funds hold a total of 1.78 million shares of the company's stock. We believe that the company's executive compensation plan should drive the successful execution of the Board's long-term strategic business plan. Today's public company executive compensation plans are largely formulaic, peer-related plans, with simplistic annual say-on-pay voting reinforcing plan homogeneity. Could you or the Compensation Committee Chair speak to whether Comcast might be better served by an executive compensation plan tailored specifically to the company's particular circumstances and its unique long-term strategic business plan? That ends the question from the Carpenters Fund.

Okay. Thank you for the question. And we do believe that we have a very tailored plan to our specific company and our strategic plan and our annual budget. While there are a few metrics tied to the performance of others -- other companies in our industry or in the peer groups that the Compensation Committee judges us by, a vast majority of the compensation is tied to performance, and that performance is specifically tied to a combination of their operating unit as well as the company at large. So I agree with the thrust of the question, frankly, which I believe, if I understand it, is to make sure that we do things that are unique to our company and what's right for our shareholders, and we very much try to pursue that. We've made a lot of changes over the last year that have been responsive to shareholders' inputs. But ultimately, we try to have something that is unique to Comcast. Tom, back to you.

We have one more question relating to compensation, specifically relating to the CEO pay ratio, which I will respond to. The question states, the CEO pay ratio is 380:1. Does the Board consider the magnitude of this ratio when setting CEO pay, in particular, with regards to our nation's problem with income inequity. The company views Mr. Roberts' compensation on a market basis, and his compensation is determined by the Compensation Committee, which consults with independent compensation adviser, Korn Ferry, and their deliberation is referred to his peers and his performance as CEO. Mr. Roberts' compensation is significantly performance-based, amounting to 89% of his pay in 2020. We believe we have the best CEO in our industry and that our compensation practices played a key role in our very strong operating and financial results in a very difficult year of 2020. Brian has successfully led this company through the pandemic with a strategic focus on broadband, aggregation and streaming, which we believe will put us on a trajectory to emerge from this challenging environment in an even stronger position. He set the tone for our businesses to execute at the highest level and work together across our complementary high-performing businesses at Comcast Cable, which achieved record results; NBCUniversal and Sky, all the time continuing to accelerate convergence in media and technology. And at the same time, he guided our company's overall response to COVID-19 as well as our company's commitment to social justice, and he accelerated our work in diversity, equity and inclusion, with a historic focus on doing the right thing for all of our stakeholders and the society at large during this unprecedented time. At this point, there are no additional questions on the proposals. So I will note that the polls for voting have been open since registration began. All shareholders and proxies have by now had an opportunity to vote, and the polls for each matter are now closed. The judge of election has informed me that based upon his preliminary tally, shareholders have voted in favor of each of the 3 company proposals and have voted against the approval of the shareholder proposal. He will execute a certificate with the final voting results that will be filed along with the minutes of this meeting. The voting results will be filed with the Securities and Exchange Commission on a Form 8-K within 4 business days. If any shareholders would like to submit a general question or comment and have not yet done so, please submit it now. We'll address any questions following a brief report of the company that Brian Roberts will now give. Brian?

Okay. Thank you, Tom. So we're halfway through 2021, or nearly so, and we have great momentum across the company. We have continued strength in Cable, which has been -- and has been doing so for a while, led by broadband, and the first quarter of this year was the third consecutive quarter of double-digit EBITDA growth, 380,000 net customer relationship additions, and it was the best first quarter on record, driven by 461,000 net new broadband customers. While COVID has impacted our businesses, we're recovering quite well as the country and the world reopens. In the parks, Theme Parks, we have huge demand in Orlando with wonderful weather and attendance hitting really 2019 levels on many days. In Hollywood, California, we're pleased to have reopened and hitting the max capacity for the early days of the reopening. In film, theaters are opening around the world. Just this last couple of weeks, we launched Fast 9 internationally to the best box office results since the pandemic in the markets where it opened. And TV production is now back, ramped up to historical levels. At Sky, we're recovering quite well in the first quarter. We had our best customer relationship additions in nearly 6 years. And pubs and clubs were back as they reopen and advertising comes back, we have high expectations there as well. And underscoring this confidence, last week, the Board of Directors increased our share repurchase authorization to $10 billion as we had $2 billion remaining from prior authorizations, and we announced that buybacks would resume immediately this quarter rather than waiting until the second half of the year. So the strength of our businesses today really is product of years of investment and innovation, a culture that fosters collaboration and an ability to execute it. And this is exactly what got us through 2020, which was one of the most challenging times that any of us can remember. We quickly moved -- and I'm proud to report that during this period, we quickly moved to ensure the safety and protection of our employees. We continue to provide customers with unparalleled service and innovative products that relied -- that they relied on more this past year than ever before. We strengthened our investment-grade balance sheet with a number of financial moves, and we remain focused on investing for the long-term growth and success of the company even in tough times while making a significant and positive impact in the communities we serve, some of which Tom just talked about. We turn to the next slide. During 2020, our scale and unique capabilities enabled us to support our people, deliver for our customers, enhance our communities. The Comcast network, really the broadband network, ran superbly, and no one could have imagined the surge of usage, but we kept our customers connected. We provided this critical connectivity with news and entertainment as people around the world adopted and adapted to a new normal. We developed new services and programs to help those who are impacted most by the pandemic. We expanded the scope of our Internet Essentials program to help ensure that students had the tools they needed to participate in virtual learning. We launched what we call Comcast Lift Zones in hundreds of community centers across the country, and we're on track to open 1,000 Lift Zones by the end of the year. This is where there is free unlimited usage of the Internet and computers for kids in the neighborhoods that they live nearby. We accelerated a commitment to diversity, equity and inclusion. We launched Comcast RISE, a program that provides free marketing and other resources to thousands of BIPOC-owned small businesses. We mobilized as a company to drive substantive lasting change with our company and also within our communities. For example, we're partnering with and providing grants to organizations working to eradicate injustice and inequality. We accelerated our efforts in all areas of diversity, equity and inclusion, particularly in hiring, advancement and antibias and anti-racism training. We put the full weight of our company's media resources behind creating a broad ecosystem of diverse content, including curated on-demand special collections. And I'm particularly proud of our ongoing efforts and accomplishments in addressing digital inequities, which disproportionately impact communities of color. Building on success of Internet Essentials, we recently announced that over the next 10 years, we're committing $1 billion to reach 50 million people from low-income families and underserved communities and provide them with the training, tools and resources they need to succeed in a digital world. We have a special culture at Comcast with high integrity and respect as well as our focus on innovation, collaboration, entrepreneurialism and growth. We firmly established ourselves as a global leader in media and technology. We're well positioned to continue to benefit from major trends in the world and our markets through our strategic focus on broadband aggregation and streaming. We managed all this through a difficult environment, I think, remarkably well. Cable's results during 2020 were exceptional, hitting a number of company records: 2 million net broadband additions for the year, strong connect activity and record low churn. Broadband drove our highest ever full year net customer relationships of 1.6 million, bringing us to 33 million total customer relationships at year-end, outstanding EBITDA growth of nearly 9%. NBCUniversal was more significantly impacted by COVID, but we remain focused on driving future growth. We invested in new attractions at our parks in U.S. and Japan. In Beijing, we'll be opening later this summer. We reorganized our Cable Networks and Broadcast Television businesses, which are now combined along with Peacock, to drive long-term cost efficiencies and revenue opportunities. We launched Peacock nationwide last summer. It's off to a fantastic start, exceeding internal expectations. Results at Sky were also negatively impacted by COVID, but we ended the year strong and we're recovering well. In the fourth quarter, we added net new customers in every market, bringing our customer base essentially back to pre-COVID levels. Same for revenue, which was essentially flat from the fourth quarter of 2019. We continue to make meaningful progress on our strategic initiatives, including expanding Sky Q penetration, preparing for the recent launch of our B2B broadband service in the U.K. and implementing our new leaner operating model. So while 2020 was challenging, our management team and employees pulled together and delivered. Results are a testament to their commitment and dedication, with full year consolidated revenue of $104 billion, adjusted EBITDA of $31 billion, adjusted earnings of $2.61 and free cash flow generation of more than $13 billion. The strength of our business and the investors' recognition of our broad range of future growth opportunities contributed to our superior total shareholder returns. We outperformed the S&P 500 for the year and by a significant amount over the trailing 10 years. But my favorite slide is to look on an even longer-term basis, on our total shareholder returns, which have been extraordinary. If you had joined my dad in 1972 when Comcast went public and bought 1,000 shares, you'd spent $7,000, on the IPO, today, you'd have nearly $18 million at the end of 2020 versus the $1 million if you had invested the same in the S&P 500. 18x the results. So I'm proud of a number of recognitions we've also earned for our progress and accomplishments on behalf of other important stakeholders, particularly our people. Recently, we were honored as one of Fortune's Most Admired Companies, placing #6 on DiversityInc's Top 50 Companies for Diversity, #4 on Fortune's Best Big Companies to Work For and #1 on Military Times' Best for Vets list. So I'd like to sum up by thanking the team for everything that we overcame in 2020. To everyone across the company, to our Board of Directors, we continue to collaborate and innovate on behalf of our customers, our audiences, our guests, our shareholders and each other. Team executed incredibly well. We positioned ourselves to grow an accelerated rate as our markets recover. With that, Tom, I'll be happy to answer questions.

Thank you, Brian. Here is the first question. It relates to WarnerMedia. And the question is, how does AT&T's spin-off of WarnerMedia affect Comcast?

I think what AT&T does, I think, sort of speaks for itself and for their company. I look at our company and say, I don't think that there's a similarity. I think, for us, we are very pleased with our assets, our talent, our culture, the strategy, as I just went through, our results. And we think we have a unique company, well positioned to compete vigorously for talent, for customers and for growth in the years ahead.

The second question relates to our director, Naomi Bergman. I will answer this question, which states that Ms. Bergman is part of senior management at Advance. Advance is involved in the WarnerMedia-Discovery merger. Isn't this a conflict of interest? And the answer is there is no conflict of interest. Ms. Bergman is not involved in senior management at Advance. The next question, Brian, is regarding virtual meetings. And the question is, would the company consider virtual access to future in-person shareholder meetings for those who cannot attend?

We'll look, as we go forward, at all the options, but the virtual shareholder meeting has been very successful, both in terms of attendance and from the efficiency standpoint. So I believe we'll consider continuing in this format. Tom?

The next question relates to independence of news. The question reads, Comcast news media holdings make a regular habit of labeling as "conspiracy theory" or "fake news" things that later turn out to be true, like the information on Hunter Biden's laptop that implicates the President, while asserting as true things that later turn out to be conspiracy theories like the [ parago ] of Russian collusion. Most recently, it has become clear that the theory of COVID-19 escaped from a Wuhan virology lab was never a conspiracy theory and is the likeliest explanation, rendering both Pulse and [indiscernible] Comcast property claims that those who suggested the possibility, including Senator Tom Cotton and other respected officials, were liars, buffoons and racists. Will you now apologize to everyone libeled by your properties and explain in detail what Comcast intends to do to restore some patina of reliability to its news outlets?

Well, thank you for your question. I would comment that I think we're very proud of NBC News, and they're committed to producing the highest quality of journalism across our platforms. Same goes for Sky News. And with the -- if they believe they've done something wrong, they usually talk about that. So I have always honored the pledge that we made when we bought NBCUniversal and our agreement with the FCC that we would not interfere in the news operations, and we took a similar pledge when we bought Sky News. So you're certainly entitled to your views and appreciate you sharing them. But I continue to believe that NBC News does a wonderful service, and we have a hard-working team of journalists throughout the world, doing their best to constantly keep society informed. Tom?

The next question relates to Universal Orlando, and asks, when is Universal Studios going to open at full capacity? And will Universal Orlando require proof of vaccination for visitors so that everybody is safe at the park?

We think we've done a -- team has done a great job of working with the local municipality and the state and other CDC guidelines and other third-party experts to find a safe way to have our parks opened and to have the appropriate protocols as we've traveled through the last year or so. And so they'll constantly be updating those rules and protocols, but we're really pleased with the momentum and the safety and the experience for our guests, which have never gotten higher ratings from those guests in terms of their comfort level being at the park. I'd like to thank the team in Orlando, particularly, for making that all happen this past year.

The next question relates to Peacock and asks that you elaborate on your plans for Peacock as well as plans for continuation of quality linear television on NBC network. Are we bundling services for Comcast-Xfinity customers?