Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Grupo Televisa's second 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, Carmencita. Good morning, everyone, and thank you for joining us. With me today are Pepe Antonio González, CEO of Cable, Alex Pena, CEO of Sky, Patricio Wills, head of Televisa Studios, and Carlos Ferrero, Antonio Lara, corporate vice president of finance and administration, respectively. Let me start by saying that Mexico's economic activity recovered strongly in the months of April and May, Expanding by more than 20% year on year, largely due to robust growth in manufacturing and the services sectors. Apparently, the better than expected momentum experienced at the end of Q1 was carried over to the second quarter, aided by declining COVID-19 cases, rebounding activity in the U.S., and improved sentiment. The economic recovery is expected to continue, supported by further easing of social distancing measures, with vaccination of the population gradually growing over the next few quarters. Mexico will also benefit from positive spillovers related to robust U.S. GDP and income growth, potentially contributing to accelerate activities related to tourism, exports, and flow of remittances, Stronger terms of trade and the lag effect of monetary easing. The Mexican economy was hit hard by the COVID-19 pandemic last year, reducing GDP by 8.5%. However, in 2021, GDP is expected to grow at around 6% after the latest upward revisions, recouping most of what the Mexican economy lost in 2020. Our content business, which has operated with limited interruptions throughout the pandemic, has been the main beneficiary of the robust economic rebound. The private sector has remained quite active advertising their products and services, as has been the case over the last couple of quarters. While the reopening has had a positive impact in economic activity, the unemployment rate deteriorated in April to 4.7% compared to 3.9% in March. So we have been cautious with promotions both at Cable and Sky. Still, with GDP recovering, job creation will accelerate relatively quickly, making the recent increase in unemployment to be short-lived, evidenced by the unemployment rate in May released a few days ago, which already declined to 4%. Moving on to our financial results for the quarter, consolidated revenue reached 24.8 billion pesos, representing a year-on-year growth of 10.5%, while operating segment income reached 10.1 billion pesos, equivalent to a year-on-year growth of 17%. Bernardo and I are pleased that our portfolio of assets delivered remarkable growth in the second quarter. This gives us confidence that our operating performance will remain solid for the remainder of 2021 as the Mexican economy keeps strengthening. Now turning to the second quarter financial results in our content division, advertising revenue increased by 32.1%, due 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 to take advantage of the robust economic recovery. Televisa's high audiences and wide reach on free-to-air television position us very well to help our clients achieve their goals. Some social distancing measures remain in place during most of the second quarter, but our advertising clients are better prepared to operate in this environment than they were a year ago and they have been more active since the end of 2020. Private sector advertising revenues were very strong, growing more than 35% year on year. On the other hand, government advertising revenues were weak, driven by ongoing austerity initiatives and as political advertising is not allowed ahead of the midterm elections. As you know, government advertising has been shrinking over the last couple of years, so today its share of total is already very low and will continue to be very low. Royalties from Univision of $100.6 million were 26.2% higher year on year, supported by EasyComps, The strong economic recovery in the United States and the transmission of major soccer tournaments. Univision's strong operating performance was also driven by several initiatives implemented by management, including a revamp of the sales team and the optimization of advertising inventory. We expect Univision's solid revenue growth to continue given the historically strong preliminary results of this year's upfront. All in during the quarter, content revenue increased by 16.6% while operating segment income grew by 23.5%. Our content margin expanded by 180 basis points to 32.7% due to the strong revenue growth. Despite additional OPEX associated with the coverage of the midterm elections, more production of content, including sporting rights related to the Mexican Soccer League, the CONCACAF Nations League, and the pre-Olympics Sub-23. In 2020, the COVID-19 lockdowns led us to have less content production costs as we broadcasted several reruns and many sporting events were canceled. With advertising revenue up 30.2% year on year during the first half of 2021, stronger GDP growth outlook for the year, and robust advertising consumption from the private sector, we feel confident that advertising revenue is likely to grow low double digits for the full year. That's low double digits for the full year. I will now turn it over to Patricio to discuss our progress in content during the quarter.

Thank you, Alfonso. During the second quarter, 16 of the top 20 programs of Mexico's broadcast television were produced and transmitted by Televisa. This includes telenovelas, dramas, newscasts, and comedies. Televisa's top three programs during the second quarter included Que Le Pasa a Mi Familia, La Rosa de Guadalupe, and Te Acuerdas de Mi, with audiences between 59% and 70% higher than the top-rated programs of our closest competitors. Through the whole week, Televisa's audiences were 89% higher than those of the second-largest broadcasters, while audiences at our flagship network, Las Estrellas, were 151%, and many more. on free-to-air TV combined. In addition, the best program of our second network, Channel 5, was among the top 20 with similar audiences than the average of the top four programs in the flagship channel of our main competitor. This demonstrates the strength of our content across all our channels. During the second quarter, Univision's audience share remained well above that our main Spanish language competitor. We believe this will keep helping us to benefit from the economic recovery in the U.S.