This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk03: Hello and thank you for standing by for Cablevision Holdings' full year and last quarter 2023 results conference call. The conference will begin momentarily. Please stay on the line. Thank you. Thank you. Good morning and welcome to Cablevision Holdings conference call. My name is MJ and I will be your conference operator today. After the speaker's remarks, there will be a question and answer session. You may submit your questions throughout the event by clicking in the submit a question box on your screen. Today, we will discuss Cablevision Holdings' full year and last quarter 2023 results. This call is for investors and analysts only. Therefore, questions from the media will not be taken at this time. However, if you are a member of the media and have questions, please contact FIG Corporate Communications following the call. I will now introduce our speakers, Mrs. Samantha Olivieri, Head of Investor Relations, and additionally, Mr. Ignacio Driolet, Executive Director and Chairman, who will also be available for today's Q&A session. The team will be discussing the results as per the earnings release distributed last Monday, March 11. If you have not received the report or need any assistance during today's call, please contact FIG Corporate Communications in New York at 917-691-4047 or the company in Buenos Aires at 5411-4309-3417. CVH has also posted the webcast presentation that can be found at www.cablevisionholding.com slash investors. Comments made by management may contain forward-looking statements about Cablevision Holdings' future performance, plans, strategies, and targets. Such statements are subject to uncertainties that could cause Cablevision Holdings' actual results and operations to differ materially. Such uncertainties include but are not limited to the effects of the impact and duration of Eastern Europe conflict, new or ongoing industry and economic regulations, possible changes in demand for Cablevision Holdings product and services, and the effects of more general factors such as changes in general market, economic, or regular conditions. Please refer to the disclaimer in the earnings report or presentation for additional information regarding forward-looking statements. It is now my pleasure to turn the call over to Mrs. Samantha Olivieri. Please go ahead.
spk00: Thank you, MJ. Good morning, everyone, and thank you for joining us. Today's call will begin with a brief macro overview and continue with a review of the company's income statements and operating results, followed by a review of the financial position. Having gone through the agenda for today's webcast, please move to slide four for the macro overview. Argentina's economic performance during 2023 was conditioned in several aspects. The presidential election, with its many stages and results, the economic measures taken by the administration in that electoral scenario, and the lingering negative effects of a severe drought. The imbalance of the public accounts and the monetary financing of the deficit marked the entire year. The acceleration of the inflation rate, which reached close to 211% year-over-years of December, along with the loss of somewhat over 20 billion U.S. dollars, turning central banks' net position negative, and the spread between the alternative and official effects rates above 150%, are the clearest symptoms of the state of the economy. The extension of the electoral process had negative macroeconomic impacts. The Ministry of Economy led a series of expansive politics which resulted in a deterioration of the public accounts and exacerbated the peso surplus coupled by the scarcity of the central bank reserves. On the external front, exports registered a 25% collapse equivalent to 21.6 billion U.S. dollars which led to a collapse of the offer of dollars in an electoral year, where private demand usually grows tied to the political uncertainty. Until the primary elections, the administration opted to face the effect's pressure with severe restrictions on the demand of foreign currency. Later, the critical reserve position forced a correction of the exchange rate, devaluating the peso. However, postponing an integral economic program resulted in the dilution of the devaluation effect by a jump in inflation. In its first few days in office, the new administration proposed an economical program of controlled shock. Its declared objective? To simultaneously attack several fronts, amongst them fiscal deficit, the correction of relative prices, mainly official exchange rate and utility tariffs, and the central bank's balance sheet, by both recomposing the international reserves and diluting the remunerated liabilities of the monetary authority. The central bank has accumulated almost $8 billion in the market, way above expectations for months when agricultural settlements are still low, although net reserves are still in the negative terrain. The fiscal front has also registered this equivalent to 0.1% of GDP, explained by the strong adjustment of primary expenses in real terms, mainly in pensions and retirement expenses. The inherited monetary overhang is being corrected through a dilution process. With a cumulative inflation of 71%, the monetary base falls close to 40% in real terms since the new administration took office. To conclude, in general terms, the economic performance of the new administration has exceeded expectations. The challenge of stabilizing the foreign exchange rate from the fragile reserves position inherited is being met. So is the inflation pass-through of the effects correction. The inflation index is expected to continue its downward trend. However, this is not achieved without some negative side effects, such as the current recession and the generalized dilution of not only the central bank's debt, but also savings and income, with its potential impact on employment. The degree of social tolerance to the unprecedented adjustment underway proposed by this administration still represents a question mark, as does the governability going forward. Slide 5 shows some highlights for 2023. During this year, we collected dividends in kind from our subsidiaries for an equivalent to approximately 18.6 billion pesos. In an increasingly restricted FX market, we successfully applied the bonds collected to pay dividends in kind to our shareholders, resulting in a gross dividend equivalent to approximately 104.58 pesos per share and a gross dividend of 0.22842 dollars per GDR. We maintained a healthy cash position with almost all of the liquidity at CVH level and US dollar accounts. We completed the delisting of our GDSs from the London Stock Exchange, which will generate a reduction in listing costs. Our subsidiary Telecom made a strategic acquisition of 5G Spectrum. Site 7 shows the key financials for 2023. The company has reflected the effects of the inflation adjustment adopted by Resolution 777-18 of the Comisión Nacional de Valores, CMV, which establishes that the re-expression of figures must be applied to the annual financial statements for intermediate and special periods ended as of and including December 31st, 2018. Accordingly, the reported figures corresponding to 2023 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standards 29. For comparative purposes, The results restated by inflation corresponding to December 2022 contain the effect of year-over-year inflation as of December 2023, which amounted to 211.4%. In this presentation, we included some figures and historical values for the sake of clarity. CBH owns 39.08 stake in TEO and is controlling shareholder of Telecom Argentina. It consolidates 100% of its operations. In constant currency, revenues for 2023 dropped 9.3% from 2,270.7 to 2,059.1 billion pesos, mainly driven by lower service revenues. Increasingly higher inflation is challenging to fully pass through to prices for our services. Evita reached approximately 577.7 billion pesos in constant currency, a 7.1% decrease compared to 2022, driven by lower revenues partially upset by lower operating costs. Evita margin increased from 27.4% to 28.1%. Evita nominal pesos amounted to 327.4 billion, 121% higher than nominal EBITDA for 2022, while average inflation for the same period was approximately 133.5%, with an end-of-period year-over-year inflation of 211.4%. Net income resulted in a loss of 246,829 million pesos from a loss of 525,000 1,522 million reported in 2022. This reduction in loss is mainly because of the impairment of goodwill registered in 2022, a higher positive income tax charge, and lower depreciations and amortizations, partially offset by negative net financial results versus a positive figure in 2022. The negative net financial results are mainly driven by the jump in the official exchange rate registered in December, which resulted in a devaluation of the Argentine peso against the U.S. dollars of 356.3%, while inflation for the same period was 211.4%, versus a devaluation of the Argentine peso against U.S. dollars of 72.5%, with an inflation of 94.8% in 2022. thus resulting in foreign exchange losses, which were partially upset by positive results for changes in the reasonable value of financial assets and debt revaluation, positive results of operations with securities and bonds versus a negative result in 2022, and higher positive inflation adjustments. The equity shareholders' net loss for the period amounted to 99.4% $1,525 million and is mainly the result of CVH stake in Telecom. Now let's continue on slide eight for a discussion of the operating results for the fourth quarter 23. Revenues in the fourth quarter 23 decreased by 13%. Albeit price increases for our services, keeping up with the high level of inflation the Argentine economy has experienced over the past 12 months has been a challenge. Revenues in nominal terms increased 136%, while average interannual inflation for the same period was 173%. The main source of our revenues is our fixed infrastructure. Broadband, pay TV, and fixed telephony and data services amounted to 51.7% of the total. Mobile service participation decreased slightly, reaching 39.3% from 40.2% in 2022, driven by lower ARPU in real terms, given the competitive dynamic of the mobile telephony industry, and a migration from post-pay to prepaid subs in the customer base with an increase in mobile subs. EBITDA increased by 170% year-on-year in nominal terms, representing an EBITDA margin of 28%, while EBITDA margin in real terms increased to 25.7%. The net loss for the period attributable to equity shareholders was 148,152 million in constant pesos, mainly as a result of CVH participation in telecoms net income. Now let's move on to slide nine. Mobile revenues represented approximately 39.3% of our revenues and decreased 17.8% in real terms when comparing fourth quarter 23 with fourth quarter 22. mainly explained by lower ARPU in a highly competitive environment and a change in the prepaid and postpaid mix, partially offset by an increase in subs. Personal Argentina clients increased 3.8% to 21 million, of which postpaid clients amounted to 39%. Mobile Internet usage increased, reaching an average of 5.8 gigabytes per user per month in 2023, thanks to the capital Deployment, Telecom has been able to increase the number of its 4G subscribers. This rapid growth in subscribers that use our 4G network has been the main driver of data traffic increase. In Argentina, Alpo restated in constant currency decreased by 11% to 3,056.1 pesos in 2023. A monthly churn decreased to 1.8% from 2.3 in 2022. Currently, 46% of Telecom's broadband customers have a mobile bundle. Since the rollout of the strategic CapEx plan and the convergent offer, the company has turned around its trend of negative portability and net addition in Argentina and has increased the number of subs over the last six years, even in a highly competitive environment. Telecom's CapEx deployment has also allowed it to obtain the award for the fastest 4G network in Argentina from UCLA for the fifth year in a row. Please turn to slide 10. Revenues for fixed services, including broadband, cable TV, and fixed telephony and data services, decreased by 11% in real terms, mainly driven by the challenging inflationary dynamic. Legacy copper fixed voice service continues experiencing a reduction in accesses, partially upset by an increase in IP telephony lines. Broadband subscribers remain stable at 4.1 million, while monthly churn increased to 1.8% in 2023 from 1.6 in 2022. Nonetheless, there is growth in the fiber-to-home segment, resulting in an increase of average speeds. 85% of our customers have accesses with speeds of 100 megabytes or higher versus 79% in 2022. ARPU in real terms decreased to approximately 8,671.6 pesos. Price increases during 2022 and 2023 and higher internet speeds sold to our customer base were not enough to fully offset the inflation. It should also be noted that due to our cross-selling strategy, fixed products have been offered with some discounts to encourage the positive mobile portability. Moving to the cable TV subscribers, the customer base decreased to 3.4 million, while Flow unique customers achieved 1.4 million, a 10.2% increase from figures observed a year ago. Through its proposal as a content aggregator, Flow includes not only linear TV, series, on-demand movies, documentaries, and co-productions, but also music, gaming, and exclusive events. In addition, Telecom continued activating the ISCPT digitalization service solution to its logical customers, which allows clients to connect to a digital service from the traditional cable connection without a decoder. At real terms decreased by 8.3% to 8,591.2 pesos during 2023, a monthly churn increased to 1.8%. Please turn to slide 11. In August 2020, the Argentine government issued Decree 690-2020, which was later confirmed by Congress, declaring mobile, fixed voice, broadband, and pay TV as public essential services and freezing their prices until the end of 2020, while instating ANACOM as a regulatory agency in charge of enforcing that decree and regulating the industry prices. Its legality has been challenged in court by the industry in general. In 2021, Telecom was granted a preliminary injunction suspending the effects of several sections of the decree, which was then extended several times and is currently in effect. In addition, during November 2023, Telecom was notified of a February 1st instance ruling declaring the nullity of such decree. Although we feel that a final ruling regarding the underlying issue is imperative to guarantee the health of the industry, As a consequence of such injunctions, Telecom can manage the pricing policy of its services as before the decree was in place. The company has been trying to offset the inflation impact on revenues and costs, but with price increases suspended in 2020 and the increasingly high inflation dynamic of the last two years, recovering terrain is a challenge. Year-over-year inflation as of December 31st of 2023 amounted to 211.4% when inflation average for the same period was 133.5%. During 2022, given the increasing inflation, our subsidiary Telecom increased prices of its services with greater frequency, a policy which continued in 2023. In response to the complex inflationary dynamic, it began increasing prices on a monthly basis, which has allowed it to close the gap between inflation and ARPUs. These price increases have resulted in higher ARPU and nominal terms across all services, as shown in Exhibits 19-222. The nominal price increases, coupled with certain discounts and promotions to retain customers following these rises in a strong competitive environment, were not enough to offset the inter-annual inflation, thus resulting in lower revenues when measured in constant pesos versus the year before. The company will continue to monitor its cost structure, competitive environment, client behavior, and household income in order to decide on future price increases to help compensate for inflation and maintain sustainability. Now let's move to slide 12 for a discussion of cost structure before we discuss quarter-over-quarter EBITDA performance. The most significant operating costs and expenses are salaries, fees for services, maintenance materials and supplies costs, and taxes and fees with the regulatory authority. On slide 13, we show the performance of Evita and the behavior of different components of revenues and costs. The company continues with its efforts to expand efficiencies and has shown positive results despite a challenging economic context. Operating costs excluding cost of equipment and handsets decreased in real terms 16.2% in this quarter. All of the company's cost components decreased in real terms reflecting the efficiencies achieved by the company's management in terms of costs. It should be noted that the fourth quarter 22 had higher severance payments. Total operating costs decreased 15.4% in real terms higher than the reduction in revenues. Thus, although EBITDA decreased by 5.3% in real terms, margin increased from 23.6% to 25.7%. Next slide, please. It is worth mentioning that this is the third quarter with a margin expansion since the first quarter 21, reflecting the efficiencies achieved in terms of cost and the pricing policy executed to tackle the increasing inflation. now for the next slide 15 please in the fourth quarter 23 investments as a percentage of revenues including the acquisition of 5g spectrum was 58.8 or 53.8 before rights of use from leases higher than the same period of the previous year if we detract the acquisition of spectrum investments decreased 25.6 year over year influenced by tighter import restrictions the capex plan is flexible and Telecom has been investing above the global average ratio of CapEx to revenues during previous years in order to achieve its goals in terms of network performance and coverage, which is currently strong. Technical CapEx was mainly allocated to network and technology and customer premise equipment, or CPE. The balance was allocated to our international operations in Paraguay and Uruguay. During 2023, Telecom acquired 100% megahertz spectrum block and the 3.5 gigahertz frequency. This is a crucial first step for the deployment of the 5G technology, which brings exciting opportunities for various economic sectors, including agricultural and oil and gas, both important sectors in Argentina's economy. During the last quarter, the company continued with the deployment and upgrade of existing sites, and expansion of the fiber-to-home network, including the overlay over the HFC network. The CAPEX program will continue evolving according to Argentina's economic condition, network performance, customer requirements, and cash flow generation in TELCOM. Going to the debt financial position, as per Site 16, As of December 2023, we have reported a total financial debt of 2,128.1 billion pesos and net debt of 1,837.6 billion pesos, equivalent to 2.3 billion U.S. dollars. The increase of total debt measured in constant pesos is explained by the jump in the FX rate, which surpassed inflation for the same period. 100% of the debt is at the operating level in Telecom Argentina. Of the total debt, approximately 54% is cross-border dollar denominated, 38% in Argentine pesos included dollar-linked local emissions, and the rest is in Guaraníes and Remembe. Telecom has been accessing the local market for its financing needs, tackling the increase in interest rates and reducing cross-border risk. In an exceptionally challenging year, it has been able to pay down or refinance all of its debt commitments during 2023. From 2024 to 2026, debt maturities remain manageable. Net debt to adjusted EBITDA coverage ratio as of the end of December 2023 was 3.2 times. That concludes our comments for today. We are now ready to take your questions. MJ?
spk03: Thank you very much. At this time, we will open the floor to your questions. If you would like to ask a question, please type it in the box and click send. We will now pause for a few seconds in order to allow participants to write their questions.
spk02: Samantha, I would like to let you know that we have a question from Mehmet Ulugbingo from Interior Capital. And he asks, could you please comment on the outlook of the dividends from Telecom in 2024? Thank you.
spk00: Thank you, Marcela. Thank you for your question, Ulug. As you know, some of the debt instruments of Telecom had certain covenants which given the foreign exchange scenario for the end of 2023, the company entered negotiations with creditors in order to obtain waivers on some of these commitments. Those negotiations allowed the company to stop calculation of net debt to evict that ratio for the period ended December 31st, 2023. And then following those negotiations, the company continued negotiating terms with the creditors and obtained a new waiver which covers the period ended on March 31st, 2025. This waiver allows an increase in the net debt to EBITDA ratio to 3.75 times it used to be 3 before to incur in up to US$2,700 million. In addition, this waiver allows Telecom to pay dividends during this period covered by the waiver for up to 100 million US dollars, subject to certain conditions. So, moving forward, I think Telecom has to see how the year plays along, how cash flow responds to this increasing inflation scenario, but If the conditions are met and Telecom can maintain a healthy cash flow, which allows it to do the investments, the minimum capex it has to do during the year, we could see some dividend close to the end of the year. It's still unclear how 2024 will microeconomics conditions will evolve during the year I hope that answers the question thank you again if you have a question please type it in the box
spk03: And again, if you have a question, you may type it in the box. It appears we have no further questions at this time. I would like to turn the program back over to Samantha Olivieri for closing remarks.
spk00: Thank you, MJ. Thank you all for your interest in CVH. Should you have any further questions, do not hesitate to contact our IR team. Have a great day.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Disclaimer