Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Grupo Televisa's first quarter 2021 conference call. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release. I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Carmen. Good morning, everyone, and thanks for joining us. With me today are Salvi Folk, CEO of Cable, Alex Pena, CEO of Sky, Patricio Wills, head of Televisa Studios, and Carlos Ferreiro and Antonio Lara, corporate vice presidents of finance and administration, respectively. It has been just over a year since COVID-19 dramatically changed how all of us live, work, and interact. With vaccinations progressing worldwide, we expect a strong recovery in the global economy in 2021, and Mexico is poised to benefit from this turnaround. Despite Mexico's 8.5% economic contraction in 2020, we are seeing solid recovery this year, with GDP growth expected at around 5%. Private consumption is estimated to increase by 4.2% in 2021 after a decline of 10.5% in 2020 due to the pandemic, setting a solid ground for growth in demand for our services across all segments. Despite the disruption related to COVID-19, our content business has operated without interruption, entertaining and informing our audiences, and it is playing a critical role in education, which in Mexico is still mostly remote. Our cable infrastructure continues to perform well, helping to support our customers who have been working from home for over a year. This is a testament to the dedication, hard work and creativity of our employees. Bernardo and I want to express our gratitude and appreciation for all that they have done and continue to do to keep the business on track during this challenging time. As we noted two months ago, the fourth quarter of last year showed a significant improvement in trends compared to the first nine months of 2020. First quarter results in our core segments were quite strong, driven by momentum in advertising demand and the needs of our customers to remain connected. Moving on to our financial results for the quarter, consolidated revenue reached 23.8 billion pesos, representing a year-over-year growth of 3.2%, while operating segment income reached 9.4 billion pesos, equivalent to a year-over-year growth of 7.7%. Excluding the results of our other business segment, which continues to operate with limited capacity due to social distancing measures to prevent the spread of COVID, revenue for our three combined core businesses expanded by 7.7% and operating segment income grew by 12.4% year over year. This was driven by robust growth in content, supported by a strong rebound in advertising revenue of 28.1%, a solid increase in cable revenue of 7.9%, and a consistent growth at Sky of 4.1%. Even comparing our three core businesses with the first quarter of 2019, we experienced revenue and operating segment income growth of 10.5% and 5.6% We firmly believe this confirms the strength of our results even compared to pre-COVID levels. Bernardo and I are pleased that our portfolio of core assets delivered strong growth in the first quarter despite the broader economic contractions. This gives us confidence that our operating performance will stay solid for the remainder of 2021 as the Mexican economy improves and as vaccination continues and people feel more comfortable resuming the rhythm of normal life. Now turning to the first quarter financial results. In our content division, advertising revenue increased by 28.1% due to both easy comps and a strong rebound in volumes from the private sector where businesses are looking to position their products and services in front of consumers ahead of the expected strong economic recovery in the coming quarters. This is especially remarkable considering the earlier timing of Easter holiday which moved into the first quarter in 2021 as compared to the second quarter in 2020. Although many social distancing measures remain in place, Most of our advertising clients are very prepared to operate in this environment than they were a year ago, and they have been more active since the beginning of the year. Private sector advertising revenues were very strong, growing over 30% year over year. On the other hand, government advertising revenues remained relatively flat, driven by ongoing austerity initiatives. Royalties from Univision of $96.5 million were basically flat, and we project them to improve as the U.S. economy is expected to recover more vigorously beginning in the second quarter. In sum, during the quarter, content revenue increased by 10.2%, while operating segment income grew very strongly by 47.3%, driven by the higher revenue and ongoing cost efficiencies. Compared to the first quarter of 2019, our content revenue and operating segment income were 3.2% and 4.8% above, respectively, while our content margin was 40 basis points higher. As we mentioned during the fourth quarter conference call, we strongly believe that we have reached an inflection point in advertising revenue. We have experienced robust advertising consumption from the private sector supporting our upbeat outlook for 2021. We are very excited about the deal we announced last week. We will be taking our industry-leading content and production capabilities to the next level through a much anticipated digital transformation as the combined Televisa Univision is expected to launch a global streaming platform in early 2022. By combining our media, content, production, library, and IP assets with Univision, we will be able to deliver an unparalleled streaming experience for Spanish language content globally. We are also thrilled to be joined by SoftBank, Google, and The Rain Company as Televisa Univision shareholders because it reflects confidence in our digital transformation strategy Our world-class content production capabilities, content library, and management team as we join forces to capitalize on future growth opportunities. It is also a privilege for us to have Eric Sinterhofer as a partner. Eric is a very talented investor, a solid businessman, and an amazing person. We're also very happy about having Wade as the CEO of the combined company. He has a lot of experience in the media industry, in streaming content in particular, and has great energy. We believe that he will be an excellent CEO that will be able to achieve our ambitious goals. The deal has been very well received already and we look forward to closing the transaction later in 2021. upon receiving the approvals of Televisa shareholders as well as the necessary regulatory approvals in Mexico and the United States. I will now turn the call over to Patricio to discuss our progress in content during the quarter.

Thank you Alfonso. Thank you Alfonso. During the first quarter, 17 of the top 20 programs on Mexico's broadcast television were produced and transmitted by Televisa. This includes telenovelas, dramas, newscasts, and comedies. Televisa's top three programs during the first quarter included Venceres de Zamor, La Rosa de Guadalupe, and Imperio de Mentiras, with audiences between 36% and 62% higher than the top-rated program of our closest and many other competitors. Through the whole week, Televisa's audience were 74% higher than those of the second largest broadcasters, while audiences at our flagship network, Las Estrellas, were 112 higher than those of our closest competitor. During the first quarter, our main newscast has a larger audience than all other newscasts on print-to-air and pay-TV TV networks combined. Moreover, the best program of our second network, Channel 5, has similar audiences as the flagship channel of our main competitor, demonstrating the strength of our content across all our channels. During the first quarter, Univision's audience share continued to be well above those of our main Spanish language competitor. We believe this will help us to take advantage of the economic recovery.