Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Grupo Televisa's fourth quarter and full year 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 we discussed in today's call and in the earnings release. I will now turn the call over to Mr. Alfonso de Angoixa, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Operator. 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 keep creating value for our shareholders. At Grupo Televisa, let me touch on four major achievements. First, a strategy to focus on attracting and retaining value customers in cable allowed us to grow our internet subscriber base by around 47,000 in 2025. This marks a full year turning point after losing internet subscribers both in 2023 and 2024, mainly driven by a strategy decision not to retain low value subscribers. Second, we keep executing on the implementation of OPEX efficiencies and the integration between EASY and Sky to extract further synergies. This contributed to expanding our 2025 consolidated operating segment income margin of 39.1% by 200 basis points driven by a year-on-year OPEX reduction of 8.3%. Third, We kept a disciplined CapEx deployment approach to focus on free cash flow generation. In 2025, we invested 12.2 billion pesos in CapEx, which is equivalent to 20.7% of sales. This CapEx is intended to deliver higher returns over the investment and has allowed us not only to have close to 1.4 million gross ads during the year, but also to upgrade 4.5 million homes to FTTH technology. This basically means that we ended 2025 with around 9 million homes or approximately 45% of our total footprint passed with FTTH technology. Balin will elaborate on our plan to keep upgrading our network later during the call. And fourth, in 2025, we generated around 5.9 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 repayment comes up of the $220 million principal amount of our senior notes already paid on March 18th. Additionally, at the end of 2025, Grupo Televisa's leverage ratio of two times IDETA compared to two and a half 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, 2025 was a breakthrough year for our direct to consumer business as VIX delivered record revenue since it was launched, achieving profitability in every quarter expanded operating margins throughout the year. For the full year, our DTC business represented nearly a quarter of the total company revenue driven by robust advertising growth from our free tier and the continued expansion of our premium subscription offerings. Moreover, our DTC business is now a significant contributor to our adjusted EBITDA accounting for approximately 20% driven by its industry leading margins. Second, the efficiency plan to reduce gross operating expenses at Televisa Univision by around $400 million in 2025 delivered outstanding results. During the year, our total operating expenses declined by around 8% year on year for total operating expenses of around $3.2 billion. This shows a disciplined execution of our cost savings initiative. These OPEX reductions have been fully realized in our 2025 results. And third, looking at Televisa Univision's leverage and debt profile, the company ended the year at 5.6 times even that, an improvement from 5.9 times at the end of 2024, driven by growth. Moreover, in 2025, Televisa Univision successfully refinanced $2.3 billion of debt, which extended its credit facilities and eliminated all near-term maturities. The leveraging remains a core strategic priority for Televisa Univision. Having said that, let me turn the call over to Alin, as he will discuss the operating and financial performance of our consolidated assets.

Thank you, Alfonso. Good morning, everyone. In 2025, consolidated revenue reached 58.9 billion pesos, representing an year-on-year decline of 5.5%, mainly driven by lower revenue at Sky. Operating segment income reached 23 billion pesos, equivalent to a slight decrease of only 0.6% year-on-year. Turning to our fourth quarter results, consolidated revenue reached 14.5 billion pesos, representing a year-on-year decrease of 4.5%, while operating segment income reached 5.9 billion pesos, equivalent to our year-on-year expansion of 6.1%, driven by the efficiency measures that we have been implementing since the integration of Sky. Now, let me walk you through the operating financial performance of our cable operations. We ended December with a network of 20 million homes after passing around 59,000 new homes during the quarter, or over 118,000 new homes during the year. During the quarter, we continued to execute our strategies to focus on value customers rather than volume, while working on customer retention and satisfaction. This contributed to achieving a monthly churn rate below our historical averages of 2% for the third consecutive quarter. our broadband gross ads remained solid, allowing us to deliver 25,000 net ads during the fourth quarter compared to net ads of around 22,000 in the third quarter and 6,000 in the second quarter and the disconnection of about 6,000 in the first quarter of 2025. In video, we also experienced stronger gross ads than in the first three quarters of the year and managed to reduce churn. Therefore, we lost about 31,000 video subscribers during the fourth quarter compared to 43,000 disconnections in the third quarter and 53,000 cancellations in the second quarter, and a loss of 73,000 video subscribers in the first quarter of 2025. Moreover, we expect these improving trends to continue going forward, influenced by our multi-year partnership with Formula One to provide line coverage of all Grand Prix via Sky Sports channels available to East and Sky, beginning in the fourth quarter of last year and through the 2028 season. Moving to mobile, our net ads of 95,000 subscribers during the quarter showed sustained momentum as they were mostly in line with the 94,000 net ads in the third quarter. Our innovative MDNO services are already making our bundles more competitive, allowing us to increase the share of wallet of our existing customers and helping us to reduce significantly the churn of our existing customers. During the quarter, net revenue from our residential operations of 10.6 billion pesos, which accounted for around 90% of total cable revenue, decreased by only 0.6% 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 1.8% in 2025. On a sequential basis, net revenue from our residential operations remained stable, potentially signalling a gradual recovery. During the quarter, net revenue from our enterprise operations of 1.2 billion pesos, which accounted for around 10% of our cable revenue, fell by 4.2% year-on-year, due to the timing of revenue recognition of an important contract signing in the fourth quarter of 2025 and because of tough comps. Moving on to Sky's operating financial performance, during the fourth quarter, we lost 304,000 revenue generating units, mostly coming from prepaid subscribers that have not been recharging their services. In addition, beginning the second quarter, we started to charge an installation fee of 1,250 pesos to all new satellite pay-to-vis subscribers to increase the return on investments on the service. This translated into a slowdown of video gross additions for Sky that has been steady over the last three quarters. Sky's fourth quarter revenue of 2.8 billion pesos declined by 16.8% year on year, mainly driven by a lower subscriber base. To sum up, Segment revenue of 14.5 billion pesos fell by 4.5% year on year, while operating segment income of 5.9 billion pesos increased by 6.1%, making it the best quarter of the year driven by efficiency measures that we have been implementing and synergies from the ongoing integration between East and Sky. Our operating segment income margin of 40.9% expanded by 410 basis points year on year. Regarding CapEx deployment, our total investment of 4.6 billion pesos accounted for 31.8% of sales in the fourth quarter. During the year, our CapEx deployment of 12 billion pesos equivalent to $645 million or 20.7% of sales. The main reason behind having a higher total investment relative to our 2025 CapEx budget of around $600 million was the strong than expected Mexican pesos. particularly during the second half of the year, and the fact that around 50% of our capex budget is in local currency. Finally, operating cash flow for Cable and Sky, which is equivalent to EBITDA minus capex, was 1.3 billion pesos in the fourth quarter, representing 9.1% of sales. For 2026, our capex-to-sales ratio should be close to 25%, as we plan to upgrade 6 million homes to fiber-to-the-home technology. increase our subscriber base, and support growth. This basically means that we expect to end 2026 with 75% of our total footprint passed with FTTH technology.

Thank you, Valim. You're doing a great job. Now let me walk you through Televisa Univision's 2025 results released on Tuesday morning. As expected, the company's full-year revenue fell by 5% year-on-year to $4.8 billion, while adjusted EBITDA of $1.6 billion increased by 2%. Excluding political advertising and FX volatility, adjusted EBITDA increased by a healthy 7% year-on-year, underscoring the scalability of a profitable DTC business and the sustained impact of the cost reduction initiatives launched at the end of 2024. Turning to the fourth quarter, revenues of $1.3 billion declined by 2% year-on-year, while adjusted EBITDA of $396 million fell by 12%. Excluding political advertising, total revenue grew by 1% year-on-year, while adjusted EBITDA decreased by 5%, despite continued DTC profitability and continued cost management. Moving on to the details of our revenue performance, during the quarter, consolidated advertising revenue was flat year on year. In the U.S., advertising revenue was 11% lower as continued growth in VIX and higher pricing were more than offset by declines in linear advertising due to secular softness and political spending relative to the prior year due to the absence of U.S. presidential election cycle. Excluding political advertising, advertising revenue in the U.S. fell by 3%. In Mexico, advertising revenue increased by 15% year-on-year, driven by the strong VIX growth and a resilient linear business, including private sector advertising. In local currency, advertising revenue in Mexico grew by 6%. During the quarter, consolidated subscription and licensing revenue decreased by 4% year-on-year. Continued growth in BICs across both the United States and Mexico, along with higher U.S. linear subscription and licensing revenue, including benefits from our new Hulu agreement and higher content licensing, more than offset the loss of Fubo, the temporary YouTube TV carriage dispute, and ongoing net subscriber declines. However, These increases were more than offset by lower linear subscription revenue in Mexico due to the renewal cycle with Easy Sky and the cancellation of another distribution company, which we have already lapped. Moving on to the balance sheet, Televisa Univision ended 2025 with $440 million in cash, an increase of 33% compared to the previous year. Total CapEx investments, We're $119 million for the full year, or a year-on-year increase of 4%. We expect CAPEX deployment to remain at similar levels in 2026. Speaking about the 2026 World Cup, it represents a great opportunity both for Grupo Televisa and Televisa Univision, and we're approaching it with a fully integrated strategy across broadcast, streaming, digital, and social. Our goal is to deliver comprehensive coverage with flawless execution while maximizing the commercial impact across platforms. In Mexico, VIX will become the official home of the World Cup, making VIX the exclusive streaming destination for all 104 matches available at a preferential price for customers of EC and Sky. VIX premium annual subscribers will get access included, while VIX's monthly subscribers and the customers of Easy and Sky will have the option to add on World Cup coverage. Finally, considering several opportunities in the telecom sector in Mexico that we're currently exploring, our board of directors approved suspending the payment of our regular dividend in 2026. This will be presented for approval at our annual shareholders meeting. To wrap up, Bernardo and I are confident that our focus on value customers, efficiencies, and ongoing integration between EZ and Sky at Grupo Televisa, and further integration and operational optimization at Televisa Univision, now that our DPC business represents over 20% of consolidated revenue and adjusted EBITDA, will allow us to create greater value for our shareholders in 2026. Now we're ready to take your questions. Elsa, could you please provide instructions for the Q&A?

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Marcelo Santos with JP Morgan. Please go ahead.

Hi, good morning. Thanks for taking my questions. I have two. The first is for Valim. Could you please walk us through the fiber plan? How many homes with fiber-to-the-home do you have today? I mean, is this goal, what is the goal exactly, if you could repeat, and is it for the end of 2026? So just wanted to get a bit more color on this plan. And the second question is about the competitive environment. How has been like the room to increase prices? Could you make some comments on how the market is going? Thank you.

Thank you, Marcelo.

Malin, please. Thank you, Marcelo. So I think that the fiber deployment is we are already at 9 million homes with fiber today. and planning to get to 1516 by the end of 2026. So that would mean 75% of our existing network would be fiber-based. So that is on plan and on target. Regarding the competitive environment in Mexico, I think it's important to emphasize that we have been increasing ARPU consistently over the last several quarters. So, it's due to price increases mostly, it's due to more products to our existing customers and better services. So, that's what we decide. We see that our alternative players, their flat was declining powerful as opposed to ours which is increasing constantly. So, and that's the route we are taking. Not so much on price increases, but in able to sell more to existing clients. And so the competitive environment in Mexico has been very stable over the last two, three years, basically. And what we have been doing also consistently is focusing on high-value clients that will churn less and value our services and be able to acquire more services from us. That's the strategy moving forward. Yeah, pretty much a rational competitive indictment.

Great. Just to follow up on the first answer, when you mentioned the 9 million today and the 15 to 16, this is really like fiber to home where there's no cable involved anymore, like it's fiber box in the home, or is it like more fiber to the curb, but there is still a cable?

No, Marcelo, fiber is still a cable. It's just a different cable. No, no, no. Sorry. Yeah, no, I understand what you're saying. And just couldn't avoid the joke. So it's just, yes, we'll have fiber to the home on 15, 16 million homes by the end of the year. So if a client, actually, nowadays, when the network is deployed, there are no deployments in HRC. So we still have a percentage of our deployments are in HSE because we are not with the full coverage. But as we grow our subscriber, our fiber network, every new subscriber goes into fiber and we migrate them as conditions are needed into fiber. So in a few years, all of our clients will not only be under a fiber network infrastructure, but also be connected to a fiber network.

Okay, very clear. Thank you very much.

The next question comes from Matthew Harrigan with Benchmark. Please go ahead.

Thank you. You're kind of almost uniquely exposed to AI positively on the telecom side, given all the repetitive processes and consumer-facing, you know, kind of customer journey experiences, and then on the media side with your JV. I know you're obviously the largest volume producer of Spanish programming in the world, and you may even be number one overall. You had a lot of dislocation in the U.S. media names a few weeks ago on account of CDANCE 2.0. And I was just curious, what's your broad perspective on how AI affects you, both on the blocking and tackling side? on telecom, and then on the creative side on television, well, with respect to, you know, your in-house content creation being even faster and more short form, and then the more competition you might face on people and companies that aren't nearly as well-funded as you. Thank you.

Thank you, Matthew. Very interesting question. answer the media side, and then Alim can take the telecom side. On the media side, we're experimenting with AI, production through AI. It's a very important tool, so in terms of script writing, in terms of production itself, it is very useful. So we're experimenting, especially we launched last year our micro novellas in the short form, We started producing last year this type of content. This year we will produce more than 300 micro-novelas, and some of them are produced 100% with AI. So we're moving in that direction, using AI more and more, which will become a very efficient way of producing content.

In Telecom, AI is mostly useful in how we handle our customers and how we operate our network. And as we speak, we are in very challenging and deep changes into the organization, making sure we have AI all over, meaning from the network usage to the client interface. So in the next... few months, we've seen significant impacts on how we interact with customers, focusing on basically 100% AI. So 2026 will be the year we'll flip from a typical call center, you know, kind of a thing to full AI, everything AI in terms of customer relationship. So this is the year that we'll go from a typical telecom to an AI-based telecom operator.

Great. Thank you. You know, it feels like even if some pretty straightforward kind of enterprise AI applications, you're in a great place without being too fanciful in the value of LRM models. Thank you.

Thank you. And sorry, just to compliment on that, we are operating with the large guys, which is the typical Oracle, Salesforce, AWS kind of guys. So we have a clear path, and we're working with the right guys to be able to achieve it.

Beautiful. Thank you.

Thank you.

The next question comes from Ernesto Gonzalez with Morgan Stanley. Please go ahead.

Hi. Thank you for taking our question. It's on the opportunities you're exploring in Mexico Telecom. Just wanted to see if you can comment a little bit on whether these opportunities are in the fixed market or on the mobile market, or any additional color you can give. And on the residential, your operations in Mexico, operating segment income was really strong in the fourth quarter. How sustainable is this market level? Thank you.

Thank you, Ernesto. Well, yeah, we're actively exploring opportunities in the telecommunications sector, but unfortunately we cannot comment on specifics or at this point share more information. Hopefully we can get those to materialize. There's no guarantee, of course, that they will. but we'll be in touch as we make progress as to those. And as to your second question?

We keep on optimizing our operations like we were just discussing a few moments ago. Try to make sure our systems are more AI-oriented in order to make our processes more efficient, not only from the customer-facing perspective, In other words, the clients see and understand that we are closer to them and providing better service, but also the flip side to that discussion is that it would allow us to have a lower cost base, all in all, in the service of our clients. So, yes, we keep on pursuing increasing operating tech clubs.

Really clear. Thank you.

The next question comes from Alejandro Azar with GBM. Please go ahead.

Hi. Good morning, and thank you for taking my question. The third one is on your common value of the 25% CapEx to sales for 2026. Is that on the Telecom? or it's telecom enterprise, or it's the full, you know, telecom enterprise satellite? Should we think 25% of consolidated Televisa? And my second question is also relative to Sky. With the rate of these connections that we have had in the last couple of years, and it is continue, it becomes really, tough for Televisa at the consolidated level, at least on the Evita side, to show growth. I'm just wondering if you guys can give us more color of how you see Sky going forward, if there is a level where you see these connections or your total clients might normalize. Thank you.

That's a great question. I think that the CapEx discussion is up to 25%. It comprises everything, EasySky and the cell, our B2B, our DTH, and our cable fiber business. So that comprises it all. With regards to Sky, I think there is this misperception of what Sky really is. Sky used to be a great business. All over the world, DTH represented a great business. But in all markets, what has happened is with the advancement of the networks, the fixed networks, obviously the connections are better and a lot of the streaming are also competing with that. So you see internet plus streaming doesn't allow much room for a DTH platform to keep on growing. So our plan is basically to make sure that we have the lowest possible cost at the sky, meaning it's revenues minus variable cost, program cost, minus the satellite and conditional access. Other than that, it's the cash flow generating business. So we don't expect it to stop or to normalize or level at any point. And I don't think that's, something that people have seen anywhere else, given the conditions that I have just described. So as you segregate that segment, sky, and its direct costs, which are the only costs that they basically have, and so everything else is our B2B and our B2C business. So I think that's the way you should approach this market as opposed to this is an overall thing and our revenue is declining. So yes, our DTH revenue is declining as expected. And what we did is streamline the DTH business so it keeps on generating cash, it will be generating cash for the foreseeable future, and we have a business that is long-lasting which is our direct to consumer and B2B businesses.

Thank you, Valim. One more, if I may, and this is just to remind us all, when do you have to pay the transaction of Sky? It's 2027 and 2028. Okay, thank you.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Angoisha for any closing remarks.

Well, thank you very much for participating. Give us a call if you have any additional questions. Have a great weekend.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.