Grupo Televisa S.A.B.

Welcome to the Televisa Univision fourth quarter and full year 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 fourth quarter and full year 2023 earnings call. I'm joined today by Wade Davis, CEO, and Carlos Ferreiro, CFO. 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 OIBDA 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 January 2022. U.S. ratings and market share figures refer to prime time audiences ages 18 to 49, and Mexico figures refer to prime time 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.

Good morning. On behalf of myself and my partners, Alfonso and Bernardo in Mexico, thanks for joining us. 2023 was another stellar year for Televisa Univision. We continue to grow at a pace in excess of the general market media companies, highlighting the uniqueness of our strategy, our vertically integrated business structure, and the markets and audience that we serve. On the top line, revenues grew 5%, with the growth in core and D2C more than offsetting the massive one-time lift we had in 2022 associated with the World Cup and U.S. midterm election spending. Adjusting for those non-recurring items, we would have grown 9%. And Mexico produced another year of double-digit top-line growth, and our U.S. revenue was higher than it has ever been in the history of Univision and the U.S. operations. In direct-to-consumer analysis, a business we've essentially built from scratch in less than two years, we closed the year with more than $700 million in revenue. And I'm super proud that our relentless and disciplined execution in this business allowed us to deliver this level of growth while driving steady and consistent progress towards our goal of profitability in the second half of this year. Across all of our platforms, our content engine continues to churn out a massive volume of hits across all genres. Premium series, unscripted, documentaries, comedies, biopics, event programming, and of course, novellas. In the U.S., the strength of these primetime scripted novellas propelled our Univision network to its highest weekday market share in nearly a decade. And the resonance of all of our programming has allowed us to maintain market shares that are roughly double our next closest competitors in both the US and Mexico. And nowhere was our ability to resonate with US Hispanic audiences on better display than this past Sunday when we televised our first Super Bowl ever. and delivered the highest Spanish language viewership in the history of the game. Although we're very proud of our execution against a differentiated strategy with our unique assets, all of this is in the context of our leading position in the massive global Spanish language market. Over the course of a year, the tailwind from our specific markets contributed to our success and stand in stark contrast to the slowing growth of the general English language markets. Our audience continues to grow in absolute size and economic, cultural, and political relevance, with most economists, analysts, and demographers expecting these trends to continue. We're executing well, but of course, it's always easier to grow a business in growing markets. And our two core markets are now the number one and number two Spanish-speaking markets from both a population and an economic perspective. In the US, the Latino market was effectively the world's fastest growing economy last year. Hispanics account for one-fifth of the total population and have grown at a rate three times faster than the nation's total population. highlighting an important difference relative to the aging and stagnating demographics of the general market in the U.S. And cultural relevance also continues to grow. In 2023, the number of Spanish-language songs on the Billboard Hot 100 and Top 10 lists was at an all-time record. And the Latino vote is widely expected to be a siding factor in many of the 2024 elections. Mexico's economy, benefiting from nearshoring trends and the world's second best performing currency in 2023, grew to capture a major milestone, surpassing Spain to become the second largest Spanish-speaking economy in the world, behind only the U.S. And we are the only large-scale company exclusively focusing on these two growing and increasingly aligned markets. We are the leading media company in both markets across all of our platforms, audio, broadcast, cable, and dedicated Spanish language streaming. No other company in the world provides investors with pure play exposure to these massive and growing markets in the way we do. Our execution against this incredible market opportunity translates into growth for ourselves and for our clients. In 2023, we continue to outperform the broader U.S. advertising market, this year to the tune of 850 basis points, even against the backdrop of ad market and macroeconomic softness. Excluding political in advocacy and adjusting for the sale of a portfolio of radio stations, we grew US ad sales by 5% for the year. These results are fundamentally driven by our continued penetration of the huge number of US advertisers who are not yet advertising to our audience in Spanish. Our new solutions, new platforms, and new go-to-market approach are resonating with advertisers and saw us onboard 86 new clients this year leading us to end the year with a record client count. And this just scratches the surface of our opportunity, where only about half of all meaningful TV advertisers in the U.S. are currently advertising in Spanish. And outside of our own execution, one factor that should accelerate client adoption of Spanish language platforms is the evolution of measurement. Last year, Nielsen introduced their new currency, panel plus big data. This massive step forward finally illustrated what we knew had been going on for decades. Panel-only data has been systematically and structurally under-representing minority audiences. Because this new currency represents a share shift in its accurate measurement of minority audience relative to general market. the large English-language companies have been doing everything they can to resist adoption. And now that the PanelPlus big data currency is fully audited by the industry bodies, it will become increasingly uncomfortable for other programmers, agencies, and advertisers to try and stay with the antiquated methodology that over-represents the white majority at the expense of the growing minority audience that has been structurally marginalized by outdated measurement. And we're optimistic that this year's upfront in the US will be exclusively transacted on this new currency. And looking ahead, I am incredibly excited about what the 2024 election cycle represents for TU. Political ad spend is expected to grow 25% over the prior presidential election cycle to over $10 billion, the most expensive election cycle in history. And over the same time period, eligible Latino voters represent an estimated 50% in the total growth in voters. Furthermore, and perhaps most importantly, this massive Latino electorate, likely more than any other group, tells us in our research that they are driven by where candidates are on issues and not by political party affiliation. We have the most powerful set of platforms for candidates to communicate where they stand on the issues that are most important to Latinos. And we've spent the past two years building up data capabilities, targeting capabilities, and real-time sentiment analysis tools that we think are more powerful than anything that exists in the market and will position us well to capture this massive opportunity. In Mexico, our ad business had an extraordinary year, fueled by the combination of a strong and growing economy and excellent execution by our team. We grew ad sales for 2023 by 18% for the full year. And not only did we grow double digits, But this is the first time following a World Cup year that we've been able to deliver absolute sequential growth above and beyond the huge World Cup comp. And in a market where we represent more than half of both primetime viewership and of linear advertising dollars, our team continued to onboard new clients and find innovative ways to work with our advertising partners. For example, The power and flexibility of our vertically integrated content engine allows us to do things with our clients that no other media company in the world can do. For our largest and most important clients, we can literally create content in real time with our advertisers' brand briefs built into the shows. To this end, we recently formed a groundbreaking partnership with Coca-Cola. who's now integrated across the slate of more than a dozen of our novellas. And I'm really excited for 2024 as we've just closed our Mexican upfront at an all-time high. And a reminder that in Mexico, the upfront, which typically accounts for about 90% of all private sector spend, we collect the funding at the beginning of the year, which obviously mitigates any cancellations. So another historic upfront lays in a great base for the year. And furthermore, with this being an election year in Mexico as well, we expect advertisers to hold some of their ad spend for the scatter market, which therefore should be stronger than normal. Moving on to direct-to-consumer, which is an incredible story. The service is building and resonating with our audience. MAUs on the free tier of the service continued to grow, and in December, we exceeded 7 million subscribers on our premium SVOD tier. And perhaps most importantly, as we have continued to rapidly scale the audience, we've increased engagement. We doubled total streamed hours in 2023 and have been continuously increasing consumption per user, which grew 20% sequentially during the fourth quarter. All this ladders up into a D2C business that was more than $700 million in 2023 revenue and is driving towards near-term profitability. And this was the first full year of operations for VIX. And when we deliver a profitable streaming service in the second half of 2024, it will have been the fastest horizon to profitability of any major streaming service in history. A testament to the power of our library, of our content engine, of our promotional power, and of our disciplined execution. 2023 was a critical year for VIX, and we saw huge improvements across all major areas of the business. Content performance, product stability and features, marketing efficiency, and distributions. We exited 2023 with a distribution footprint that is nearly complete in our core markets, with a handful of significant partnerships pending and in the later stages of execution. And Q4 was a critical quarter in our distribution journey. In Mexico, we launched with the number one e-commerce platform, MercadoLibre, and we expanded our cash payment network. In the U.S., after finalizing and launching distribution on all major CTV platforms, we rolled out our fast channel strategy with Samsung, Roku, and Amazon, and the pending majors to follow soon. Not only does our fast channel strategy provide incremental reach and monetization, but it expands the top of the free funnel, which we have used so effectively to drive down SAC for the paid service. On the content side, we now have sufficient audience scale and consumption data to scientifically refine our content offering. In Q4, our new original series, Agallo de Oro, was the strongest premiere to date in terms of US user engagement. And one of our VIX original films, Radical, became the highest earning Spanish language movie in the US in nearly four years, winning 11 awards, including the festival favorite at Sundance. And our 2024 content slate, informed by our data, will be the strongest yet. And one of the most exciting evolutions for VIX for 2024 will be the launch of the ad-supported premium tier. As our service has matured and with the success of our ad products in the US, we're now in a position to launch this new tier. which will expand the market and should drive ARPU up across all tiers. We plan to soft launch this tier on a D2C basis in early Q2, followed by a full-scale launch across the entire spectrum base in early Q3, which is a great segue to discuss the innovations we're driving with our partners in the U.S. pay TV ecosystem. Our strategy to create a distinct and complementary content proposition for linear and for streaming has differentiated us from the start. It's also positioned us incredibly well to work with our distribution partners to enhance and stabilize linear platforms and work together to grow streaming. We think the expanded partnership we recently announced with Charter is reflective of where the pay TV ecosystem is likely to head over time. In order for the pay TV ecosystem to stabilize and grow, consumers need to see improvement in the value proposition. And that is only going to happen through innovation. Innovation in product, interface, platform availability, packaging, pricing, choice, and of course, content. Charter is pushing this forward, and our new partnership enables their offering on a number of these fronts. First, the rebundling of streaming packages with the basic linear package. This obviously improves the value proposition for consumers, but only to the extent that the content in the streaming service is not redundant to the content in the linear package. And as I said, this has been our strategy since the launch of VIX. Our assets, our library, and our vertically integrated content machine have enabled us to continue to invest in original linear content for multiple hours, 365 days a year, and at the same time, program a unique streaming service with different original content and live sports that's completely additive to our linear proposition, serving new audiences that are not on TV, and super serving our linear viewers. Charter's partnership with us to fully distribute the new ad supported premium tier of VIX to all of their expanded basic subscribers is a recognition of the complimentary and additive nature of our two products and a validation of the strategy that we launched less than two years ago. The second example is us providing our linear services as the cornerstone of Charter's upcoming launch of a lower-priced, Spanish-only OTT product. This new packaging and pricing creates a valuable choice for price- and platform-sensitive consumers. And given our market share in excess of 60% of linear viewing, our networks will be the anchor of this new service. We think this is a great product that can attract new subscribers into the pay TV ecosystem, growing the pie for everyone. And lastly, it's important to point out that this renewal happened early, which is unique in an environment of increasing tension between programmers and distributors. And this is clearly a recognition of the value of our services and the ways that we can work collaboratively to help our partners build their business. On a particular note, carriage of all of our linear networks was maintained and or expanded in this partnership. 2023 was a great year for us. We outperformed the industry, accomplished many important milestones, set new records, and galvanized many aspects of our business for future growth. We continue to benefit from our leadership of a massive and attractive market where the demographic and economic tailwinds are intensifying. An alignment between our two core markets, the US and Mexico, now the two largest Spanish-speaking markets in the world, is increasing. But however happy we're about the performance of 2023, we're even more excited about what's ahead for 2024. We're positioned to deliver a record political year from an ad sales perspective and a profitable streaming service in the second half of the year, faster than any other major streaming service in history, which should then return our company back to overall EBITDA growth and allow us to continue to focus on strengthening our balance sheet through deleveraging and through extending and smoothing our maturities. Thanks so much for joining us. And thanks for your interest in and support of our amazing company. Before taking Q&A, let me hand the call over to Carlos to take you through our financials in more detail.