Grupo Televisa S.A.B.

Good morning, everyone, and welcome to Grupo Televisa's second quarter 2026 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 will discuss today on the call and in the earnings release. I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Elsan. Good morning everyone and thank you for joining us. With me today are Francisco Balim, CEO of our Telecom Operations, and Carlos Phillips, CFO of Grupo Televisa. Before discussing our second quarter operating and financial performance, let me remind you that we are celebrating the third anniversary since Francisco Balim and his team joined Grupo Televisa to meet the turnaround of our Telecom Operations. Therefore, we would like to take the opportunity to share with you what we believe have been our major accomplishments throughout this period. First, our strategy to focus on attracting and retaining value customers in cable has allowed us not only to stabilize our internet subscriber base, but to grow it sequentially for five consecutive quarters. The quality of our subscriber base has improved considerably throughout this period, allowing us to maintain churn below 2%, also for five consecutive quarters. Moreover, during the second quarter of 2026, our churn rate was the lowest of the last 10 quarters, leading us to believe our value strategy is proving successful. Second, following several quarters with cable revenue pressure, we experienced a turning point over the last couple of quarters. During the first half of 2026, our residential and enterprise revenue of 23.7 billion pesos increased by 2.6% year-on-year, and we are confident this pace of growth is sustainable. Third, we have been executing on the implementation of OPEX efficiencies and the integration between ESEA and Sky to materially reduce our OPEX structure and extract synergies. Evidence of this is that our annual OPEX of 34.5 billion pesos is 18.4% lower than the 42.2 billion pesos we spent three years ago, despite the accumulated inflation of 14.7%. Most of these savings come from headcount deficiencies as we move to about 25,000 employees from around 34,000 in mid-2023. This allowed us to cut labor costs by almost 8% despite cumulative minimum wage increases of more than 50% over the last three years. Moreover, our programming costs and expenses have also been cut by around 20% throughout this period. This contributed to expanding our annual consolidated operating segment income margin by around 260 basis points to 40.7% from 38.1% three years ago. Fourth, by the end of 2024, we decided to upgrade 100% of our 20 million homes network to fiber to the home. Back then, we only had around 22.5% of our homes passed by an FTTH network. Still, 18 months after the launch of the upgrade, we already passed 12 million homes with FTTH and are on track to have a full FTATH network in the second quarter of 2027. Fifth, our CAPEX deployment approach has been very disciplined to focus on free cash flow generation, which has been our absolute top priority. On average, our annual CAPEX of 11.3 billion pesos has been 36.5% lower than the average of the two years before Valim joined the company, While our aggregate capex to sales ratio of 18.5% compares well to the 25.8% we used to have before. Excluding the upgrade of our network, these numbers look even better. On average, our yearly organic capex of 9.1 billion pesos would have been almost 50% lower than before, while our aggregate capex to sales ratio would have been only 14.9%. Over the last three years, Grupo Televisa's corporate expenses have declined by around 65% to an annual figure of around 400 million pesos, compared with about 1.2 billion pesos before. We have been able to achieve this by further integration of several functions with our telecom operations, including back office, IT systems, and procurement, among others. And seventh, over the last three years, free cash flow generation has been quite strong. As I mentioned, this is our top priority. Throughout this period, Grupo Televisa has generated an accumulative amount of 16.4 billion pesos in free cash flow, equivalent to $300 million per year. Excluding the upgrade of our network, the accumulated free cash flow would have been 20.6 billion pesos, or around $375 million annually. This has been contributed for Grupo Televisa's leverage ratio to decline to 1.6 times EBITDA from 2.4 times at the end of the second quarter of 2023. I strongly believe we're on the right track here, and we have a great team headed by Valim. The results speak for themselves. 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.

Let me start by saying I'm very proud to be here and for the achievements of the team over the last three years. It has been a wonderful journey full of accomplishments. Now, let me walk you through the operating and financial performance of our cable operations. We ended June with a network of 20 million homes after passing around 12,000 new homes during the quarter. In addition, we upgraded over 1.5 million homes to fiber-to-the-home technology, ending the second quarter with around 60% of our total footprint passed with FTTH. Moreover, as Alfonso mentioned, we are on track to upgrade another 8 million homes to FTTH technology over the next 12 months to have a full fiber network by the end of the second quarter of 2027. In the second quarter, our monthly churn rate remained below our historical average of 2% for the fifth consecutive quarter as we keep focused on value customers while working on customer retention and satisfaction. Our broadband graph test is low due to our price increase implemented in April, more aggressive promotions from our competitors, and an early than expected rainy season. This led us to have softer broadband net ads of 9,400 during the second quarter. However, looking at the last four quarters, we were able to deliver over 80,000 broadband net ads, which is in line with our annual internal goals. In video, we lost about 31,000 subscribers in the second quarter, which compares well to an average of around 38,000 disconnects over the last four quarters. Moving on, our mobile net ads of 72,000 subscribers during the second quarter remain solid, but slowed some compared to an average of about 92,000 net ads over the last four quarters. The new law requires all mobile phone users to register their phone lights with photo ID and their official identification, maybe causing a generalized temporary slowdown in the Mexican mobile market. However, we are well positioned to face this new environment as all our new users are postpaid, making their registration automatic. During the quarter, net revenue from residential operations of 10.7 billion pesos increased by 1.8% year-on-year. This marks the best quarter of the last two years and a half at our residential operations from a revenue growth performance standpoint and compares well to a full-year revenue decline of 1.8% and 2.5% in 2025 and 2024, respectively. On a sequential basis, net revenue from our residential operations grew again by 1.1%, solidifying our gradual recovery. Net revenue from our enterprise operations of 1 billion pesos increased by 0.8% year on year, is lowering considerably relative to the strong growth experienced in the first quarter As most of the revenue increased debt we expected for this year at our enterprise operations already took place. Moving on to Sky's operating and financial performance, during the second quarter, we lost 279,000 revenue generating units, mostly coming from prepaid subscribers that have not been recharging their services. While the disconnections at Sky continue to be robust, we saw an improvement compared to the average disconnections of 326,000 revenue generating units over the last four quarters, potentially driven by the World Cup transmission. At Sky, second quarter revenue of 2.5 billion pesos declined by 20.3% year-on-year, mainly driven by a lower subscriber base. However, the pace of decline slowed some relative to year-on-year contractions of 24.6% in the first quarter. To sum up, segment revenue of 14.3 billion pesos fell by 3% year-on-year, while operating segment income of 6 billion pesos increased by 5%, showing sustained momentum on the growth rebound experienced over the last two quarters, leaving by an effective line of 8%. Our operating segment income margin of 41.8% expanded by 310 basis points year-on-year, Making it the best quarter of the last three years in terms of profitability, driven by efficiency measures that we have been implementing and synergies that have been ongoing integration between Sky and Easy. On a sequential basis, profitability expanded by 40 basis points. Regarding capex deployment, our second quarter total investment of 3.6 million pesos accounted for 25.3% of sales. The main reason behind having higher total investments relative to the second quarter of last year was the FTTA upgrade of 1.5 million homes previously discussed. Finally, operating cash flow for Cable and Sky, which is equivalent to the down-minus topics, was 2.4 billion pesos in the second quarter, accounting for 16.6% of sales.