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Welcome to the Televisa Univision fourth quarter and full year 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 star 2. We ask that when you pose your question, you pick up your handset to allow for optimal sound quality. Today's call is being recorded. I will now turn the call over to Betsy Frank, Head of Investor Relations. Please go ahead.

Thank you, and welcome, everyone, to Televisa Univision's fourth quarter and full year 2022 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.televisaunivision.com. A few notes about the content of our remarks today. We will refer to adjusted OIDDA 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 and market share figures refer to primetime audiences ages 18 to 49, and Mexico figures refer to primetime 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 measures. I will now turn the call over to Wade.

On behalf of myself and my partners, Alfonso and Bernardo in Mexico, I'm thrilled to share the results from our first year as Televisa Univision. 2022 was an incredible year, which kicked off with the closing of the transformative merger to create our combined business, which is now the world's leading Spanish language media company. Over the course of the year, we delivered a number of historic operating achievements, from a record-breaking World Cup in Mexico to high watermarks in ad sales, the launch of VIX, and the continued stream of hits coming out of our San Angel Studios. All of this and more contributed to an amazing financial performance that Carlos and I are excited to share with you today. When we closed the transaction to combine Univision and Televisa's content business to create TU, we had a focused strategy to create a business without comparison in the global media landscape. And our stellar results in 2022 underscore that not only is this strategy correct, but just as importantly, we have the right team to execute against it. The strength of our execution is demonstrated in our financial results. Our merger closed in February, and we've been building momentum over the course of the year, culminating with 22% revenue growth and 5% adjusted EBITDA growth in Q4. This capped off a year in which we delivered full-year revenue growth of 13%, growth across all lines of businesses and in all of our geographies. The durability of our core business, the breadth and power of our assets, a differentiated and efficient streaming strategy, and the discipline of our execution enabled us to launch the largest Spanish-language streaming service of its kind while still preserving and growing our consolidated EBITDA, both in the fourth quarter and for the full year. These results are driven by the power of our content and its resonance with our enormous audience. Spanish is the most widely spoken native language in the world outside of China. And our two main markets, Mexico and the US, account for more than half of the $8 trillion global Spanish-speaking economy. In the U.S., which is the largest Spanish-speaking market in the world, Hispanics represent the GDP equivalent of the fifth largest economy in the world. And beyond the economic power, Hispanics are increasingly at the center of the conversation in the arts, music, culture, and politics in the U.S. Mexico is the most populous Spanish-speaking country in the world with nearly 130 million people. Mexico and the Mexican culture is literally the crossroads between the North, Central, and South American cultures and their respective economies. It's this nexus which makes the content we create in our studios in Mexico so powerful and resonant. And now, with the launch of VIX, we're expanding our reach beyond our core U.S. and Mexican markets to serve nearly all of Spanish-speaking Latin America. which we'll talk about more as we progress into 2023. During 22, we extended our lead with audiences in Mexico and the Spanish-speaking US, where we hold around 60% market share of linear viewerships in both markets. In the US, our scripted entertainment significantly and consistently outperformed the market, underscoring the power of our fully aligned production pipeline enabled by our combination at the beginning of the year. In 2022, we aired the top three award shows for Hispanics. We continue to lead the market with soccer, with 80% share of Spanish language viewership and more than 60% share of viewership regardless of language. We remain the destination of choice for news and are the market leader in Spanish-language national news, where we have a double-digit audience advantage over our closest competitor. And on the local side, we have the highest-rated early and late news in our top six markets for 2022 and the highest-rated midterm election coverage for U.S. Hispanics, regardless of language. In Mexico, we continued to significantly outperform the competition. Our free-to-air audience was more than two times the next largest competitor. And our pay TV portfolio achieved its highest market share in the last decade, led by Distrito Comedia and Telenovelas. In entertainment, we delivered all of the top 10 time slots per day and all of the top 20 total week programs. In news, 4OTV grew its audience double digits as we provided more relevant content, created brand awareness, and saw strong digital performance alongside the broadcast channel. And in sports, we had a phenomenal year, which was punctuated by massive World Cup viewership in the fourth quarter. Linear ratings were even higher than the previous World Cup despite the morning and daytime games and despite Mexico being eliminated early in the tournament. This massive World Cup audience was further enhanced and expanded by our unique coverage on VIX. For our audience, the importance of culturally relevant content that's originally produced in Spanish cannot be overstated. Certainly our audience enjoys some international content dubbed in Spanish, but at the core, the majority of what they consume is content in culture and in language. And no one has the IP, the talent, or the production infrastructure that we do. We produce more Spanish language content than anyone in the world across entertainment, news, and sports. and we've expanded and aligned our production to power all geographies and all platforms. This is a set of assets and capabilities that cannot be replicated. Moving to monetization and starting with advertising, we saw global revenue grow 10% in the quarter and for the full year. Both the U.S. and Mexico were able to build upon their amazing upfront basis, and drive strong execution across the other elements of the ad sales business to deliver this fantastic result. In the U.S., our performance bucked the market trends and accelerated into the end of the year with 14% growth for the fourth quarter. Based on market data published by Magda, this is more than double the overall growth in general market, excluding search. For the full year, we grew 10%, led by our national business, which grew 12%. This result was fueled by strong linear performance and massive growth in our advanced marketing solutions category. Our local ad business grew 8%, which was driven by a huge political midterm performance, representing 80% growth over Univision's previous midterm cycle. Over the past two years, we've completely transformed our U.S. ad sales function, and our above-market growth reflects this. We installed new leadership and retooled the entire function, from basic operations to a completely redesigned go-to-market approach with dramatically different packaging strategies. We designed entirely new capabilities by introducing our advanced marketing solutions portfolio, which accounted for more than half of our national revenue growth in the year, And within this category, by far the largest contributor is our enhanced video offering, where the massive volume of new VIX inventory is at the center. Our strong performance relative to the market is a function of a great strategy and excellent execution, to be sure. But fundamentally, even the best strategy and the best execution can't produce sustained results unless there's a market opportunity. And our market opportunity is huge and fundamentally different than the general ad market in the U.S. We talked about the U.S. Hispanic market being the fifth largest economy in the world. Within the universe of advertisers in the U.S. who spend meaningfully on television, only about half of them are currently advertising to our audience in Spanish. It's remarkable. There's an economy inside the U.S. which is the size of the U.K., and half of the active advertisers have not even begun to tap into this market. And beyond the huge opportunity to engage new advertisers and new brands, we have significant upside in price. For those that have historically advertised in Spanish, the rate they pay versus English language is at a meaningful discount, which makes no sense given the premium nature of our audience and the limited outlets to reach them in language and in culture. So between advertiser penetration and price, we have huge ad sales runway. Fundamentally, our great ad sales outcomes were driven by great performance and progress against these two basic elements, market penetration and price parity. This year, we welcomed a record number of new clients. We also completely changed the trajectory of our pricing. After years of flat year-over-year upfronts, we recorded our second upfront in a row of meaningful price increases at or above general market increases. And we've further built on that with scatter premiums that we've sustained around 30% over the course of the year, including in the fourth quarter, where the rest of the scatter market significantly softened. In Mexico, ad revenue grew 9% for the full year. Outside of the pandemic-related rebound from 2020 to 2021, This was our highest growth rate in eight years. We benefited from a strong 22 upfront that produced the highest volume growth in our history with a record number of clients participating in the upfront. On top of that, we improved scatter market performance relative to the prior two years and added more than 100 new scatter clients. Our team closed 2022 with strong World Cup monetization. where ad sales for the event grew 9% over the 2018 World Cup. And we're also making massive progress on VIX monetization. In November and December alone, we exceeded the cumulative streaming revenue since the launch of VIX in March. And looking ahead to 2023, we just closed our upfront in Mexico, which happens on a calendar year cycle. And this was another historic year for us with record volume commitments, growing mid-single digits versus 2022, which is all the more exceptional given that we're comping to a World Cup year last year. And it bears remembering that in Mexico, the upfront is truly upfront, in which we actually collect payment in the majority of the cases at the beginning of the year, which ensures a very stable base for our Mexican ad sales. Now, moving on to the second component of monetization, subscription and licensing, which grew 20% for the full year. We saw growth across all elements of this category, linear, streaming subscription, and content licensing. For the fourth quarter, we delivered nearly 50% growth. We saw strong growth in all areas, but this was significantly amplified by the sub-licensing of the World Cup rights, in Spanish-speaking Latin American countries outside of Mexico. In the U.S., subscription and licensing revenues grew 22% for the full year. And outside of third-party World Cup licensing, the most significant driver of this growth was VIX subscription revenues coming online at the end of July. On the linear side, we saw traditional MVPD subscriber declines in line with the market, which were more than offset by contractual rate increases and continued strength in our virtual MVPD category. We continue to see further opportunities with virtual MVPDs as these distributors are massively under-indexed to Spanish speakers in a marketplace where at the same time, U.S. Spanish speakers over-index on streaming video consumption. We believe we offer these distributors a unique and foundational proposition to reach this valuable audience, Given that we represent around 60% of Spanish language TV viewership, it's difficult to feel the compelling Spanish language offering without our services. And like most other areas of the U.S. economy, penetrating our audiences is a significant and sustainable source of growth for these distributors. In Mexico, subscription and licensing revenues grew 20% for the quarter and 14% for the full year. Mexico also benefited from the launch of the VIX subscription tier. In linear subscription revenue in both the year and the quarter benefited from meaningful annual price increases, further amplified by modest subscriber growth in 22, as the market for pay TV remains strong in Mexico. Additionally, the increased volume of premium original content for VIX has begun to contribute to our licensing growth. as we start to sell this content outside of our core Spanish language markets. Now turning to streaming. It's been an amazing few quarters for VIX. In July, we completed the full launch of the service when we added the subscription tier to the free ad supported tier that we launched in March. With the free service in market for nine months, we're very happy with the audience momentum that we've generated and we closed the year with more than 25 million highly engaged monthly average uniques on a global basis. Beyond the massive resonance with our audience, the broader ecosystem has also taken notice. By year end, VIX was awarded Apple TV's App of the Year globally, the first time any Spanish language app has ever been given this award. And in Mexico, Google Play named VIX the best app of 2022. Q4 marked the first quarter of having both tiers of the service live. And with the complete service operating for a full quarter, we're very happy with the operational benefits we're seeing from offering a free and a paid tier inside of a single app. The free tier is a unique and powerful part of our model. Having a free tier makes this a mass market product for an audience that has limitations around subscription penetration. Second, the free tier is a massive self-funding customer acquisition funnel to our premium paid tier, and we've already seen it deliver more than half of the gross subscriber ads. And third, the free tier, in its own right, is a huge economic opportunity that's underscored by the massive advertiser demand, even in the early days. where we're seeing attach rates north of 60% and sellout rates close to 100%. Finally, over time, we expect to see the two-tier ecosystem provide us with meaningful advantages in managing churn. This is all driven by the amazing content we have on the service. On our free tier, about 40% of total streaming hours are coming from exclusive live daily content we're producing across news, sports, and daily entertainment. This is hugely strategic as it drives daily viewing habits relative to other free offerings that see high levels of sampling, but sporadic and inconsistent usage over time. And at the core of this free service is our massive library, which can't be found anywhere else. and is home to some of the most iconic titles in the Spanish-speaking world, like Rosa de Guadalupe and Familia Peluche. Our first-party content is often driving in excess of 75% of total consumption on this tier, which has obvious economic advantages. And one of the huge highlights for the free tier in the fourth quarter was the World Cup in Mexico. We simulcast 40 games on VIX, which was the only place you could find these games off of linear TV, which was important given the time of day these games were airing. And the service saw peak streaming activity with more than 5 million devices for a single game with zero technical issues, which is remarkable for a service as young as VIX. And beyond the great success we're seeing with Free, these past few months have really been about the debut of the paid tier, where we're focused on super serving our audience with premium original entertainment and a massive volume of live sports. On the entertainment front, we've delivered over 60 original titles to date, including blockbusters like Maria Felix, Mujeres Asisinas, and La Mujer de Diablo, which have been released to critical acclaim. Our video cine-led movie slate has been extraordinary, with releases like Presencias, Mexizombies, and Huevitos Congelados, which drove record engagement. On top of this is our soccer proposition. Our paid tier is home to the largest volume of soccer you can find on any service. Since launching the paid tier in late July, we've aired 5,000 hours of exclusive live soccer, which has been a powerful driver of new subscribers and massive levels of engagement. Lastly, I want to touch again on the economics of our streaming business. We are now through our peak year of losses, and we fully offset this investment with the growth and profits of our core business. We will deliver a profitable streaming service by the end of this current year, the first full year of operations for VIX, a timeline that's unprecedented for a large-scale streaming service in our industry. Only we can do this. We can do this because we are single-mindedly focused on the Spanish-speaking audience. which allows for a more thoughtful design and a purpose-built service with meaningful operation and economic benefits. We can do this because with 60% market share in our core business, in our core markets, we're able to deliver huge promotional reach every single day. And most importantly, we can do this because the power of our content advantages, our massive volume, our production economics, and our unrivaled library and IP ownership. 22 was a fantastic first year for Televisa Univision, and we're just getting started. As everyone can see, we have an enormous opportunity with our single-minded focus on the massive global Spanish-speaking audience. We have a unique market position, unique assets and advantages, and we have the right strategy which is amplified by disciplined, world-class execution. All of this has yielded huge operational achievements and delivered remarkable financial performance. Above-market top-line growth, a stable and growing core business fully funding our investments in streaming, and industry-leading margins, which is a great transition for me to hand it over to Carlos to discuss our financial results in more detail.

Thanks, Wade, and good morning, everyone. It is great to be speaking with all of you about our fantastic 2022 results, our first year operating as Televisa Univision. Last year, we closed a transformative merger, creating the world's leading Spanish language media company. And also, in 2022, we launched a two-tier streaming service that is unlike anything else in the market. We accomplished all of this while achieving solid financial results. We delivered our second consecutive year of double-digit revenue growth, and we grew adjusted EBITDA by 4 million, despite investing heavily in our streaming service. Now I'll go through our results in more detail. Consolidated revenue grew by 13% in 2022, with healthy growth in our main revenue lines, advertising, and subscription and licensing. In the U.S., revenue growth includes about $200 million of non-recurring revenue associated with sub-licensing of the World Cup rights in Latin America and U.S. political spend around midterm elections. Consolidated fourth quarter revenue grew 22%, boosted by the non-recurring revenue I just mentioned. Looking at advertising, consolidated revenue grew 10% in 2022. In the U.S., ad revenue also grew 10% as we continue to benefit from a strong 21-22 upfront, where we produced the highest volume in the past seven years and a second consecutive year of CPM growth. We achieved record midterm political ad revenue, and we finished the year strong. fourth quarter revenue grew 14% to a six-year high driven by growth in new clients, improvements in pricing and political dollars. In Mexico, 2022 ad revenue grew 9% on the heels of a strong 22 upfront with record volume growth, participating clients, healthy scattered market, and of course, strong monetization of the World Cup that took place in November and December. Fourth quarter revenue growth of 4% reflects a strong Q4 of 2021 when advertisers pushed spend towards the end of the year when they returned to market following COVID-driven pullbacks. We benefited from World Cup-related revenue that grew 9% relative to the 2018 World Cup. Overall, our strong performance for the year was partially muted by a decline in public sector spend. Looking ahead, we have closed our 23-calendar year up front in Mexico with volume growth in the mid-single digits. This is exceptional when you consider that the comp is a World Cup year. More than 60% of our existing clients grew their investments with us, and the majority of those that did not had invested heavily in the World Cup. We continue to add new clients to our portfolio. Moving to subscription and licensing, where full-year consolidated revenue grew 20%. In the U.S., Subscription and licensing grew 22%. This includes nearly $150 million from sub-licensing of World Cup rights in Latin America. While this revenue sold by our content licensing team in Mexico, for legal purposes, it is recorded in the U.S. On the subscription side, we benefited from the launch of VIX's subscription tier. Linear revenue reflected market-driven declines in traditional MVPD subscribers, partially offset by increases in virtual MVPDs, as we continue to benefit from YouTube TV distribution that was implemented in the third quarter of 2021. For the fourth quarter, YouTube subscription and licensing revenue grew 57%, driven by the World Cup sub-licensing and the launch of VIX. In Mexico, growth of 14% in 2022 reflects modest subscriber gains and growth in pricing, which increased in line with inflation. Here, we also benefited from the inclusion of VIX's subscription tier launch. Growth for the fourth quarter was 20% driven by VIX and price increases to subscribers that became effective in October. Turning to expenses and profitability, expenses grew 21% for the full year and 32% for the fourth quarter. This underscores the significant investments we made to launch VIX in new original premium content, sports rights, marketing, and technology. We are well positioned with a growing and profitable linear business that fully funded all of these investments. Accordingly, adjusted EBITDA increased $4 million for the full year or roughly flat on a percentage basis during a year that will absorb peak losses in streaming. For the fourth quarter, adjusted EBITDA increased 5%, reflecting strong revenue associated with World Cup and U.S. midterm political spend. Now let's cover the balance sheet. We ended the quarter with $539 million of cash on our balance sheet, with incremental liquidity available through credit lines. Cash increased from $647 million from the same period a year ago, primarily related to investments in streaming, the acquisition of Pantaya, and merger-related one-time costs. Our leverage ratio ended the quarter at 5.6 times, down slightly from 5.7 at the end of the prior quarter, due to the 5% year-over-year increase in EBITDA and down significantly from before we closed the merger. As a result of several refinancings during 2022, our average maturity profile is now four and a half years. We will continue to be opportunistic about addressing our maturities and remain committed to deleveraging the company over time. I will also remind you that as it relates to a rising interest rate environment, we have reduced our exposure to hedges. This means that nearly 80% of our debt is now effectively fixed at very attractive rates. As we look ahead to 2023, there are several tailwinds in our favor, including resetting to a higher upfront in both Mexico and the US, the opportunity with US side sales that we just outlined, and a full year inclusion of VIX, where we're convinced of its significant growth potential. We're also mindful that headwinds around the macro environment may continue. To that end, we made changes to our cost structure in 2022, as part of our integration that position us well to weather these headwinds. We take a very disciplined approach to expense management, but we'll make further changes as the environment requires. And now let's take your questions. Operator, please open the line.

Thank you. At this time, if you would like to ask a question, please press star 1 now on your telephone keypad. Again, that is star 1 on your telephone keypad. We'll take a question from Michael Nathanson of Moffitt Nathanson. Your line is open.

Thanks. Good morning, Wade. Good morning, Carlos. How are you guys?

Great. How are you?

Doing well. Doing well. I have a couple questions around VIX. You called out the 25 million users and MAUs. Do you have any sense of any of the regional skew? That is, are you seeing growth outside of U.S. and Mexico? So is there any regional skew? Anything you can add on time spent you're seeing, MAU? And then most importantly, you mentioned this way in your prepared remarks about how you've integrated the modernization of those MAUs. Could you talk a bit more about how you've gone to market on the ad sales front, bringing in VIX, how it's sold, and the relative premium of VIX audience to maybe the current way you monetize?

Sure. There's a lot in there, so keep me honest if I don't get it all answered in the first pass. So in terms of how we're seeing the audience distribution, I guess what I'd say is, I mean, if you think about the U.S. population and the Mexican population, in the U.S., there's about 60 million U.S. Hispanics. Slightly less than that are Spanish speakers. In Mexico, as I said, there's 130 million people in Mexico. And I would say that when you think about our audience distribution across those two, you know, our two core markets, that it's probably reflective of those proportions. In terms of outside of the U.S. and Mexico in ROLAC, we actually have a pretty significant uptake. It's particularly significant when you think about the fact that we actually haven't hard-launched anything in the ROLAC countries. Essentially, it's soft-launched because when you launch an app on any of the major platforms and it's accepted in Mexico, It's also available in the rest of Spanish-speaking Latin America. But we have yet to do anything from a consumer standpoint to drive that. That's actually an initiative that is on the front burner for 2023. We have additional countries that are prioritized, Colombia, Peru, the larger countries in the rest of Spanish-speaking Latin America that were actually focused on hard launching this year. So I think that's your audience distribution question. As it relates to time spent and engagement, look, some of that's the most important metric, and that's something that we're super focused on month over month. I guess what I can say is that our AVOD engagement and time spent is higher than other free services. We're seeing month-to-month engagement growing really rapidly. I'd say in terms of total streamed hours, consistently since we've launched VIX in March, on a global basis, when you look at it across the U.S., Mexico, and ROLAC, we're seeing total streamed hours grow 20 to 30% month over month. And this is kind of a good transition just into your, I think, your advertiser question, which is, you know, those levels of engagement and the audience that we now have is really, really showing up in advertiser demand. I mean, in the U.S. now, we're seeing essentially 100% sellout, which is pretty extraordinary.

And The premiums that we're seeing to linear are about, you know, call it 20%, 25%. And, by the way, one of the things that's super interesting is that in terms of the U.S.

advertisers on VIX, there's only about a 60%. at a 60% attach rate.

Although that's a great metric, and it shows that a lot of our existing advertisers find the VIX solution really compelling, You know, one of the other interesting, you know, the flip side of that is that we're actually attracting a lot of new advertisers to the VIX platform that aren't TV advertisers. And as you know, and as I highlighted in... In my prepared remarks, one of the biggest drivers of our ability to deliver substantially above market ad sales results in the U.S. is the fact that Spanish language advertising is just so massively underpenetrated.

relative to the size and economic power of our audience. And so the upside that we get from continuing to engage, call it the other half of the U.S. advertisers not currently advertising in Spanish, is a big part of that momentum. And so the fact that, among other things, VIX is allowing us to attract new advertisers that otherwise haven't been on the television platform is – is really powerful and positive indicator for us. Did that get all your questions, Michael?

Yeah. Yeah, Wade, you got it all done. Thank you. All right. Thanks.

Okay. Bye. Our next question is coming from Jessica Reif-Ehrlich, Bank of America Securities.

Good morning. Thank you. I have a couple of questions on DTC and also on advertising. On the ad platform, I'm not sure you said it, but how many minutes an hour do you have, do you offer?

From a unit, is your question a unit load question, Jessica?

Well, I don't know if you do 30s or 15s, but just curious what your inventory load is on DTC versus,

Oh, yeah. Well, we do both 30s and 15s, and the unit load is substantially less than the linear unit load. And it's also substantially less than competitors. You know, Sid, we're seeing... because of the growth that we're seeing in the platform, it said, you know, kind of on a global basis, 20% to 30% month-over-month growth in total streamed hours. And the fact that, you know, we're seeing such significant price premiums You know, we're still driving explosive growth around AVOD. And, you know, we have yet to pull the lever of increasing unit load that, you know, most of the other free ad-supported services have pulled. So it's a great customer experience. unit loads substantially lower than TV and significantly lower than any of the competitors from a unit load standpoint as well.

And then my other questions on DTC, and then I have an advertising question. Does the subscription tier have any advertising at all? What do you think your margins longer term will be on streaming? And given that you talked about U.S., Mexico, and then this year moving on to other countries, how would you define your ultimate TAM for streaming?

Sure. I'm going to try and get all those –

The answer to ads on the subscription tier is no, we don't have ads on the subscription tier except for on certain sports content. So in a lot of cases, the sports feeds that we're putting behind the paywall do have ad breaks, and so we do fill those ad breaks. But with respect to all of the other content behind the paywall, there are no ads. And that, by the way, includes the, you know, there are some overlaps in terms of the library content that's available in front of the paywall and behind the paywall. And so to state the obvious,

is for subscribers who are accessing library content behind the paywall, they have an ad-free experience relative to free users in front of the paywall looking at the same content. As it relates to long-term margins for streaming, probably too soon to tell since we're five months into having a subscription service, but I think what I can say and what I have said is that this will be a profitable service by the end of the year, and that is unprecedented in terms of timeline relative to the rest of the industry. Okay. And so what you can take away from that is the margin structure and the economics of our streaming service are superior to anything else that has been brought to market.

So in terms of what those margins will

will manifest in the long term. In the long term, they will be lower than the linear margins that we have, but I think it's going to be a premium to anything else that you're gonna see. I think the other important thing is that we will achieve steady, just as we're achieving profitability faster than any other large scale streaming service, we will achieve steady state margins and margin contributions meaningfully faster than anybody else. you know, you can expect that margin contribution much more quickly than you're gonna see it materialize in the others. You know, as it relates to the ultimate TAM, I mean, I think that's one of the most compelling things about our story here is that Streaming for the global Spanish language audience is still a relatively wide open lane. Streaming in the U.S. is fairly well penetrated. I mean, it's extremely well penetrated, but even within that, U.S. Hispanics have relatively high levels of penetration. Outside the US and in the rest of the Spanish-speaking world, streaming penetration on a relative basis is extremely low. And so, as I said, this is one of the most compelling things about the television Univision story is that we are, as you know, only people purely focused on the global Spanish language streaming opportunity. There are others who provide Spanish language, they provide streaming in Spanish, but it's very different. So penetration levels, if you want to look at it on a ex-U.S. basis are less than 20% of the global Spanish-speaking population. So, you know, compare that to call it 80% or 80-plus percent penetration that you're seeing in the rest of income of the other developed streaming markets. So that's an enormous opportunity, and we think we're better positioned than anybody else to go after that for the reasons that we've described previously. And then also, in terms of that TAM, obviously over the next few years it's going to be approaching 600 million Spanish speakers globally, and that's As I said in my prepared remarks, that 600 million people globally reflects an economic block that's $8 trillion.

So it's an enormous TAM. It's underpenetrated relative to the rest of the streaming landscape. And the competitive dynamics are fundamentally different than what the general market streamers are facing.

And then I'm sorry for so many questions, but on advertising, you said in your comments that there's a big pricing gap versus English language. Can you, you know, what is it at this point, you know, relative size and anything you could say about trends going into first quarter?

The pricing gap of linear advertising?

You mentioned that earlier, that Spanish is still, like, there's still a huge price gap. Like, there's been forever, but I'm just wondering how big the gap is currently.

I'm just wondering how big the gap is currently.

Well, I mean, as you know, a lot of the pricing in the linear market is a function of, is legacy, and then ultimately ends up you know, trading on a rate of change basis, particularly in the upfront. And so for people who have been, you know, longtime Spanish language advertisers, I mean, unfortunately, the way Univision was selling historically really was focused on price, not the value proposition. And so, you know, the real discount from gap standpoint is with the legacy US Hispanic advertisers. And, you know, that gap can range from, you know, anywhere between a 20% discount to a 40% discount. Now, the interesting thing, which is real testament to what Don and the team are doing in the U.S. is that as we bring on new advertisers to the platform, the gap is almost zero. So that's kind of point number one. Point number two is we see the same dynamic on streaming where as we've been growing our streaming business, we're actually seeing seeing CPMs that are in line or at a premium, depending on exactly the packaging, to what comparable free ad-supported services are commanding in the U.S. So there's a legacy issue. Our newer products and the things we're bringing to market, you know, currently have completely closed that gap. And, you know, we've also reported on the success that we've had on linear in terms of driving prices. The last two upfronts, you know, after many, many years of essentially zero pricing increases, Univision's been able to command pricing increases that are at or above what English language is seeing. And then, you know, interestingly, you've seen our scatter pricing hold up much better than the rest of the market. I mean, over the course of 2022, we were able to hold scatter premiums 30% or more. and including, you know, as we went into the back half of the year in the fourth quarter, where scatter premiums for the general market essentially collapsed. So making a lot of progress on price continues to be a big source of upside for us that we're confident in.

Thank you so much.

Our next question is from Brett Feldman of Goldman Sachs.

Thanks. I think I'm going to stick with the pricing theme, but I'll take it in a different direction. Maybe I misheard, but I think you indicated during your comments that your U.S. linear subscription revenues grew year over year because your fee increases were offsetting pay tv subscriber losses and so if i heard that right if that is the case i'm curious why you were able to achieve that it seems like most of the traditional media companies have gotten to the point where they're no longer able to offset cord cutting pressures and if and if it is indicative of maybe a pricing gap that exists on the linear side and whether you think there may still be some room to further close that and then my second question As you noted, it would be pretty remarkable. It's going to be remarkable to see how quickly your streaming service gets to profitability. So I'm going to throw a question at you that I would never ask another media company, which is should you be investing more money in it? Or if you were going to spend more money in it, what would it be? Would it make sense to have more original content or just lean more into marketing? Or are you pretty comfortable with the level of spend here?

Thanks.

So first, on the first part of your question, just to correct what was said, hopefully it wasn't confusing, but in the prepared remarks, what I said is that the price increases, pricing, the combination of our price increases and our growth in virtual MVPDs caused our linear subscription business to grow. So we saw 9%. If you want to just purely focusing on the linear subscription business in the U.S. for the year, we saw 6% growth. And that was a combination of the annual contractual price increases that we get and the improved performance in the virtual NDPD segment. Pure pricing alone for existing distributors does not offset the traditional MVPD decline. So that specific trend that you're highlighting is consistent with what other media companies are seeing. But what I can say is that the element that that did drive overall growth was the performance, in combination with that, was the performance of our virtual NDPD distributors. And that's an area that we remain under-penetrated in. I think we have about, now we have about 50% penetration into that category. So there are millions of additional subscribers that we expect to bring on with additional penetration with really the only, there are two distributors that don't currently carry our services. Look, we're confident that we're going to continue to make progress with the virtual MVPs. I mean, our audience is a driver for growth period. It's a driver for growth in the economy at large, and it's a driver for growth for our distributors. So it doesn't really make sense that, you know, for a major distributor in the United States, States, they're going to ignore this audience. And given we represent 60% viewership for this audience, you can't really feel a viable Spanish language offering without our services. The other thing I would add to that in terms of why we're confident that we're going to continue to make progress with

virtual MVPs is that, as you know, our streaming service is completely complementary and non-overlapping with our linear product.

All of the distributor deals that we're doing include a VIX component to them. And just given the nature of virtual MVP products in which they're delivering the channel's experience in an app, the combination of being able to distribute our channels alongside with our app, of our streaming service in their app, is a very compelling consumer proposition, and frankly one that I think you know, compares favorably with the traditional MVPDs.

So we're confident that we're going to make progress, continue to make progress with virtual MVPDs, which should allow us to continue to drive above-market growth in our U.S. linear subscribers. That was your MVPD question. What was the second question?

Just how quickly you're getting to streaming and are there actually areas you might want to step up investment?

Streaming profitability. Streaming profitability.

I mean, look, fundamentally, I mean, we have huge advantages in streaming. And those, I mean, when you look at the cost of operating a streaming service, I mean, really 80% of it is in marketing and content. And those are the two places where we have the biggest advantage, right? The fact that we have... 60% market share in both the U.S. and Mexico on our O&O platforms. The fact that we're reaching 125 million Spanish speakers every single day across all of the platforms we have is an enormous embedded promotional asset.

asset, you know, at the top of the funnel.

So, and the fact that we have, that we continue to have excess capacity on both, you know, on our linear platforms in both the US and Mexico, we can bring to bear the power of that promotional asset without any sort of opportunity cost to our ad sales business. So that's one of the big marketing benefits that we have that help us with our margins. The other big marketing benefit is just the power of having a free tier and a paid tier inside of the same app. The free tier essentially acts as a very powerful self funding subscriber acquisition funnel. It's very easy to get people into that funnel. There's very high levels of engagement in that funnel. As they're engaged, they're obviously generating inventory that we're selling and making money on. And we're seeing that funnel deliver huge results. I would say that over half of our gross subscriber ads have come out of that funnel. So that's probably the second thing, which is this really product design and composition that gives us an additional subscriber acquisition benefit. And then on the content side, I mean, look, this is really the special sauce of everything we have at Televisa Univision, is the fact that we really have the most powerful content creation engine on the planet.

You know, we produced in 2022 87,000 hours of content across entertainment, news, and sports. And that content pipeline, you know, with the combination of our two businesses has now been fully optimized to power all of our geographies and all of our platforms. And not only do we have the volume, that volume we're able to produce at price point advantages that are significant relative to our competitors. The other half of our content spend advantage really comes from our library. We have a library that's two to three times the size of any other major media company.

It is the definitive Spanish language library. It is the home to the most powerful Spanish language IP. And that library is not licensed away in any of our core territories. And so, it's 100% available exclusively for our streaming service. And again, comes at zero incremental cost to us relative to others who have to go out and buy, you know, buy a library from third parties or or forego licensing revenue that they've already kind of locked in to bring it back for their own use. So fundamentally, I'd say those are the four things that cause our streaming service to be so much more structurally profitable than others. We will continue to invest in content. we are significantly growing our content spend year over year, both on linear and on streaming. And so, I mean, we've made the plans that we have, you know, based on what's working working. We don't need to spend any more than what we've already allocated and what we are spending. And that's really, at the end of the day, one of the big drivers is why we're going to be able to achieve profitability so much faster than anybody else. Thank you for that color and

for clarifying that comment. I appreciate it.

We'll take our next question from Aaron Watts of Deutsche Bank. Your line is open.

Hi. Thanks for having me on. You covered a lot of ground, so I just had one question. You had highlighted that leverage has certainly to come down from prior to the merger, but it does remain elevated relative to many of your peers.

With the current economic industry market backdrop, might you look to accelerate the deleveraging process?

And perhaps you can help us think about the trajectory of bringing down that leverage. And Wade, I'm curious how that dovetails with your vision of where Televisa Univision may be headed, remaining a private entity, joining the public market, or perhaps participating in industry consolidation. Thanks. Carlos, do you want to take that?

Sure. Hi, Aaron. Thanks for the question.

Well, as you know, we've significantly over the past year prior to the merger to 5.6 times at the end of last year.

Even considering the fact that we launched our streaming service in the back half of the year, which in essence, we had a lot of investment last year and with little to reduce or very small revenue coming out of streaming. As we scale the business, which is happening as we speak, and Wade was mentioning profitability, as we gain a scale of the business, We expect that we will accelerate the generation of cash flow, and that's obviously going to help us grow the business and deleverage the business going forward. To mention, if you exclude merger-related costs and M&A transactions in 2021,

and then eliminate transactions in 2022, we generated positive cash flow.

So that going forward with the profitability instrument should make us deleverage the company going forward. I don't know if you want to take the last question, Wade, or...

Yeah, I mean, look, we are solely focused on executing against the huge opportunity that we have. That's 100% what we think about every single day. This opportunity is unlike anything else in the media landscape. I mean, we are. the definitive leader in this massive, massive market. We're laser-focused on that, and that obviously yields a fundamentally different set of competitive dynamics than the rest of the marketplace. That shows up in the fact that we're consistently growing this business on the top line, double digits. Nobody else is doing that. We're consistently growing our profits. For the second year in a row, we've grown EBITDA despite investing hundreds of millions of dollars in launching our streaming service. And our streaming service is just getting started. Again, you know, the fourth quarter of 22 was the first quarter that we had in which we had the full service live. So, you know, we're looking forward to 2023 when we're going to have a full year of VIX operating. That's going to be a huge driver of our overall growth. And then, you know, as we exit the year with a profitable service, you know, the fact that, you know, we're going to start seeing profit contributions from VIX going forward in addition to all of the core business business growth that's been funding the investments that we've made so far. All of that together yields, you know, a pretty remarkable company. And so, you know, obviously given the size of that opportunity, we're just every day heads down focused on capitalizing on that.

And this does conclude our question and answer session. I'd like to return the call to Wade Davis for closing remarks.

I think that's all we had for today. Thanks, everybody, for tuning in. We'll see you next quarter. This does conclude today's conference.

You may now disconnect your lines.

And everyone, have a great day.