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.

Thank you, Valim. Great job. Now let me walk you through Televisa Univision's second quarter results. The company's revenue of $1.3 billion increased by 10% year-on-year, including the impact from the appreciation of the Mexican peso, driven by our exceptional results in Mexico. During the quarter, Mexico's revenue surged by 53% year-on-year to $605 million as the FIFA World Cup was an extraordinary success, serving as a catalyst for multi-platform growth across our advertising, Thank you very much for joining us. Thank you very much. Advertising revenue was 29% lower, reflecting cyclical softness in our linear business and lower VIX advertising revenue, both of which were impacted by us not having the World Cup. Although advertiser spending shifted during the quarter, we continued to grow audience ratings leading into the tournament, and we expanded CPMs year on year while successfully navigating a dynamic counter-programming environment. Our core business demonstrated resilient underlying trends, and we saw growth in recurring sports-related revenue driven by emerging categories such as sports betting. In Mexico, advertising revenue increased by 23% year-on-year, driven by the strength of both our linear and DPC platforms, which offered 39 consecutive days of premium World Cup coverage. During the quarter, we delivered an unprecedented total reach of approximately $415 million across 79 matches, nearly doubling our closest competitor by underscoring the dominance of our multi-platform ecosystem. We saw strong demand for the World Cup inventory, and our scale combined with strategic execution across our linear and digital platforms unlocked new revenue streams that monetized viewership. During the quarter, consolidated subscription and licensing revenue increased by 40% year-on-year, driven by approximately $90 million in World Cup sub-licensing revenue in Latin America, continued growth in VIX's premium tiers, and higher linear distribution revenue. In the U.S., subscription and licensing revenue grew by 8%, reflecting higher average rates, incremental distribution revenue from Hulu Live TV, and growth in VIX. In Mexico, subscription and licensing revenue increased by 157%, supported by the previously discussed World Cups of licensing revenue and continuing growth in VIX's premium tier. VIX delivered exceptional engagement and record subscriber growth as the platform was the exclusive streaming destination for the tournament. Our World Cup strategy significantly outperformed expectations as we posted record VIX subscription revenue and the highest quarterly subscriber additions in the platform's history. VIX continues to scale and we remain focused on driving subscription revenue growth and DTC profitability, which are our primary operating priorities. Moving on to our balance sheet, Televisa Univision ended the quarter with $766 million in cash Ruben by seasonality and timing of advertising upfront collections in Mexico amplified by the World Cup. In addition, we have around $770 million of available capacity under accredited facilities. CAPEX for the quarter was $36 million compared to $23 million last year, but we continue to expect full-year 2026 CAPEX to be consistent with full-year 2025 levels. Looking at our leverage, we ended the quarter with a net debt to EBITDA of 5.5 times, a modest improvement from 5.7 times in the prior quarter. Going forward, we remain prudent on the U.S. advertising market. We expect third quarter U.S. advertising trends to be broadly consistent with the second quarter, reflecting macroeconomic conditions and a competitive sports programming slate. We anticipate continued World Cup momentum in Mexico and Latin America together with fourth quarter U.S. political advertising to partially offset near-term U.S. advertising pressures through the second half of 2026. To wrap up, Bernardo and I are confident that Grupo Televisa's strong balance sheet and the solid financial performance of our telecom operations position us well to consolidate our undisputable position as the second largest telco operator in Mexico after the incumbent and to create greater value for our shareholders. Now we are ready to take your questions. Elsa, could you please provide instructions for the Q&A?

Thank you. 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 are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. At this time, we'll pause momentarily to assemble the roster. The first question will come from Alejandro Galascar with BBVA. Please go ahead.

Hi, good morning, Alfonso, Marlene, Carlos. Can you hear me well?

Yeah, yes.

Excellent. Excellent. Thank you. Alfonso, I'd like to ask you a few questions about your strategy, about your intention to potentially consolidate the telecom market. First question, Alfonso, is I would like to ask you What do you think is more likely to happen? Do you think that Televisa is more likely to try to consolidate the market on its own, going with it alone, or is more likely to bring a strategic partner for this journey? The second question I would like to ask is, what is your intention? Are you looking to acquire 100% or whatever assets you are interested in, we would be happy with a 51% control mistake. And finally, Alfonso, I'd also like to know what would be the leverage that you would be comfortable with at a consolidated level after consolidating any potential asset.

Well, Alejandro, great questions. I could spend an hour answering them, but I will try to make that shorter. I guess what I would say is we have been trying to consolidate the cable industry for a very long time. I think it's the right thing that we have to do as an industry. I think if you look at other cases throughout the world, A four-player market is a complicated market, so we have been trying. Unfortunately, we have been unable to accomplish that. As the telecommunications sector in general, I would say that we always analyze strategic opportunities. This is all the time that they come. These are opportunities that we see would strengthen our competitive position and, of course, create shareholder value within our sectors. We have always tried to be disciplined as to our capital allocation and returns over the investment. So it depends on the particular opportunity to determine whether We bring in strategic partners or not. So it depends on the possibilities, the opportunity, the company itself, the part of the sector that we're talking about. So it all depends on that, on the particular opportunity as it comes. I would say as to the level of leverage that we feel comfortable in having, I guess It all depends also on the opportunity and the cash flow generation that that opportunity would bring or not and how we would leverage in a particular acquisition. So it all depends on how we see a particular opportunity.

And the question also regarding the state that you're looking to acquire, Any comments on that? Are you happy with a 50% stake or always looking to acquire 100% of the refugee industry?

Yeah, I would say it depends on the particular opportunity as well. So, in some instances, we would like to control and operate the company, but in some instances it would depend and we could have less than that as well. So it all depends.

Okay, got it. Thank you very much. And I would only add, Alejandro, to your point about leverage, that as you've seen, since we've changed our strategy in cable, we've generated a lot more cash. We've been able to deliver the company significantly below two times. So our balance sheet is very strong in case of any energy opportunities, like Alfonso was saying, it's going to depend on the opportunity, but our balance sheet today is pretty strong to be able to deal with it.

The next question will come from Marcelo Santos with JP Morgan. Please go ahead.

Hi, good morning. Thanks for the opportunity to ask these questions. I want to go more on the operational side, probably more to Valdir. The first question is, how much more space do you think there is to extract synergies between Cable and Sky? I mean, I think, a full summation, a lot of these gains are coming from headcount reductions. At what point do you reach kind of a static? I know cost has always had to keep cutting and improving, but probably I wanted to more structural changes. How far are we there? That's the question number one. And the question number two would be, could you expand a bit more on your comment regarding increased competition in broadband? Because I think you gave two reasons for the broadband ads, like price increase, more competition, and early rainy season. So I was interested in the second one, if you could just... Say a bit more about that.

Thank you. So, Marcelo, I think that synergy is a broad name to define many things. And in Telecom, in this day and age, with the amount of new technologies, especially helping in terms of efficiencies on the back end of the operations, I think we still see a lot of room for improvement. Obviously the synergies are coming to an end in terms of the integration between the Chinese. But it doesn't mean that we are not pursuing further improvement in terms of efficiency. And we do that on a daily basis. So I would not assume We cannot find even more opportunities in terms of how we can streamline the operations. And like I said, technology has a lot to do with that. And we have been heavily invested in making sure that we have the best, most efficient operations, but at the same time, that provides the customers with satisfaction. So NTF is a key element of our business. but also making sure that we do that at the least possible cost is always part of the discussion. So from our day-to-day operations like you're referring to, we see opportunities for improvement in many areas of the business. It's still telecom, especially in a large organization. They take time to mature, and we have several coming up in the future projects So we should see still improvement in terms of margins moving forward. In terms of the competition, I think that is an interesting question because there are many levels of competition. So let's discuss our subscriber base in terms of different groups. So Sky is a technology that is by definition are struggling when fiber is deployed all over the country. So most of the consumers are either migrating to us or some of the other players and also using more OTTs than they used to. And Skype customers typically have a higher ARC. So obviously the migration in Skype is something Thank you very much. because there's a lot of competition for the bottom feeders, meaning those people that are going after 50 pesos discussion, 50 pesos cheaper than you and then such and such. So churn is higher at the entry level, but our churn is significantly lower at the end of the pyramid. So our subscriber base at the end of the, so subscribers that have 12 months or more We keep on improving subscribers. We keep on improving our focus. And so those are our focus. And why should we increase competition at the lower level doesn't make a lot of sense because it requires sales, capex installation, and definitely higher churn and lower payback for this customer. So we see some of the players in the market going after those low-end players customers like crazy. You can see it reflects on their capex, which is significantly higher than ours for those acquisitions. So we are being very selective as to which channels and which clients we are going after. Because we can always go do this, you know, fight for the lower ARPU and have higher net ads but the question is how long they will stay on the subscriber base and how much they contribute to the subscriber base. And we don't want to go after those clients. We want to go after those clients that need more service, that are looking to a more resilient provider that not only provides provide other services that are very appealing to them, not only in terms of the services and the quality of the services, but also in terms of the overall value proposition. So that's our approach. I understand some other players in this market have a different approach. We appreciate them, and we think that they are doing a good job, but we have a different strategy, and that reflects itself in growing subscriber base, Okay, thank you very much. Very good.

The next question will come from Luca Brendan with Bank of America. Please go ahead. Hi. Good morning, everyone. Thank you for taking my questions. I have two for my side. The first one, can you give us some color on the increase that we've been seeing the last couple of quarters in leased payments? There's a reason, a specific reason behind that and if this trend will continue or not. And then the second one, On the regions where you are upgrading to fiber, are you already seeing benefits from that in terms of your competitive position in the region? If you're able to raise R4 more there, or if you're seeing lower churn, any color on that would be great. Thank you.

Thank you, Luca, for your question. Carlos, can you take the first one, please?

Yeah, Luca, the main driver of the increase in visas that you've been observing has to do with one of the efficiencies that the team at AP has been executing. which is to, we used to own most of the auto fleet in the company, and now we've been switching to these same autos which has generated a lot of savings in other lines. So that's really the main driver in terms of these increase.

And regarding the deployment of the network, the idea here is very simple. All of our new net ads are on Fiverr. and whenever a client has an issue or needs some service, we upgrade them from our existing network to the fiber network. So that's how we are approaching this. And what we are seeing is we are able to sell better products, higher prices, and more solutions when we migrate to the fiber network. We do not do this side-by-side comparison because it's the same subscriber base. As the client decides to see more fees, better services, we migrate them to Fiverr and that's easy. But this is an ongoing process. We do not have to file our services independently. It's the same service. Most of the clients actually do not know if it's fiber or not. We have surveyed our subscriber base many times, and they do not know which technology they are using in their homes. So for us, it's basically a technological migration to allow us to be competitive in the long run. In the short run, the network that we have works okay, In the long run, obviously, fiber is the end game. So we are ready and working towards migrating the subscriber base to fiber. And we'll do that when the clients need or when we feel it's necessary for a more robust or more sizable migration.

Very clear. Thank you for the answers.

Thank you.

The next question will come from Fani Kanumuri with HSBC. Please go ahead.

Thanks, everyone, for taking my questions. The first one is regarding the impact of Starlink. Are you seeing any potential disruptions on Starlink, or do you see them as partners in the telecom sector? And the second one is regarding your strategy for Televisa in Asia. Now that you are considering a much more active M&A strategy in Mexico, depending on the opportunity, do you plan to monetize Televisa's initial stake around the M&A to maintain your leverage? Thank you.

Can you put your mic on, Niel? Thank you. Thank you, Pani. So as your first question, we believe it would be a mistake to underestimate Starlink and what they're doing in terms of launching 800 new satellites with much higher capacity. However, in our market, with the pricing and the ARPUI experience, we believe it's not a threat in the short term in the mass market. We have basically two approaches with Tony. We have a B2B approach.

We have signed an agreement with them early last year, and we are ahead of the curve. We are using them as a complementary and sometimes a backup to other services to corporate clients. So Sound Inc. is happy. We are happy. We have been moving forward very quickly with that deployment. We are also starting a new phase with Starlink, which is a B2C phase. which is also complementary to what we offer. So when we have Fiverr, obviously Fiverr provides an excellent solution, but where we do not have and combining that with the content that we offer is where we are going with Starlink. So together with Starlink in both B2B and B2C, we see a lot of room for improvement and I think that's a very profitable partnership for both sides.

Okay, thanks, and on the Televisa Unison.

Well, the strategy, as we have communicated in the past, is basically what we see as the future is growing big as our streaming service. I think we gained a lot of strength and we moved in the right direction Using the World Cup as leverage. In Mexico, VIX was the only streaming platform that had 104 games. So that was the total amount of games of the World Cup. We, in essence, launched a product that had all those games, and we were very, very successful with it. We sold around a million add-ons of that service. Thank you everyone.

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

Thank you. A European telecom peer of yours, Liberty Global, had some really interesting presentation numbers from a study that McKinsey and Google did on AI-related optics savings. They really broke down the cost buckets where they're applicable and some pretty substantial percentage cost reductions to realize over a period of time. I know you probably have done similar things. I know Televisa Univision has it. Obviously, Google's an owner there, as I recall. What do you think the long-term AI benefits are to some kind of the blocking and tackling operational side? And is there any concern over token costs increasing? Because that's certainly an issue with some U.S. companies that are involved with the hyperscalers. Thank you.

Thank you for your question, Matthew. It's a great question. I'll answer in respect to Televisa Univision. And then Francisco is doing a lot of stuff that has to do with AI on the easy side, so he can answer that part. I would say that as Televisa Univision, we're doing all types of things with AI. We're working on the production side. This is with several companies, specialized companies. We're working on the production side. We're working on the set designing side. We're working with special effects. We're working with the musicalization of our programs and shows. We're working with a great company called Eleven Labs in what has to do with dubbing. Now you can do great dubbing with the voices of the actors and actresses with AI. And this company is providing us an excellent product where we conduct, for example, a telenovela into Portuguese or into Korean and then very efficiently taking the great products that we have, those telenovelas and launch them in Korea or in Turkey or all over the world. So we're working on all fronts as to what we can do with AI and we have seen This brings tremendous efficiencies to our, especially to our production, to our, as I mentioned, set designing, special effects, musicalization, etc. So we're very happy with the prospects there in terms of not only on the cost side, but also on the revenue side, as I mentioned, in being able to duck into different languages and take those products to different countries throughout the world.

In terms of E3, we also have deployed AI in several processes, from sales to collections. And so it's all already embedded in all of those processes. One of the questions people ask is about the cost of tokens. We took an approach that many companies have taken. bringing the infrastructure internally so we don't go outside, so we don't pay, in essence, tokens. We have storage, cloud storage, and GPUs that do that internally. And that has two advantages. One, we manage the cost precisely, so we don't have to go, you know, just guessing what's going to happen. And two, it also prevents Any leakage of potential data. So we do already have infrastructure and already AI in all of our processes from sales to collections. Obviously, this is an ongoing process and an ongoing evolution. And like you said, and I think Marcelo has asked the same question earlier in terms of evolving costs. We see that as improvement moving forward as well.

Great. Thank you.

This concludes our question and answer session. I would like to send the conference back over to Mr. Alfonso de Angoitia for any closing remarks.

Thank you for participating in our call. If you have any questions, please give us a call and have a great weekend.

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