Grupo Televisa S.A.B.

Welcome to the Televisa Univision third quarter 2023 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 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 third quarter 2023 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 year-over-year basis. 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. And I will now turn the call over to Wade.

Good morning, everyone. On behalf of myself and my partners, Alfonso and Bernardo in Mexico, thanks for joining us. The third quarter was another great quarter for Televisa Univision. We had a long list of amazing operational accomplishments across all areas of our business that drove fantastic financial performance. PU is a truly unique company and represents a unique growth opportunity. We are the media and content leaders in the massive global Spanish-speaking market. This is an $8 trillion GDP with more than 50% of this opportunity in our core U.S. and Mexican markets. In this quarter, the LDC and Wells Fargo published their annual U.S. Hispanic Marketplace Report highlighting the U.S. Hispanic GDP surpassed $3.2 trillion last year, making it the equivalent of the fifth largest economy in the world. And even more remarkable was that this economic block grew double digits over the last year. Again, if this was a country, it would not only be the fifth largest, it would be the fastest growing major economy in the world. And TU is the only scaled company in the world that is a pure play on the global Spanish consumer economy. It's against this unique economic opportunity that we delivered another quarter of double-digit revenue growth and a massive 58% year-over-year improvement in D2C losses that led to flat consolidated EBITDA. These financial results are being driven by remarkable audience engagement across all of our platforms and all of our geographies. Our U.S. network share of viewing hit 65%, the highest in nearly a decade. Our Mexico networks continue to deliver at historic levels, and we're both number one and number two in the country for the first time in history. And our streaming service is now seeing MAUs in excess of 40 million. This is the magic of the company we created when we brought Univision together with Televisa's content business. A fully optimized content engine that can power multiple platforms across the two largest Spanish-speaking markets in the world and deliver market-leading audience outcomes. And we can do it efficiently enough to create a completely new streaming business with hundreds of millions of dollars of year one revenue and nearly no consolidated EBITDA degradation. As an overall company, we delivered 11% revenue growth in the quarter. For the US business, we saw the highest Q3 revenue in the history of the company. In Mexico, as we have every quarter since we closed our merger, we delivered strong double-digit top-line growth. In adjusting for the lapping of last year's midterm political ad sales in the U.S., we delivered growth across all of our lines of business in all of our geographies. The ad market in the U.S. remained relatively soft this quarter, but notwithstanding that, we grew U.S. ad sales 3% excluding political inadequacy. And based on Magna reporting, we outperformed the broader market by 800 basis points, an expansion on our outperformance from last quarter. This is driven by activating new advertisers in Spanish language as more and more companies that have historically not advertised in Spanish are looking to reach the massive U.S. Hispanic market in language and in culture. More than 70% of our advertisers, both new advertisers and longstanding clients, are now using multiple components of our marketing solutions portfolio. And I'm also super happy to report that as we enter Q4, our U.S. linear business is starting to transact using Nielsen's new, more advanced methodology, panel, plus big data. As we've known for years, a panel-only methodology has intrinsic flaws and biases that massively under-reports viewership of minority audiences. We now see ratings uplifts of 20% to 30% for our entertainment properties when our audience is more accurately measured using this more advanced methodology. It's really gratifying to see systemic biases like this being rectified and minority audiences being properly counted and represented. We congratulate the agencies and clients that are embracing this and look forward to the rest of the market moving in this direction. In Mexico, we had an amazing ad sales quarter. The combination of new client activations and new advanced solutions coming online in Mexico, led by streaming inventory on VIX, drove continued growth in the quarter. In a market where we've long represented more than half of all television advertising dollars, and given the concentrated nature of the ad market in Mexico, activating this level of new clients and driving growth of this magnitude really illustrates the power and flexibility of our overall solutions and the quality of our sales executions. The other major part of our revenue, subscription and licensing, grew 18% in the quarter, driven by the premium tier of VIX, which is more than offsetting some of the softness we saw in linear subscribers. And we're also starting to see some very early momentum from the third-party licensing of our massive slate of new original VIX programming outside of our core Spanish language markets. This is another unique element of our business which we expect to drive meaningful growth. Because we're laser focused on Spanish language, we have a unique licensing opportunity to the rest of the world in any other language without licensing to competitors and fragmenting our audience in our core markets. Lastly, from a financial point of view, we are incredibly proud of the consistent and accelerated march to the profitability of our D2C business. This quarter, we narrowed our losses by nearly 60%, and we continue to have direct line of sight to our target of D2C profitability by the second half of 2024. This is now only nine months away, and when we deliver this, VIX will have had the shortest ramp to profitability of any major streaming service. We can do this because of the unique content costs and the powerful marketing advantages we've created with the combined Televisa Univision business. We have a massively scaled, fully vertically integrated business operating across multiple platforms and leading in the largest Spanish-speaking markets in the world. Our relentless focus on efficiency manifests on an overall consolidated basis with the highest operating margins in the industry. But this will be further underscored as we continue towards B2C profitability, where we believe our margins will also be best in class. Beyond the financial efficiency of the business, our platforms are posting records with our audiences. Our U.S. television networks delivered our highest prime time Spanish language market share in nine years, growing 500 basis points versus a year ago to reach 65%. This was propelled by primetime novellas, where we were number one in all four of the primetime slots during the quarter, and record-setting live events in both sports and in music, with the Gold Cup as the number one rated soccer tournament a year, regardless of language, with the 20th edition of the premieres who've been tuned, our award show honoring the best in Latin music, changemakers, and pop culture, delivering growth in audience, and positioning Univision as the number one network on all of television for the entire night for the third consecutive year. Our Mexico networks are setting records as well. Against the backdrop of stable Mexican consumption, our market share is so meaningful and our content offering is so strong we actually saw recruitment of audiences to TV that drove overall usage to levels that haven't been seen in Mexico since the pandemic lockdown. While our flagship network, Astraeus, remains number one in Mexico this quarter, our performance was notably driven by our second network, Channel 5, which is the most popular network for viewers under 25. And this network posted its highest audience in five years. surpassing our largest competitor for the first time in history, giving us both the number one and number two broadcast networks in Mexico. We've built one of the world's most efficient and prolific long-form video content engines. Our massive, fully integrated infrastructure has been constantly producing at full capacity, guided by sophisticated analytics and insights. optimized to power all of our platforms through innovative windowing and production strategies, and allowing us to maximize the value of our rights and intellectual property. This system allows us to program our linear and streaming platforms to complement one another. We are continuing to delight our networks audience on linear TV, while expanding our reach to new audiences that have not been historically well served by linear TV in Spanish. on streaming. Our strategy and assets allow us to leverage each platform for what it does best. Linear is designed around cultural and habituated viewing with live soccer, tent poles, high volume novellas, and appointment viewing like morning and evening news. Streaming is designed to deliver high intent viewing around our original movies and series, a massive volume of live exclusive soccer that's indispensable for a serious soccer fan, and a huge volume and range of niche content to serve as more nuanced Latino audiences. Q3 had some fantastic examples of the two platforms working together in concert. On the entertainment side was La Casa de Los Famosos, a Mexican reality show where we produced different and complementary content for streaming and for linear. The linear show was a traditional twice-weekly live reality show that aired on Channel 5. And for streaming, we produced separate content that was pitched from linear and included multiple live 24-hour feeds that drove always-on engagement for the superfans. We were able to produce a huge volume of content at incredibly low price points per hour, and we were able to cross-promote the two platforms and experiences to create enormous reach and engagement on Linear, where the show propelled Channel 5 to the number two position in Mexico. And on VIX, we saw free-tier audience levels rival the World Cup last year, and it drove the highest attributable new subscribers in both Q2 and Q3. This strategy also works really well for us with sports. As previously mentioned, we have the Gold Cup this quarter. The right fees for that property include a massive number of games. Some of these early games made sense to use on VIX in front of the paywall to build awareness for the tournament. As we got further along, we moved the games behind the paywall on VIX to drive subscribers. And having used VIX to build engagement and reach with games we couldn't have aired on linear because of limited shelf space, we were able to push a massive audience to linear for the playoff and final stage games to deliver the highest rating for a soccer tournament this year. There's almost nothing we do from a content perspective that doesn't contemplate a combined linear and streaming ecosystem. Not only does this help with audience flow, cross-promotion, and content efficiencies as our results illustrate, but we're also maintaining the integrity of the ecosystem with our distribution partners. Obviously, this quarter saw some tension between programmers and distributors in the U.S. around the levels of content overlap between linear and streaming that's causing the industry to evolve. But the composition and positioning of our platforms as non-overlapping and complementary positions us extremely well for these dynamics. VIX also continues to evolve and progress operationally. Remember, VIX has only been live in the market for four full quarters. We launched this service a handful of months after closing our merger, and this required to bring the market a very streamlined minimum viable product and focused our early launch efforts on emphasizing the content offerings. Not only it continued to release a consistent volume of incredible original content, but we're now getting the product's underlying features and functions to basic parity. Improved content recommendations, multiple profiles, and casting are all great examples of really, really important features that are only coming online now and already having big impacts on incremental engagement and retention. We also made huge strides from a distribution perspective this quarter. Until now, we only had about 60% of the connected TV market live. But this quarter, we activated Vizio, LG, and Hisense, and now have nearly 100% coverage. And this week, we're launching with MercadoLibre, the market leader in e-commerce in Latin America and one of the largest sources of streaming subscriptions in the regions. All of the advancements that we made in the quarter supported VIC's continued success. We saw gains in viewership and engagement across all regions, surpassing 40 million MAUs, while our two-tier ecosystems exceeding our expectations in terms of productivity, with the free tier delivering a high watermark of two-thirds of our gross new subscribers this quarter. The consistent operational improvement The great content slate, expanded distribution footprint, and rapidly growing revenue across both subscription and ad sales all contributed to the significant progress we made this quarter narrowing our D2C operating losses by nearly 60%. We have been very disciplined in keeping our D2C investment inside the financial envelope afforded by the growth of our core business over the past two years. And we are very happy with the return on this investment in terms of the magnitude of overall B2C revenues we expect this year, as well as the turn to profitability around the quarter next year. As one of the only pure play companies delivering on the massive global Spanish-speaking consumer economy, we continue to deliver above market levels of growth and industry-leading profit margins. Our unique content engines continue to deliver hits at scale, attracting record audiences across all platforms and all geographies. And our investments in streaming are paying off, both in terms of revenue scale and improved profitability. It's a really exciting time to be at TU, and I'm incredibly proud of what our team has delivered this quarter, and I'm even more excited for what lies ahead. And with that, I'll turn it over to Carlos to take you through our financials in greater detail.