Grupo Televisa S.A.B.

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I got it, I got it, I got it, I got it, it runs in my blood, oh. I love it, I love it, I love it, I love it, you already know. I take my time and I'm lucky, I'm lucky, I'm lucky, I know. It's my love affair. Let's go!

Hot girls, red and brown, we don't look like models. Dead lines, fake cries, and the energy goes. You'll be falling in love with a girl from Rio. Todos están pendientes a ti. Pero tú puesta para mí. Uh-huh. Dile que tú eres mía, mía Tú sabes que eres mía, mía Tú mismo lo decías

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I do love you with me Hey, hey, hey

Si tú me dices ahorita que me quieres a tu lado, que lindo sería Si tú con esa boquita ya me tienes embobado, yo te desalía Pero no me dices que sí, que sí, que sí, que sí Ay, tú no me dices que sí, que sí, que sí, que sí

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Voy a reír, voy a bailar, vi-vi-vi-vi-la-la-la-la. Voy a reír, voy a gozar, vi-vi-vi-vi-la-la-la-la. I can't help it. If you look at me and go, you take me to another place. Got me feeling like I'm flying like I'm out in space. Something about your body says, come and take me. Got me begging, got me hoping that the night don't stop. I ain't not slow. I ain't not slow. I ain't not slow. I ain't not slow. We'll be right back.

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Hello and welcome to the Televisa Univision second quarter 2022 earnings call. At this time, all participants have been placed in a listen-only mode. Following management's prepared remarks, we will open the call for questions. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, press the pound key. We ask that when you pose your question, you pick up your handset to allow optimal sound quality. Today's call is being recorded. I would now like to turn the call over to Betsy Frank, Head of Investor Relations.

Please go ahead. Thank you and welcome everyone to Televisa Univision's second quarter earnings call.

I'm joined today by our CEO, Wade Davis, and our CFO, Carlos Ferrero. This morning we issued an earnings press release which can be found at investors.univision.net. A few notes about the contents of our remarks today. We will refer to adjusted OIDSA as EBITDA. Unless stated otherwise, all financial comparisons will be on a pro forma year-over-year basis. Pro forma comparisons are adjusted to include the Televisa content business for all prior periods. Unless stated otherwise, our U.S. ratings figures refer to audiences ages 18 to 49, and Mexico ratings figures refer to audiences P4+. Some of the information discussed today will contain forward-looking statements. These statements involve risks and uncertainties, including those highlighted in our press release, and may cause actual results to differ materially from these statements. We are not obligated to update forward-looking information discussed on this call, except as may be required by law. Our press release and reporting package contain definitions and reconciliations of our non-GAAP measures to the most directly comparable GAAP measurements. I will now turn the call over to Wade.

Thank you all for joining us.

On behalf of myself and my partners, Alfonso and Bernardo in Mexico, it's great to be here to share with you another stellar quarter for Televisa Univision. and to discuss the continued progress of our transformation. Halfway through our first year as a combined company, we're delivering on the promise of Televisa Univision. Our core businesses in the US and Mexico are growing at rates that lead the market in both countries, and we're accelerating this growth with our industry-defining streaming business, which as of last Thursday, now has both the free ad-supported and the premium subscription tiers fully launched in the US, Mexico, and the rest of Spanish-speaking Latin America.

In the second quarter, we delivered double-digit consolidated revenue growth.

The growth of our core business and the efficiency of our streaming model has allowed us to fully launch VIX and VIX Plus while maintaining EBITDA for the first half of 22, a remarkable achievement. which illustrates the power and uniqueness of our combined assets, as well as the focus and discipline of our execution. In previous earnings calls in the early days of our transformation, we focused our discussion in two areas. Number one, the turnaround and optimization of our core business, and number two, the evolution of our business for the future. With our merger complete and our transformation well underway, The construct for our calls going forward will be focused on the following three pillars for our long-term success. First, our ability to grow our audience with superior content. Second, our ability to monetize that audience through advertising and subscription revenues. And third, our digital transformation where our massive growth opportunity in streaming will further accelerate our already growing core business.

I'll cover the strategic and operational progress across these three areas, and Carlos will discuss how our achievements against these three pillars translate into market-leading financial performance. With that, I'll start with the first pillar, our audiences and our content.

The single most strategic and powerful element of our merger is the ability to leverage our library and IP and to optimize our massive content creation engine across multiple territories and platforms. We can now optimize our linear pipeline across both the US and Mexico, and we can deploy the huge new volume of premium original content and our library to deliver on our streaming proposition.

On the linear side of our business, the ratings results this quarter were mixed.

In the U.S., our flagship Univision network performed extremely well. Univision was essentially flat in ratings compared to the rest of broadcasts, which was down mid-teens. Univision was also the number two network in absolute audience delivery, regardless of language, and behind only ABC, going into the all-important May sweeps, which set us up extremely well for the 22-23 upfront, which I'll touch upon later in my remarks. On the other hand, some of our smaller networks performed significantly below market. But despite the disappointing performance of our smaller networks, the size and overperformance of Univision allowed us to continue to grow the overall market share of our portfolio. Our Spanish language share grew 40 basis points year over year to 63.2%, and our total television share improved 20 basis points to 7%, marking the highest level in a decade. The market leading performance of the Univision network was driven across all major content categories. Our news programming grew share across the board. Our market share of Spanish language evening news was two times higher than our next largest competitor. And we maintained the number three spot nationally regardless of language. In local news, our early newscasts maintained their number one or number two position in our top five markets across both English and Spanish languages. In entertainment, our hit drama Madre made Univision the number one network in the 10 p.m. weeknight hour regardless of language and ranked among the top five most watched dramas on primetime in any language. In sports, we grew ratings for both League MX and Champions League, including a record high final match for champions. Our networks also home to nine of the top 10 rated soccer matches aired during the quarter period. In Mexico, the story was similar. Strong performance of our flagship network, Astraeus, offset by mixed results from our smaller and pay TV networks for a modest decline in overall television audience this quarter. Much of this was driven by a decline in television usage, which we believe is a natural rebalancing back to pre-COVID levels rather than an ongoing trend. Las Estrellas saw modest absolute ratings declines, but outperformed both the decline in total television audience and the competition, thus gaining share. This quarter, our primetime market share expanded 250 basis points. And to give you a sense of our reach in Mexico, Our portfolio of broadcast and pay TV channels have a larger prime time audience than all other companies in the market combined. And in the free to air segment, we were two times the size of our next largest competitor. Our content factory in Mexico continues to deliver unstoppable content. We maintained our market leading position with 19 of the top 20 shows this quarter. Our news offerings grew both in terms of absolute ratings and audience share. And about two-thirds of the free day our Liga MX matches were on our networks and we're looking forward to hosting the 2022 World Cup coming up in the fourth quarter.

Now turning to monetization, Q2 was a fantastic quarter of growth.

Our core business continues to deliver sufficient growth to essentially fund the investments we're making in our new businesses. We delivered double-digit growth in advertising and in subscription and licensing in both the U.S. and Mexico this quarter. The transformation of our U.S. ad sales business continues to deliver exceptional results with 10% revenue growth this quarter. The core growth rate, excluding last year's elevated COVID advocacy revenue, was 13%. All the strategies we implemented to optimize the core ad sales business are working. We're improving advertiser churn, attracting new advertisers to the platform, improving pricing, mix, and driving improved yields. This quarter, we benefited from our extremely strong 21-22 upfront, and we're executing very well on the scatter market. Our scatter pricing this quarter was the highest in the company's history, and we had the highest number of new client activations in the past five years. In terms of the components of our growth, the national business grew 13% during the quarter, which was offset slightly by slower mid-single-digit growth in local, as the auto category continues to be soft in the Tier 2 and Tier 3 levels. Across both local and national, our new products and solutions are working. Streaming revenue doubled in the quarter, and our advanced marketing solutions revenue grew 66%, delivering half of our overall ad sales growth. The strength of our ratings and the resonance of our new products and solutions contributed to us closing another incredibly successful U.S. upfront for the 22-23 season. Notwithstanding the comparison to the huge increases we achieved last year, we were able to grow volume this year mid-teens to the highest absolute levels we've achieved in seven years. Our growth in linear ratings and our market-leading streaming service allowed us to grow both linear and streaming upfront commitments. We're now delivering pricing rate of change in line with the general market, which was in the high single-digit range this year. This is something Univision has historically been unable to achieve, and it's rewarding to see the marketplace acknowledge the value of our content and the value of our audience. The upfront results for VIX were fantastic. Demand for VIX came from new advertisers and existing linear advertisers, where the attach rate approached 70%. VIX was able to command premium pricing relative to linear, and importantly, this premium pricing held for us in streaming, which was not generally the case for other publishers, as they had to drop their price to achieve their volume objectives. And during this year's Upfront, we unveiled the first-ever U.S. Hispanic Household Data Graph. This is the most complete view of our audience and the U.S. Hispanic marketplace ever built. We've now mapped nearly 90% of all Hispanic households in the country, and this is an extraordinary asset that will drive insights for us and our clients, powering new products and services as well as enhanced targeting across both linear and streaming. Turning to Mexico ad sales, we had an outstanding quarter with 14% growth, the highest in recorded history. Before we get into the drivers here, let me take a moment to remind you of the dynamics of the Mexico ad market, which are structurally different than in the US. The upfront is a calendar cycle rather than a broadcast cycle and accounts for 90% of the total national private sector business. We've had a historic upfront for 22 with 14% growth, the highest ever. Second, there are a smaller number of television advertising clients and we already have a very high share of spend in line with our viewership share. This places a premium on attracting new advertisers to the platform as a source of growth. And third, given our high share of the TV ad market, on a relative basis, our opportunity for above-market growth will disproportionately come from digital, where VIX is already delivering massive new capacity.

Given this backdrop, it makes our results this quarter even more impressive.

We produced significant volume growth in the scatter market, where there's historically been little opportunity. We brought in new advertisers during the quarter, added depth of advertisers in many categories, grew seven out of the top 10 categories, and expanded our share of wallet with existing advertisers. The bottom line here is that our Mexico team is laser focused on all key levels of growth and delivering incredible results. The monetization of VIX in Mexico will be an enormous opportunity for us. In only three months since launch, VIX is delivering extraordinary audience, consumption, and therefore ad capacity in Mexico. As we've said, Spanish language streaming is a wide open lane. The success of VIX in the quarter is really the first time the Mexican market has seen this sort of premium OTT video inventory. This market's in its early stages in Mexico, but given the audience momentum of VIX and our leadership position in the TV market, we expect to be at the forefront of helping advertisers see the power of premium, long-form digital video. And as the market matures, we expect to see significant revenue growth catching up with the massive capacity we're already delivering.

Now let's move on to the second component of monetization.

Subscription and licensing, where consolidated revenues grew 10%. In the U.S., subscription revenue grew over 11% and was offset slightly by declines in third-party content licensing. Subscribers were essentially flat. Traditional MVP PD subs declined in line with the industry, and for us, were completely offset by the growth of our virtual MVP sub-base. We saw the virtual MVPD segment of our revenue grow by 300% this quarter, and we continue to be only about 50% penetrated in this category.

This quarter, U.S.

subscription revenue growth was partially offset by a reduction in content licensing fees, where we made the strategic decision to stop licensing content to third parties in our core markets in favor of exclusive availability on our VIX platform.

The revenue from third parties this quarter was immaterial and can no longer impact our revenue comparisons going forward. In Mexico, subscription licensing grew 10% in the quarter.

Subscriber trends remain stable, and this market is not experiencing the same cord-cutting tendencies seen in the U.S. and is actually experiencing slight growth, given that pay-to-be continues to reflect a very strong value proposition in this market. We report our rest of world content licensing in this line. And unlike the US, we expect to increase the amount of content we're licensing outside of our core markets as we increase the volume of premium content we're creating for VIX+.

So going forward, this will be an area we expect to grow. Last, but certainly not least, we have made enormous progress on streaming.

The free ad-supported tier of VIX, which launched at the end of March, is on a tear. After only being in the market for one quarter, our analysis suggests that we already have the largest audience of any Spanish-language free AVOD service in the world, surpassing other services that have been in the markets for years. This is driven by a content offering that is unlike any other free service. First, the scope is massive, over 130 channels and 40,000 hours of content across all genres. But second, and most importantly, is the quality and exclusivity. Over 80% of the consumption of entertainment content is our own first party content, which includes nearly 10 hours a day of exclusive news and sports, in addition to exclusive access to our library. The majority of VIX content is original or exclusive. Relative to the other major free services, which are overwhelmingly non-exclusive library offerings,

There is no comparison. On Thursday of last week, we launched VIX Plus, the premium subscription tier of our service.

With VIX and VIX Plus fully launched, we now have our full service in market, which is product offering that is truly unique. There is no other service in the market that combines a comprehensive free ad-supported tier with with a super premium subscription tier, offering original entertainment content and a massive volume of premium live sports. While the rest of the market is just now waking up to the power of ad-supported streaming, we built it to be an integral part of our service from day one. Other premium streamers look at ads only as a way to buy down subscription price, offering an ad load or not, depending on which price is paid. And in our opinion, This will miss the mark for our audience, which is much more nuanced in what they're looking for in streaming service. VIX Plus is a paid tier inside the VIX app. It's priced at $6.99 in the U.S. and 119 pesos in Mexico. Having these two tiers inside the same app provides huge benefits to our users and to us. From a user standpoint, the massive base of VIX content is always available to you. The premium content is there when you want it, and our ability to leverage the free tier has huge promotional and churn management benefits to us. The original content lineup at launch for VIXplus is just the tip of the iceberg, but is already more expansive than any other premium streamer fielded at launch. Day one, we started with seven original series, including Maria Felix La Doña, and five original movies, including Moraes contra Godinez Dos. And this is on top of the 10,000 hours of exclusive entertainment content and the thousand of hours of soccer we'll have in year one. Over the course of our first year, we will be delivering an average of at least one blockbuster original series or film premiere per week. Immediately at launch, VIX Plus was available on all major platforms, including iOS and Android for mobile, connected TV, including Amazon Fire, Google TV, Android TV, Apple TV, Roku, and Samsung TV, and also as an add-on service for Prime Video channels, YouTube TV, and Sling TV. Beyond this distribution footprint, we have announced some powerful marketing partnerships. the first of which we announced last week with T-Mobile. T-Mobile will offer VIX Plus to their customer base at no extra cost. This makes T-Mobile the first carrier in the U.S. to exclusively offer a service built to represent and serve the Hispanic culture. In Mexico, Izzy, the largest cable operator, is our exclusive MVPD distribution partner for VIX Plus, And we had a massive marketing partnership with OXO's 20,000 retail locations, making it easy to pay for VIX Plus in cash to the extent our users prefer that. I'm thrilled with the progress that we've made on streaming in such a short period of time. In just 15 months since the announcement of our merger, we brought on board hundreds of new employees and functions Televisa and Univision never even had. built a product and a platform to support a completely unique consumer experience, and have developed and greenlit hundreds of new original projects, and have ramped our sports production to unprecedented levels. VIX and VIX Plus programming complements our linear services, and together, we're bringing the most comprehensive programming experience to more Spanish-speaking audiences than ever before. In summary, we had another outstanding quarter. We're continuing our integration, and it's invigorating to see our teams working together, learning from each other, and finding new ways to deliver value and grow our business. We accomplished a lot this quarter. All the pieces we now have in place, I'm incredibly excited about the future. Our business is firing on all cylinders, and we are positioned to capture the huge opportunity that lies ahead. And with that, I'll turn it over to Carlos.

Thanks, Wade. It is great to be here today to share our second quarter results. Consolidated revenue grew by 11% in the second quarter and by 11% year-to-date. Our consolidated EBITDA declined by 8% in the second quarter and by 1% year-to-date, reflecting our strategic decision to invest aggressively in our streaming opportunities. Moving to advertising, consolidated ad revenue grew 11 percent. In the U.S., it grew 10 percent. If we exclude political and advocacy where we have strong COVID spend, our growth was even higher at 13 percent. We continue to benefit from the strong 21-22 offering. We had strong scatter market participation with the highest scatter CPMs in recent history. We successfully expanded relationships with existing advertisers by landing an attachment rate of about 50% with VIX, an outstanding number in just its first quarter, and one we've already seen expand in the recent 22-23 U.S. upfronts. Our local business has been impacted by the supply chain disruption in the auto sector, which is traditionally the largest category here. On the national level, brand-based auto campaigns have not been impacted. Mexico advertising revenue grew an outstanding 14% in the quarter. In local currency, this growth was 15%. This is especially impressive given our existing position as the market share leader in linear audience and advertising dollars. And as Wade mentioned, This growth is really coming from linear, although we see a big opportunity ahead with this. Now going into subscription and licensing. Revenue grew 10% in a consolidated basis. In the U.S., this growth was also 10%. Total subscribers were roughly flat as the decline in traditional MVPD subs mostly offset the increase in virtual MVPD subs. We continue to benefit from YouTube TV, where our carriage began in the third quarter of 2021. In addition, we captured the last of the benefit from our 2021 reorg this quarter. In Mexico, subscription and licensing revenue grew 10% in U.S. dollars and 10% in local currency. We benefited from both subscriber growth and price increases. Expenses grew 24% in the quarter, largely driven by investments in streaming and ad sales, where we see attractive returns. Although it weighs on margins this quarter, our streaming investment is the right decision for the long term. We expect these investments to continue, after which we should see margins and profitability re-accelerate. For ad sales, our investment in advanced marketing solutions has clearly begun to pay off as evidence in our top-line results. We also remained on pace to deliver our synergies from the merger. Let's talk about profitability. We generated EBITDA of $373 million, down 8% year-over-year as a result of investments in streaming and ad sales. For the first half of the year, our EBITDA of $769 million is down 1% versus previous year. Turning to our balance sheet, during the quarter, we successfully addressed some of our nearest maturities and extended that profile while eliminating our highest cost branch of debt of $370 million of 9.5% senior notes. In total, we refinanced $1.5 billion of our debt. Including hedges on floating rate debt, 75% of our debt is now effectively fixed rate. We also extended our average maturity, which is now 4.7 years. Finally, we reduced refinancing risk while we will continue to generate free cash flow. We ended the quarter with $684 million of cash on our balance sheet, with incremental liquidity available through credit lines. Our leverage ratio remained consistent with the prior quarter at 5.5 times. As a reminder, we significantly delevered the company when we completed the merger. And over time, we remain committed to reducing it further. One last topic I want to address, which I'm certain is top of mind for all of you, is economic uncertainty. To date, our business is firing on all cylinders and we're benefiting from our efforts to transform the company. The areas where we have seen softness to date have been supply chain related. One thing we closely monitor is upfront cancellations. For Q3, we have seen a slight increase in cancellations, but it is an immaterial amount and more related to digital than macro trends. Like all others, we're monitoring the macroeconomic situation as we're not immune to a recession. But I would like to make some points about why our business should perform better than peers during an economic downturn. First, in the U.S., a big part of our ad sales strategy is to grow our power ratio by attracting zero and low share advertisers. In a market where a marginal ad dollar needs to work harder, it is likely to go further in underpenetrated and growing markets, such as the U.S. Hispanics, than in fully penetrated or non-growing markets. Second, In Mexico, the offering dynamics are very different. We collect the cash for the entire commitment at the beginning of the year. Therefore, cancellations and erosion are different than in the U.S. Third, Televisa Innovation is now a larger company with a stronger financial profile, benefiting from scale and diversification. And finally, as it relates to our rising interest rate environment, we strategically and successfully refinanced a significant amount of our capital structure. We have a comfortable mix of fixed and variable interest expense. However, we will continue to monitor market opportunities. We've been through scenarios like this before, and disciplined expense management is in our DNA. When COVID hit, and we needed to react quickly, both Univision and Televisa delivered significant savings. In summary, I'll echo Wade's comments that we had an outstanding quarter. We're excited about the opportunities ahead, and we're hard at work to capture those. And now, let's take your questions. Operator, please open the line.

Certainly. And at this time, if you would like to ask a question, please press star 1 on your touch-tone phone. You may withdraw your question at any time by pressing the pound key. Once again, that is star and one. And we will take our first question from Aaron Watts with Deutsche Bank. Please go ahead. Your line is open.

Thank you for having me on today. Appreciate the time, as always. A few quick questions for me, if I may. I guess first, encouraging advertising trends through the first half of the year. And, Carlos, I caught I think most of what you were saying there at the end, but Could you maybe just talk a little bit more about what you're seeing in the marketplace today and for the back half? We've obviously heard from pockets of the media world there's been some softening. Have you seen that hesitancy? And I think I did hear you talk about some slight increase in upfront cancellations, but any other hesitancy tied more to kind of a real fear of recession? And if so, where are you seeing that?

Yeah. Carlos, maybe if you want to take the second half question and some of the tailwinds we're seeing, and then I'll talk a little bit more about the advertiser trends.

Yeah, sure. Yeah, as you mentioned, well, half of the year has gone by. We're very happy with the results that we got in the first half of the year. We are seeing several tailwinds for the second half. First, we closed a very successful 22, 23 upfront in the U.S., Second, political advertising will definitely help us in the fourth quarter in the U.S. as well. Fourth, there are two components around the World Cup that will also help us in the second part of the year. The first one being advertising in Mexico. The second is the fact that we will be sub-licensing the rights to most of the Latin American countries. And finally, and most importantly, what I would like to comment is that we should have a big tailwind in the second half of the year related to the fact that we have launched BICS and BICS+, and that's something that should play in our favor in the second half.

And thanks for your question, Aaron, and nice to hear your voice. As it relates to just economic softness and the impact on our advertising business, I think the first thing to point out is that Q2 was the best quarter that we've had in five years period in terms of overall volume. Pricing was the highest in the history of the company. We achieved triple digit growth in streaming and advanced solutions represented the highest percentage of overall ad sales that we've had in the history of the company. You know, Carlos touched a little bit on this in his remarks, but I really want to underscore it because we do think that it's going to be differentiated when it comes, you know, when and if we see any sort of real significant and sustained economic softness, which is, you know, we are delivering these really fantastic ad sales results because of the superb execution of our ad sales team. But the mega opportunity that exists here is the fact that only about a third of U.S. TV advertisers are advertising today to the U.S. Hispanic population. And of those that are advertising, about half of them are under-indexing their spend relative to the audience and the size of the economy that they represent. So the billion-dollar U.S. ad sales opportunity is simply for us to get the fair share of marketing spend relative to the size and purchasing power of our audience. In terms of any softness that we're seeing, Carlos mentioned that we did see slightly elevated cancellations, but those cancellations were really category-specific cancellations. You know, we saw maybe two or three points higher cancellations than we have seen historically in this part of the year. But 70% of those cancellations were from auto, TPG, and food, and retail. And in terms of what we're seeing in Q3, It's really similar, maybe a point better sequentially in terms of improvement on cancellations. So our advertising business is a cyclical business. Carlos highlighted a number of factors that we think are going to benefit us to the extent that there is a more pronounced downturn. So, in general, you know, our business is holding up really, really well because of a number of these factors, and we continue to be really optimistic for the second half of the year.

Okay. Very helpful context. Wade, you mentioned some softness in your smaller networks, but overall you've highlighted the healthy market share gains in both Mexico and and the U.S., was there anything one-off in nature driving that over the recent past? And do you see the momentum as being sustainable going forward?

So, yeah, there were really, I would say that there were only two one-offs, right? So in the U.S., the one-offs were related to the disappointing performance of our smaller nets, which we're going to fix. Just maybe to take a minute on that, Univision significantly outperformed the broadcast market for the quarter, and we feel very good about the outlook for big Univision. The softness in the portfolio came from Unimas and GalaVision, and they were pretty different root causes. For UNIMAS, the softness was with an Amarantinos, which is two hours a day, every day during prime time when it's running. In this quarter, it had a bad lead-in, and frankly, it required some format changes. And when the show returns in late August, both of these issues are going to have been resolved. Galavision, frankly, this network needs a reboot from both a brand and a programming perspective. This is in process. I'd say stay tuned. But in the meantime, the network capacity here can be absorbed elsewhere in the portfolio. So I'd say those are the only one-time items that we saw in the U.S. In Mexico, it was really usage-driven. Our Astraeus network outperformed the market. You know, we saw putts decline for freed air in Mexico about 6%. Astraeus saw ratings performance of about negative 3%, so obviously, as a result, we took share. But fundamentally, we view the usage issue as a one-time item as well in Mexico, where If you look back over the PUT trends over the years, we really see this as a rebalancing back to the same usage levels that we saw in 2019. So we view that as, I guess to use your words, kind of a one-time rebalancing as well. And in terms of whether or not we expect these trends to continue at a macro level from a share of viewing standpoint, I would say that we do expect to continue to chip away at both Spanish language share and total TV share. I guess with the only potential hiccup is I think there's going to be a brief time in the fourth quarter where our main U.S. competitor has the World Cup in the fourth quarter. But otherwise, we're highly confident that we're going to continue to chip away both Spanish language and total TV share in the U.S. and continue to dominate Mexico.

And we'll take our next question from David Joyce with Barclays. Please go ahead. Your line is open.

Thank you. A couple questions. If you could help us understand what all comprises the Advanced Marketing Solutions program, It seems like the VIX offering is part of that, but how can we think about all of the different buckets that are in the advertising revenue line? And then secondly, if you could help us understand your FX exposure, given that you have a services agreement with Grupo Televisa and you've got the Mexican ad and subscription revenue and VIX in a few countries. What is the proportion of revenue in EBITDA that's non-U.S. dollar denominated? Thank you.

Sure. Why don't I take the marketing solutions question and Carlos can take the FX piece of it. So the biggest piece of what's in our advanced marketing solutions business is VIX. We also have audience targeting that cuts across both VIX campaigns and data-driven linear campaigns, which Univision never had. We have social and branded content and experiential solutions as well. So those are the lines of business that comprise what we refer to as the advanced marketing solutions business. VIX is by far the biggest driver of growth there, where we saw either triple-digit improvement in the quarter around VIX, Monetization, we're very happy with monetization in the U.S. around VIX, where we're seeing about 90% sellout. We're seeing premium pricing relative to linear. And so, you know, you should expect that this segment of our overall advertising is going to continue to be a big driver of growth.

Hi, David. Thanks for the question. As you know, most of our FX exposure is on the revenue we get in Mexico, which is primarily in Mexican pesos. That's why we're giving revenue results both in U.S. dollars and local currency. On the OPEX side also in Mexico, what I would like to tell you is that OPEX in dollars in Mexico is pretty much offset by revenue in dollars that we get in our Mexican operation, so we're pretty much hedged on that front. You mentioned something around contracts with Televisa. What I can tell you is that, first of all, these are arm's length contracts. And some of them are in pesos, some of them are in dollars, and that depends on the nature of the service. And finally, as we launched VIX and VIX Plus very recently, the amount of revenue that we're getting in Latin America is still small. It will increase over time, but it will be mostly FX exposure as well on the revenue that we're getting from these Latin American countries.

Great. Thank you very much.

And we'll take our next question from Jessica Reef Ulrich. Please go ahead. Your line is open.

Thank you. Good morning. I have two topics. Direct to consumers, one, and advertising, the other. On DTC, any concerns? The question's on ARPU. For the SVOD service, it's $6.99, you said, as the subscription price. Is there any advertising component to that? And what's the ARPU on the ad-supported service? What are you thinking about longer-term margins in this business? And is there any comment you can make on your content investment for the direct-to-consumer platform over the next few years?

Sure. So... Keep me honest, I'll try and hit each one of those. So on the ARPU front and the question as to whether or not there's advertising behind the paywall, there is only going to be advertising in a couple places behind the paywall. Number one, there will be some ads on some of the sports content. And number two, hopefully to state the obvious, when people subscribe to the service, we're not going to be taking away access to the massive volume of AVOD content that we have in front of the paywall. And so some of that content may show up or will show up in content recommendations based on a subscriber's usage. You know, in terms of margins, we're not providing any guidance beyond what we've said about the growth of our core business funding our investment in the streaming business. But let me take a minute and touch on why our model is going to deliver a superior margin profile relative to other streaming businesses in the marketplace. When you think about Any streaming business, the two most significant components of cost are content and marketing, and these are both areas that we have extraordinary intrinsic advantages. So let me start with content. So first and foremost, we're able to leverage the largest library of Spanish language content in the world exclusively on our service, which, as you've seen over the past quarters, we've been strategically bringing back in-house that content in our core markets, which has hurt us in terms of licensing revenue, but you also heard in our prepared remarks, that is now concluded. And so, you know, we've, if you will, taken the pain of the negative revenue comps but now have this massive library sitting underneath everything else that we're doing, and it's already proving itself in AVOD, where we're seeing a massive over-indexing of first-party content consumption, which, to state the obvious, therefore reduce our revenue share and content costs. The second thing is just the scope and efficiency of our massive content engine in Mexico. The fact that we have a vertically integrated content creation engine across 92 studios that produces year in and year out many tens of thousands of hours of original scripted entertainment. We can produce at a scale and a price point that's not replicatable by anybody else in the market. Furthermore, because we're only laser focused on the Spanish language market, that allows us a lot of production flexibility to think about either co-production or licensing of our new original content to the rest of the world. And so you can assume that on top of the intrinsic price point advantages that we have, we can further reduce the net effective cost of original content by licensing or co-producing for the rights outside of the Spanish language market. And then the last thing I'll say with respect to our content advantage is that You know, we've gone out and strategically aggregated an extraordinary portfolio of sports rights. Many of those rights, we either leveraged what we had and our relationships in particular in Mexico around extending them. And in other cases, we've gone out and efficiently secured what historically might have been viewed as niche rights that are going to be very powerful in the context of our streaming offering. So in the aggregate, those are probably the three biggest benefits, which add up to massive differentiation on our content costs. As it relates to marketing, as everybody on this call knows, we have 60 plus percent market share of television viewership in the US and Mexico. Because our streaming proposition is additive to linear and we are able to leverage the linear platform to promote the streaming product without undermining consumption on the linear platform. We touch 125 million Spanish speakers every single day on digital audio or TV. And although there are other companies in the world, you know, diversified media companies that have O&O platforms, The decline in their ratings and therefore their linear promotional capacity limit their ability to use these platforms to promote their services without compromising revenue. And then the last thing I'll point out as it relates to efficiency of marketing is that we have a very different product proposition, which is a two-tier service inside the same app in which we have a broad-based free ad supported service and then a super premium subscription tier inside that same service. And that creates huge benefits for us in terms of both user acquisition and churn management as we're able to use the free tier to drive sampling, build a relationship, use that promotional inventory to upsell people into the paid tier, and then also as people naturally churn out over the course of different tournament seasons, series that they're focused on, they churn out into our AVOD service where we maintain a relationship with them by providing them daily news, daily sports highlights, live sports programming, and a massive volume of free content. So maintaining that relationship on an ongoing basis gives us a really efficient way to reactivate people as we move into new seasons of soccer, new series, new films that they're interested in.

That's a really interesting point. And then on advertising, I just wanted to go back to the upfront. I don't think I heard you say what you sold out, what your increase was in dollars or awards, however you can – shape it, you know, frame it. When you guys are talking, it sounds like your share shifts are within broadcasting. Is it just broadcasting? Are you taking money from digital or other areas? And then finally, you know, what's your outlook for political in a non-presidential year? I mean, a record amount of money has been raised, and Hispanics seem to be more critical than ever as like kind of a deciding factor, like swinging the vote. So you seem to be well set up. Can you give us your thoughts?

Sure. I'll start with the upfront and then cover political. So it was a fabulous upfront. Just to be clear, we saw volume increases in the mid to high teens. And that is probably 3x what the rest of the market got. Linear alone was up double digits and streaming was up triple digits. And really importantly, we have now reset pricing for Univision and seeing pricing rate of change at or above the general market for the past two upfronts. And importantly, we're driving this growth both in linear and in streaming because we have the linear capacity to do so and because our streaming offering is complementary to linear and unique to anything else in the marketplace. So this is not a share shift for us in the same way it is for other people. Streaming was incremental. We grew the network alone double digits. And with streaming, as I said before, we were in the mid to high teens. Why is streaming so incremental for us and not for others? You know, first and foremost, as I said a moment ago, it's capacity. We have growing linear capacity. The rest of television has seen sustained shrinking linear capacity. So for them, streaming by definition needs to replace it. For us, it's incremental. Second, since our streaming service is built as incremental from a content standpoint to our linear services, we're reaching new audiences. And so adding streaming to the mix expands what our advertisers have access to. And third, we also think about just the delivery of audience across streaming and linear as we're doing more and more audience-based and not demo-based guarantees. These guarantees are written to allow us to deliver across linear and streaming, and all of that is unlocked by the new capabilities that we've built like our proprietary U.S. Hispanic household graph. As it relates to political, you're absolutely right. The U.S. Hispanic audience is increasingly the swing vote for both Republicans and Democrats. And in addition to these better demand dynamics, we have new solutions. We have the household graph that I just referenced that that provides insight to behaviors, propensities, spending patterns, content consumptions, demographics. And then we have an expanded team in D.C. and a totally new go-to-market approach around political. So, you know, we've said before that we expect the political this midterm election to be significantly more than double what we achieved in the 2018 election. midterm election, and we're just as bullish, if not more bullish, the closer we get to the elections.

And we'll go next to Marcelo Santos for JP Morgan. Please go ahead. Your line is open. Thank you.

Hi, good morning. Thank you for taking my questions. The first question is about the distribution of VIX Plus in Mexico. I think you mentioned that EZ would be the exclusive distributor. So you are not going to try to distribute to other players. Could you please explain a bit more the strategy on distributing VIX? And the second question would be about the deployment of VIX in other markets beyond U.S. and Mexico. What is the plan to ramp up there, and what are the expectations in the near term? Thank you.

Sure. Well, just to clarify what I did say is I said that Izzy is currently the exclusive MVPD distributor in Mexico. So... VIX is, frankly, fully distributed across, as I said in my prepared remarks, across Roku, across Android, across iOS, Samsung TV, and we're going to be rolling out incremental distribution platforms in, frankly, the coming days, like LG, for example. We have other marketing partnerships. I mentioned OXO, which is incredibly powerful in Mexico, as you know. And there are likely to be other co-marketing partnerships in which people look at offering VIX as a benefit to their users or subscribers. But Izzy is currently our exclusive NVPD distribution partner. So it's the only place that you can get VIX as part of your pay television package. VIX is live in the rest of Spanish-speaking Latin America today. You should view that, though, as more of a soft launch. As you know, when an app is accepted on the major platforms in Mexico, it's also available in the rest of Spanish-speaking Latin America. And we're actually seeing extraordinary AVOD consumption already in the ROLAC countries. As it relates to VIX+, we will initially be only focused on B2B distribution and not significant direct-to-consumer expenditures. But in terms of prioritization, you should really think of us stepping on the gas in the rest of Spanish-speaking Latin America. Sometime towards the end of 2023, Mexico and the U.S. are our priorities. And as we think about prioritizing the other countries in Spanish-speaking Latin America, we're first going to focus on the big economies that have higher affinities for the Mexican content that we're creating. And then over time, we will think, based on the performance of those markets, we will think about further localization.

Thank you.

We'll take our next question from Alejandro Chavez with Credit Suisse. Please go ahead.

Hi.

Thanks for taking my question. I was wondering, first of all, about the breakdown of ad revenues by sector. If you could provide us or at least some guidance of how your ad revenues are broken down by sector. Okay. And the second one is on the disclosure of progress with subs and engagement and non-plugged users and all that. I was wondering, perhaps you're not disclosing this yet because you're still in ramp-up mode, or why do you think you're not disclosing as much information on the performance of streaming, which I understand has been phenomenal, so it's a bit surprising to see that you're not yet disclosing much information on that front. Thanks a lot.

Sure. I mean, in terms of ad revenue by sector, that's a very long answer. You know, in the U.S., it's much more nuanced and complicated than it is in Mexico because we have a lot more television advertisers in the U.S., and there are a lot more categories that advertise in the U.S. I mean, look, I guess just to try and be helpful and give you some context, I mean, the main categories in the U.S. are CPG, retail, quick-serve restaurants, tech, auto, pharma, financial services, telco, alcoholic beverages, non-alcoholic beverages. So these are diversified categories. You know, in general, we're really happy with the positive momentum in the market. We're, as I said previously, the only places where we're seeing any sort of challenges from a category standpoint. our auto retail and food. And frankly, auto is holding up reasonably well at the national level. It's really at the Tier 2 and Tier 3 and local level that we're seeing the softness. And in fact, auto was probably, I think, maybe our third biggest category in terms of growth in the upfront. So certainly Tier 1 auto, the big OEMs, we're feeling very good about that category. And in terms of our disclosure around VIX and the underlying metrics, I mean, look, we understand investors' desire for and their need for projections and targets and disclosure. And we are absolutely going to provide clarity and disclosure around this at the appropriate time. I guess I would just ask you to keep in mind that we launched the new service five days ago, and the service that we have in the market is completely unique. There's nothing else out there in which you have two different tiers that are totally different content compositions. inside the same app. Every other product out there that has paid and ad supported is really just, you know, they're using ads to buy down the subscription price and offer a lower price tier, but the entire service is against the same content stack, and they generally don't have a fully free comprehensive service. So we need to see the behavior of consumers between free and paid and We need to see churn. We need user acquisition costs to settle in. We need to understand the productivity of various user acquisition channels. And frankly, providing disclosure and targets before we completely understand these operational dynamics and give the service some time to season would frankly, I think, be counterproductive for investors who are trying to reach conclusions. So Please be patient. Full and clear disclosure around streaming will be coming at the appropriate time when we can confidently give you guidance.

And thank you. And this will conclude today's Televisa Univision second quarter 2022 earnings call. You may disconnect your lines at this time and have a wonderful day.