Grupo Televisa S.A.B.

Ladies and gentlemen, this is Stop Raider. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold. Thank you for your patience. Alfonso de Almeida, Alfonso de Almeida, Alfonso de Almeida Thank you for watching! Thank you for watching! Good morning, everyone, and welcome to Grupo Televisa's fourth quarter and four-year 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, Tamia. Good morning, everyone, and thank you for joining us. With me today are Pepe Toño González, CEO of Cable, Luis Malvido, CEO of Sky, and Carlos Phillips, CFO of Grupo Televisa. Before reviewing Grupo Televisa's operating and financial performance, I'm delighted to share with you some exciting news about Televisa Univision after effectively closing the merger on January 31st. It has been almost one year since we announced a transformative combination of Televisa's media and content business with Univision to create a new company, Televisa Univision. This union has created the world's leading Spanish language media and content company, a business without comparison in the global media landscape that will exclusively focus on the massive market opportunity that exists with a global Spanish-speaking audience of almost 600 million people. We are very fortunate to have a group of amazing partners that came together to help create this unique platform and pursue our digital transformation strategy. Wade Davis, CEO of Televisa Univision and founder of ForgeLight, Eric Sinterhofer at Searchlight, and SoftBank, Google, and Rain. Those teams have helped us a lot. In preparation for this merger, both Televisa and Univision have made significant progress transforming their businesses across all dimensions. Both teams have built upon our brands and deep connection with our audience to deliver levels of viewership these two companies haven't seen in years. Univision's portfolio of television networks had the highest audience share since 2014, and Televisa's content performance and audience delivery in Mexico was equally impressive. Univision completely reinvented its ad sales business, and both companies experienced above-market advertising revenue growth in 2021. and most importantly, we have completely transformed our organization, strengthening our already exceptional teams. By merging Televisa's content and media business with Univision, we have created an unprecedented platform. Televisa Univision now reaches over 60% of the respective television audiences in both the United States and Mexico, holding leading positions in both markets. We reach over 100 million Spanish speakers every day across television, digital, streaming, and audio. We have the most prolific long-form Spanish language content engine in the industry and the most powerful Spanish language library and intellectual property. Televisa Univision is already delivering results that neither company could have achieved independently. And we're just getting started. One of the most exciting things created by this historic merger is the largest ever Spanish language global streaming platform. With the assets and resources of Televisa Univision, we are on the cusp of launching something extraordinary. The history, the brands, the reach and trust with our audience, the content engine and library of the combined companies have come together with two new ingredients. A massive capital commitment of several hundreds of millions of dollars for Spanish language content, multiples of what any other service spends in the language, and an extreme conviction in the opportunity for the world's first large-scale streaming platform to exclusively serve the Spanish-speaking world. As we announced on February 16th, VIX, our new streaming brand, will be the first of its kind global streaming product with two very distinctive experiences, advertising video on demand or A-Bot and subscription video on demand or S-Bot, all in one single app, easily accessible for everyone across all major platforms in the United States, Mexico, and 19 countries across the rest of Latin America. The benefit of having two tiers in one app is that we will be able to easily upsell our premium service to ABOT users while SBOT subscribers will be able to enjoy these distinctive experiences each with its unique content proposition seamlessly. The ABOT tier VIX launches on March 31st and promises our users a linear-like experience that includes live news and sports and a significant amount of entertainment content across all genre. Available in the form of linear channels as well as video on demand. All advertising supported and importantly, for free. At the same time, the SBOT tier VIX+, which will launch in the second half of the year, is a premium paid experience. Our mission and our promise is to deliver compelling original content produced in the Spanish language. and since this is our only focus, we want to be the Spanish-speaking world's go-to platform. Between these two experiences, VIX and VIX+, in our first year alone, we will have an unprecedented offering of more than 50,000 hours of free and premium content. In the subscription service specifically, we will launch at least one high-quality new movie or series every week for the entire first year. VIX Plus will feature content developed exclusively for us by some of the master storytellers of Spanish language content, including one of the industry's most respected and popular artists and producers, Salma Hayek and her production company Ventana Rosa, U.S. superstar singer and actress Selena Gomez, Peruvian writer and literature Nobel Prize winner Mario Vargas Llosa, Spanish author Maria Duenas, and Mexican comedian Eugenio Derbez, among many others. We are very excited about the achievements we've had so far since announcing the merger and look forward to sharing with you the future success of Televisa University. Three strategic factors lead us to believe and have confidence that we are much better positioned than other traditional media players migrating to streaming. And that will deliver on our digital transformation strategy. First, we have a sizable traditional media business growing double digits and generating strong free cash flow to fund the lounge of our global streaming platform. We have the largest Spanish language content factory in the world that can produce premium content in a cost-effective way. We also have the most powerful Spanish language library and intellectual property. And last but not least, we have a world-class executive team, and we have built one of the best streaming teams in the industry. Over the last 12 months, we far exceeded our initial growth expectations. and our prospects for 2022 look equally as impressive. On a platform basis, Televisa Univision's revenue for 2021 reached around $4.2 billion, representing year-on-year growth of almost 15%, while EBITDA reached more than $1.6 billion, equivalent to a year-on-year increase of approximately 11%. We expect a strong revenue growth trend to be sustainable in 2022, driven by several factors, including, one, record audience share and great upfront performances, both in Mexico and the United States. Two, additional partnerships to launch our content on digital multi-channel video program distributors. Three, the monetization of the World Cup, and four, the launch of our global streaming platforms. We expect EBITDA to remain relatively stable this year as we invest in the strong foundation for our next phase of growth, including launching our global streaming platform, acquiring streaming users, and delivering higher revenues. With that, let me spend some time on milestone achievements. Last year, the Mexican economy expanded by around 5% year over year. The improving economic environment helped Thank you for joining us. Our cable segment also performed relatively well, and our initiative to expand our fiber-to-the-home FTTH footprint by 2 million homes in 2021 has already started to show initial results. On the other hand, an increase in out-of-home activities led to softer net additions of revenue-generating units, or IGUs, at Sky and lower prepaid recharges. At the same time, Sky experienced elevated costs related to the higher number of live sport events that were canceled in 2020, putting significant pressure on margins. All in, our full-year consolidated revenue reached 103.5 billion pesos, representing year-on-year growth of 6.3%, while operating segment income reached 43.5 billion pesos, equivalent to a year-on-year increase of 7.3%. Turning to our fourth quarter results, consolidated revenue reached 28.8 billion pesos representing a year-on-year increase of 3.7% while operating segment income reached 12.3 billion pesos equivalent to a year-on-year growth of 3.1%. Bernardo and I are pleased to see that most of our assets delivered We are also confident about the opportunities to keep growing in 2022. Now let me address the fourth quarter financial results in our content division. Advertising revenue increased by 7.2% as the economic rebound has been driving up marketing activity and advertising spending across the private sector. Most of our clients are looking to position their brands, products, and services In front of their consumers and Televisa's solid ratings during the fourth quarter, particularly on prime time, created a great advantage. During the fourth quarter, royalties received from Univision of $110 million were relatively flat year on year. Univision's solid operating performance during the fourth quarter was particularly offset by tough comps given heavy political and ad spending in the same period of 2020. In sum, during the quarter, content revenue increased by 4%, while operating segment income grew by 1.3%. Our content margin contracted to 47.1% due to the difficult comp associated with more production of content. In 2020, the COVID-19 lockdowns led us to have lower content production costs, Live programs such as sporting events were canceled and we broadcasted several reruns. Moving on to the full year, content revenue grew by 10.2% year on year, mainly driven by an increase in advertising sales of 17.2%. In 2021, our advertising sales reached 19.2 billion pesos and were close to pre-pandemic levels. Operating segment income in our content business was up 11.5% compared to 2020, translating into a 38.3% margin. This is an increase of 40 basis points from 2020 and the highest margin since 2016. Regarding our upfront, I am very pleased to say that our negotiations with our customers have successfully concluded. We expect advertising deposits to grow by around 13% year-on-year, representing the best upfront performance on Televisa's history. We are optimistic that this will help sustain advertising revenue growth at a solid pace in 2020. During 2021, our main newscast had great audiences, and we're very proud of this achievement. In the U.S., Univision's ratings on linear television were the only ones to grow year on year during 2021, allowing it to increase its overall portfolio share with Spanish language and total television in the United States. We're very proud to report that the strength of Univision's ratings has been driven by Televisa content, which currently occupies most of Univision's prime time programming grid. These audience metrics in Mexico and the United States are evidence that Televisa's strategy to revamp its content production, which was implemented a couple of years ago, has been very successful. Now, let me turn the call over to Pepe Toño, CEO of Cable.

Thank you very much, Alfonso. During the fourth quarter of 2021, our cable segment saw an important turnaround in operating metrics. It was the strongest quarter in the year in NetApps, coupled with a solid financial performance and strong profitability. In NetApps, the fourth quarter closed with 2,001,000 fixed revenue generating units, or RGUs, and 17,000 mobile RGUs. It was the strongest quarter of 2021 and the highest since the second quarter of 2019, including the pandemic quarters. The year closed with 14.6 million RGUs. The result was largely driven by both the realignment of some of our flagship products, as well as the Homes Past expansion plan we implemented last year. Our table business keeps growing due to our higher levels of sales and an improved product mix, which also brings a higher average revenue for users. In video, we turned it around and had the first positive quarter since the second quarter of 2019, including the pandemic quarters. We reached an inflection point and added 11,000 video RGUs during the quarter, thanks to our improved product mix from the product realignment process. Today, 75% of sales are triple play and the strengthening of our retention programs. In broadband, we added 58,000 RGUs, the second strongest quarter of the year for a total of 5.7 million RGUs. Broadband continues to be the highest margin service, So we will continue to enhance its product offerings. Now for the financial metrics. During the fourth quarter, our cable segment delivered year-on-year revenue growth of 4%, while operating segment income increased 8.3%. Our residential segment revenue grew 4.8%, while our enterprise segment, which accounts for around 15% of total cable revenue, increased 10.4%, mainly due to the timing of revenue recognition. For the full year, Revenue growth at our cable segment was 5.8%, and operating segment income grew 7.3%, reaching a margin of 42.2%. We expect that the full impact of our strong operating results to materialize in the coming quarters. During 2021, capital expenditures reached $855 million, equivalent to 36.1% of sales. These investments allow investors allow us to successfully achieve our plan to pass 2 million homes, ending the year with 17.8 million homes passed, of which more than 65 are passed by either Fiber to the Node or Fiber to the Home. By the end of the fourth quarter, we have successfully launched Fiber to the Home services in the cities of Guadalajara, Toluca, Durango, Mazatlan, and recently, Tepic. This will help us to accelerate RGU's net ads from 2022 onwards. Before turning the call back to Alfonso, let me say that we are convinced that the expansion to selective locations makes a lot of sense for EZ. We have a nationally recognized brand, exclusive content, and high-quality service with competitive offers. Thank you very much.