Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Grupo Televisa's fourth quarter 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal your conference specialist by pressing the star key followed by zero. Please note this event is being recorded. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release. I will now turn the call over to Mr. Alfonso D'Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Balim, CEO of Cable & Sky, and Carlos Phillips, CFO of Grupo Televisa. Last year was marked by several milestones, both at Grupo Televisa and Televisa Univision, which Bernardo and I are confident will allow us to create greater value for our shareholders. In 2024, we focused primarily on four key goals. The first goal was to streamline the OPEX structure and to rationalize CAPEX deployment, our cable company, to improve our free cash flow generation. Our second goal was buying the AT&T minority stake in Sky to integrate it with EC and attain material synergies through cost-cutting initiatives. Our third goal was to spin off our non-core sports and gaming businesses, creating a newly publicly listed company in Mexico to unlock value for our shareholders. And our fourth goal was scaling and turning profitable our DTC business at Televisa Univision while identifying opportunities to materially reduce the company's OPEX in 2025 to improve profitability and enhance its free cash flow generation. We believe we accomplished all these goals. Let me touch on each of them. First, we implemented a corporate restructuring process at our cable segment to improve profitability, optimize capex, increase free cash flow generation, and position us well to achieve sustainable revenue growth over the coming years. Balim is doing an amazing job at our cable company and at Sky. The measures carried out so far allowed us to improve profitability by over 300 basis points to 39% in 2024 relative to the third quarter of 2023, and we are confident that our cable EBITDA margin will continue to expand gradually over the coming years due to ongoing efficiencies. Regarding CapEx, our cable investments were optimized by 37% to almost $400 million in 2024, while our cable CapEx to sales ratio of 15.6% was 740 basis points lower than that of 2023. This streamlining in cable investments has been driven by a more disciplined subscription acquisition approach focused on value customers and a more efficient and rational expansion of our fiber network. In 2024, operating cash flow for our cable segment, which is equivalent to EBITDA minus CAPEX, was over 11 billion pesos, growing by almost 38% year-on-year and accounting for more than 23% of sales. This implies that operating cash flow margin of our cable segment increased by around 700 basis points. Second, we integrated Sky with our cable segment to strengthen our competitive and financial position. On this front, we reorganized the structure of the combined company, allowing us to retain top talent and optimize duplicated roles. We also implemented synergies and efficiencies across several areas, including commercial, sales commissions, programming, IT, technology, finance, and marketing, among others. This integration has allowed us to standardize regions, sales channels, and commissions, have better customer-based management, increase productivity, achieve cross-selling and upselling, improved penetration of triple play services, and gradually reduced churn. The Sky restructuring and integration process allowed us to cut OPEX by around 10% year-on-year in 2024, while allowing our CapEx deployment of $83 million declined by 44%. Therefore, Sky's operating cash flow of around 3.2 billion pesos increased by 3% year-on-year and accounted for almost 21% of sales. This means that the operating cash flow margin for Sky expanded by 300 basis points year on year. All in all, Grupo Televisa's consolidated operating cash flow was 14.3 billion pesos in 2024, growing by over 28% year on year and accounting for almost 23% of sales. This implies that our consolidated operating cash flow margin increased by 600 basis points year on year. In 2024, the OPEX and CAPEX efficiencies obtained in our two consolidated businesses and a leaner corporate structure allowed Grupo Televisa to generate over 10.1 billion pesos in free cash flow. We view this as a great achievement as it represents a free cash flow yield for our consolidated operations of around 43%. Third, on February 20th, 2024, we concluded the spinoff of Oyamani and its listing on the Mexican Stock Exchange. This spinoff not only streamlined Grupo Televisa's operations and simplified our asset structure, but also unlocked value for our shareholders through this new company that currently has a market cap of around $270 million. And our fourth major milestone was to turn VIX, our streaming platform, into a $1 billion direct-to-consumer business from a revenue standpoint and turn it profitable during the third quarter of 2024. Our DTC business is growing and scaling with our most important metrics trending in the right direction with most of them ahead of plan. We added users and subscribers by more than 20% during the year, grew engagement, reduced churn, and generated significant marketing savings driven by our efficient customer acquisition funnel through our free tier. Therefore, During the second half of the year, we already delivered the major milestones of a profitable direct-to-consumer business only two years after launching the service compared to four to five years for our peers. This was only possible because of two main reasons. The first one being we own the rights to the largest long-form video library in the world in any language, with over 300,000 hours of durable, scripted entertainment. And the second reason, we have material advantages with regards to original content cost production, as we have a fully vertically integrated system in a very efficient location. We have a great and very efficient factory of content in Spanish. Each year, we produce around 100,000 hours of long-form video content across news, sports, and scripted entertainment. Achieving this milestone was an essential step in our transformational phase of Televisa Univision. Now, the next big opportunity for value creation is to build on this foundation through further integration and operational optimization of the business. On this front, I'm glad to share with you that we have already laid the foundation for further integration and efficiencies within Televisa Univision. In late December, we executed an optimization program reducing our headcount by around 1,000 employees, or about 8% of global workforce. Combined with other efficiency measures, will reduce our 2025 operating expenses at Televisa Univision by over $400 million. Having said that, let me turn the call over to Valim as he will discuss the operating and financial performance of our consolidated assets. Thank you, Alfonso. Good morning, everyone.

In 2024, Grupo Televisa's consolidated revenue reached 62.3 billion pesos, representing a year-on-year decline of 6%. while operating segment income reached 23.2 billion pesos, equivalent to a year-on-year decrease of 7.5%, mainly driven by lower revenue at Sky. Turning to our fourth quarter results, consolidated revenue reached 15.2 billion pesos, representing a year-on-year decrease of 6.9%, while operating segment income reached 5.6 billion pesos, equivalent to a year-on-year contraction of 4.4%, also caused primarily by the factor that I have mentioned. Now let me walk you through the operating and financial performance of our cable operations. We ended December with a network of 19.9 million homes after passing around 73,000 new homes during the quarter, or over 365,000 new homes during the year. During the quarter, we continue to execute our strategy to focus on value customers rather than volume, while working on customer retention and satisfaction. This contributed to achieving a monthly churn rate in line with our historical average of 2% per month, which we view as solid. However, more intense promotional activity by some of our competitors led us to deliver lower than expected gross ads. As a result, we lost 85,000 broadband subscribers and 95,000 video subscribers in the fourth quarter. However, so far this year, we have already seen an uptick in gross ads, while we keep working on churn reduction. This should contribute to a stabilizing and potentially growing slightly our cable subscriber base going forward. During the quarter, net revenue from our reduction operations of 10.6 billion pesos, which accounted for around 89% of total cable revenue, decreased by 2.3% year-on-year, mainly because we lost revenue given the cancellation of a Ficcionados video package during the second quarter of 2024. Net revenue from our enterprise operations of 1.3 billion pesos, which accounted for around 11% of total cable revenue, declined by 6.3% year-on-year, as in the fourth quarter of 2023, we're concluding an important government contract which translated into higher revenue streams. Moving on to Sky's operating financial performance. During the fourth quarter, we lost 270,000 revenue-generating units at Sky. mostly coming from prepaid subscribers that had not been recharging their service. Sky's fourth quarter revenue of 3.7 billion pesos fell by 12.4% year-on-year, mainly driven by a lower subscriber base. To sum up, segment revenue of 15.6 billion pesos fell by 5.2% year-on-year, while operating segment income of 5.6 billion pesos declined by 4.4%. Our operating segment income margin of 36% expanded by 30 basis points year on year, mainly driven by the efficiency measures that we have been implementing since the third quarter of 2023. Regarding CapEx deployment, our total investment of 2.7 billion pesos during the fourth quarter fell by more than 27% year on year. So, our CapEx to sales ratio of 17.3% was over 500 basis points lower than that of the fourth quarter of 2023. Finally, operating cash flow for Cable and Sky, which is equivalent to BIDA minus CAPEX, was 2.9 billion pesos in the fourth quarter, increasing by 34% year-on-year and accounting for 18.7% of sales. This basically means that our operating cash flow margin increased by 540 basis points year-on-year. Thank you, Valim.