Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Group O Dell TVCO's third quarter 2025 conference call. 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 discussed in today's call and in the earnings release. Please note this event is being recorded. I would now like to turn the call over to Mr. Alfonso de Ingoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead.

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. Before discussing our third quarter operating and financial performance, let me share with you what we believe are the key milestones achieved this year, both at Grupo Televisa and Televisa Univision. At Grupo Televisa, let me touch on four major achievements. First, our strategy to focus on attracting and retaining value customers in cable has allowed us to grow our internet subscriber base in the first nine months of the year compared to the end of 2024. Second, we keep executing on implementation of OPEX efficiencies and the integration between Easy and Sky to extract further synergies. This has already contributed to expanding our consolidated operating segment income margin by 100 basis points in the first nine months of the year to 38.2%, driven by year-on-year OPEX reduction of around 7%. Third, we continue to keep a disciplined CapEx deployment approach to focus on free cash flow generation. So far this year, we have invested 7.5 billion pesos in CAPEX, which is equivalent to 16.8% of sales. In the fourth quarter, CAPEX deployment should remain at similar levels to those of the third quarter. Still, our CAPEX budget of $600 million for 2025 implies a reasonable CAPEX to sales ratio of less than 20% for the full year. We have been able to achieve this mainly because we have had successful negotiations with suppliers, resulting in more favorable terms. And fourth, during the first nine months of the year, we have generated around 4.2 billion pesos in free cash flow, allowing us to prepay a bank loan due in 2026 with a principal amount of around 2.7 billion pesos. This debt prepayment comes on top of the $220 million principal amount of our senior notes already paid on March 18th. Additionally, at the end of the third quarter, Grupo Televisa's leverage ratio of 2.1 times EBITDA compared to 2.5 times at the end of last year, mainly driven by our free cash flow generation. And at Televisa Univision, I will mention three key milestones. First, engagement and growth for VIX remain solid, with strong momentum across both our free and premium tiers. Moreover, the Gold Cup semifinals and finals, and the compelling entertainment and sports slate that included the third season of La Casa de los Famosos Mexico, and our broadcast of Liga MX and the NFL help drive a high single-digit increase in MAUs and robust demand for advertisers and VIX. Second, the efficiency plan to reduce operating expenses at Televisa Univision by over $400 million in 2025 is delivering outstanding results. In the first nine months of the year, our total operating expenses have declined by around 12% year-on-year, for total savings of around $300 million. This shows a disciplined execution of our cost savings initiatives, including lower content, technology, and marketing costs, and a normalization of our DTC-related investments. And third, looking at Televisa Univision's leverage and debt profile, the company ended the quarter at 5.5 times EBITDA, an improvement from 5.9 times in the fourth quarter of 2024 driven by growth. Moreover, so far this year, Televisa Univision successfully refinanced $2.3 billion of debt. As discussed in our second quarter earnings conference call, the company successfully issued $1.5 billion of new 2032 senior secured notes and refinanced over $760 million of term loan A now due in 2030. In addition, more recently, Televisa Univision extended its $500 million revolving credit facility and its $400 million accounts receivable facility. These transactions strengthened Televisa Univision's balance sheet, enhanced its liquidity, and extended its maturity profile with its nearest maturity now almost three years away. The leveraging remains a core strategic priority for Televisa Univision and management remains committed to further strengthening the capital structure of the company over the coming quarters. Having said that, let me turn the call over to Alim as he will discuss the operating and financial performance of our consolidated assets.

Thank you, Alfonso. Good morning, everyone. As Alfonso mentioned, we had an excellent quarter in this third quarter. First, let me walk you through the operating financial performance of our cable operations. We ended September with a network of almost 20 million homes after passing around 20,000 new homes during the quarter. Our monthly churn rate has remained below our historical average of 2% for two consecutive quarters as we continue to execute our strategy to focus on value customers while working on customers' retention and satisfaction. Our broadband gross ads continue to improve on a sequential basis, allowing us to deliver 22,000 net ads during the third quarter compared to net ads of around 6,000 in the second quarter and disconnections of about 6,000 in the first quarter. In video, we also experienced strong gross ads than in the first two quarters of the year. and managed to reduce churn. Therefore, we lost about 43,000 video subscribers during the third quarter compared to 53,000 cancellations in the second quarter and 73,000 disconnections in the first quarter of the year. Moreover, we expect these improving trends to continue growing forward, influenced by our recently announced multi-year partnership with Formula One to provide live coverage of all Grand Prix via Sky Sports channels available through ESG and Sky. Beginning in the fourth quarter of this year and through the 2028 season, Formula One is one of the fastest growing and most passionate sports events in Mexico and around the world. And we definitely see this as a competitive advantage relative to our peers. Moving to mobile, our net ads of 94,000 subscribers during the quarter continue to gain momentum, beating the 83,000 net ads of the second quarter and doubling those of the first quarter. Our innovative MVNO service developed by ZTE, offering enhanced user experience is already making our bundles more competitive and allowing us to increase our share of wallet from our existing customers. During the quarter, net revenue from our residential operations of 10.6 billion pesos, which accounted for around 91% of total cable revenue, decreased by only 0.7% year-on-year. This marked the best quarter of the last two years at our residential operations from a revenue growth performance standpoint and compares well to a decline of 3% in the first half of the year. On a sequential basis, net revenue from our residential operations grew by 0.4%, potentially signaling an ongoing, gradual recovery. During the quarter, revenue from our enterprise operations of 1.1 billion pesos, which accounted for around 9% of our cable revenue, increased by 7.7% year-on-year. This also marks the best quarter of the last three years of our enterprise operations from a revenue growth performance standpoint and compares favorably to growth of 3% in the second quarter and a decline of 4.5% in the first quarter of this year. Moving on to Sky's operating and financial performance, during the third quarter, we lost 329,000 revenue-generating units, mostly coming from prepaid subscribers that had not been recharging their services. In addition, beginning in the second quarter, we started to charge an installation fee of 1,250 pesos to all satellite pay TV subscribers to increase the return on investment for this service. This translated into a slowdown of video gross addition for Sky that has been steady over the last two quarters. Sky's second quarter revenue of 3.1 billion pesos declined by 18.2% year-on-year, mainly driven by a lower subscriber base. To sum up, segment revenue of 14.7 billion pesos fell by 4.4% year-on-year, while operating segment income of 5.7 billion pesos declined by only 0.7%. making it the best quarter of the year as we appear to be very close to reaching operating segment income stabilization. Our operating segment income margin of 38.5% extended by 140 basis points year-on-year, mainly driven by the efficiency measures that we have been implementing and synergies from the ongoing integration between EC and Sky. Regarding CAPEX deployment, our total investments of 3.6 billion pesos account for 24.3% of sales during the third quarter. This shows a material sequential increase in CAPEX deployment, but it is in line with our updated CAPEX budget for 2025 of $600 million. Finally, operating cash flow for cable and sky, which is equivalent to EBITDA minus CAPEX, was 2.1 billion pesos in the third quarter, representing 14.2% of sales.