Megacable Holdings

Good morning. Welcome to Megacable First Quarter 2024 Earnings Conference Call. With us this morning, we have Enrique Yamuni, CEO, Raimundo Fernandez, Deputy CEO, and Luis Zetter, CFO. Let me remind you that the information discussed in today's earnings call may include forward-looking statements on the company's future financial performance and prospects, which are subject to risk and uncertainties. Megacable undertakes no obligation to update or revise any forward-looking statement. I will now turn the call over to Mr. Enrique Yamoni.

Sir, you may begin. Good morning, everyone. Thank you for joining us today. First, I would like to talk about the mixed macroeconomic environment in which once again we have delivered positive results. We continue to see a challenging scenario marked by a slower than expected decrease in interest rates. In addition, the FX has remained strong, but a weaker peso is expected for the end of the year. Inflationary pressures once again were present in the month of March after a positive February and finally the uncertainty from the upcoming federal elections in Mexico and the U.S. continues. In this scenario, the outlook for our industry remains positive as we expect penetrations of the broadband services to continue improving, thus bringing new subscribers to the market, while most of the industry shifts towards fiber adoption as a standard. Although video has a more conservative performance, we continue to leverage our growth in the content integration capabilities of our video platform, taking advantage of all the content available from many sources to offer our subscribers a complete video experience. In this context, MEGA remains focused on the execution of its two main tasks, the network evolution and network expansion projects, which would ensure our capacity to provide better services with higher bandwidth in line with the current and future requirements of the market. At the same time, we continue to see the outcome of the investments already made, which allowed us to post steady growth in net ads and an upward trend in revenue and EBITDA generation. Nevertheless, one of the highlights of the quarter is that we are cash flow positive in more than 788 million pesos. This is a significant milestone and just a glimpse of what we will be achieving regarding cash generation in coming periods. The mass segment revenues continue to grow at a double-digit pace, driven by a strong performance in net additions with record figures for the period. In the same line, EBITDA posted a solid performance with the EBITDA margin at its peak level of the last six quarters. and exceeding market expectations. As you can recall, starting in September 2023, the new territories became EBITDA positive and have continued to improve with each month as penetration in these territories rises. During the quarter, Megacable continued to make steady progress in the construction phase of its expansion plan. As you will recall, during 2023, we significantly exceeded our target for homes past, which allowed us to slow down the pace of construction and coverage requirements for this year. As we anticipated in our last conference call, the capex figure for the quarter already represents a lower number of homes passed and kilometers added during the period. We expect a full year with a capex to revenues rate below 35%. In this context, the company continues to look for the most efficient sources of funding, and at the end of March, we successfully completed the issuance of a long-term sustainable local note for approximately 4 billion pesos. This transaction will guarantee the required resources to support our ongoing projects. Even considering this additional debt, We managed to lower our coverage ratio for the period when compared to the fourth quarter of 23. We remain confident that the results of our initiatives will allow us to record top leverage of 1.6 to 1.7 times and decrease from their own. For 2024, our efforts will strive complete the construction phase of our expansion with a much lower investment pace with a subscriber and revenue consolidation phase beginning in 2025, ready to grasp benefits from all the investments deployed. In these regards, although the company is willing to analyze alternatives that could boost its commitment to value generation, Today, there are no relevant operations plan for the short terms other than the expansion project to which we continue to direct 100% of our efforts. Before concluding, I am pleased to share that in line with our commitment to drive the greatest generation of value yesterday at our annual ordinary shareholders meeting, The payment of a dividend of 2.6 billion pesos was approved, equivalent to 20% of the EBITDA recorded in 2023. With this milestone, Megacable stands at the top of Mexican publicly traded companies that pay off the most in dividends to its shareholders. Conclusion, we are the company with the most aggressive expansion plan in the sector in recent years. A plan that was supported by a solid financial position. We have been executed according to our efficiency culture and we are very proud of our progress and results. Despite having invested a significant amount over the last three years, we remain one of the companies with the lowest leverage ratio in the industry, and our perspective on value creation for the coming period is looking brighter. Now, I hand the call to Raimundo for his remarks on our operational performance. Raimundo, please go ahead.

Thanks, Enrique. Good morning, everyone. We are pleased to share that in line with the execution of our expansion project and the positive performance recorded in our legacy territories, this quarter will be the 5 million unique subscribers mark, mostly following a solid performance of our internet and telephone services. During the quarter, 514,000 new homes were added to our network, representing 2,000 kilometers of new fiber. With this, we now have nearly 16 million home paths through 95.6 thousand kilometers of distribution network, bringing us closer to the culmination of our expansion initiative. This has already been reflected in the sequential soft landing of CAPEX, which went from 3.9 billion pesos in the fourth quarter of 2023 to 2.3 billion pesos this quarter, as Enrique mentioned. We expect a cap-to-revenue rate for the full year between 32% and 34%, though reflecting a clear deceleration in investment deployment. Unique subscribers were up 12.1% year-over-year to 5.1 million, representing 550,000 net additions, of which 143.9 thousand were recorded this quarter. As for the internet segment, in line with expectations, it registered a year-over-year increase of 13.7%, equivalent to 587.7 thousand net additions, of which 151.3 thousand were recorded this quarter, bringing subscribers to 4.9 million. It is worth highlighting that we remain committed to fiber adoption with the goal of becoming a full fiber player in the coming years. In that line, 67% of our subscribers are getting the service through this technology compared to 52% a year ago. Video subscribers reached 3.9 million, representing an increase of 4.4% on a year-over-year basis, or 167,000 net additions, of which 14.8 thousand were registered this quarter. In this segment, our XView platform continues to play a key role in our various proposals. as reflected in the 21.9% annual growth of its subscriber base, which reached 3.1 million, equivalent to 549,000 net additions. This implies that 78% of our video subscribers are already enjoying our flagship next generation platform, compared to 67% a year ago. Telephony subscribers grew 18.9% year over year, totaling 4.3 million. Out of these, 677,000 subscribers were added in the last 12 months and 173,000 this quarter. NVNO services registered a total of 461.1 thousand subscribers recorded a year-over-year growth of 22.3%, equivalent to 84,000 net additions, of which 28,000 were posted this quarter. Regarding RU's, this amounted to 13.1 million this quarter, increasing 12.3% compared to the 11.6 million in the first quarter of 2023. This growth derives from a larger subscriber base generated by our expansion plan and incremental market penetration in legacy territories. IUs per unique subscriber increased from 2.56 in the first quarter of 2023 to 2.57 this quarter. Shown rates were 1.8% for internet, 2.1% for video, and 2.1% for telephone, remaining practically unchanged from last quarter. In the case of internet and telephony, the shown rates improved on a year-over-year basis. ARPU per unique subscriber went from 420.4 pesos in the first quarter of 2023 to 421.7 pesos this quarter. Compared to last quarter, ARPU per unique subscriber slightly decreased due to a seasonality effect with better collection of revenues in the fourth quarter of 2023. Turning to ARPU by segment, compared to the first quarter of last year, internet and video grew 5% and 2% respectively, while telephony and MVNO decreased 7%. In this quarter, the solid performance of the corporate segment, when compared to the first quarter of last year, is mainly due to the extraordinary revenues recorded by OLA in the enterprise segment, coupled with the steady growth recorded by MetroCard with a significant performance in the enterprise segment. To conclude, as Enrique mentioned, our efforts remain focused on maintaining the operating efficiency and service quality that have characterized our company, while consolidating our infrastructure through our expansion and the evolution of our legacy territories. We want to ensure our capacity of value creation through the best network of the country, service quality, and the best profitability. Thank you for your attention. I will now hand over the call to Luis, who will provide a detailed analysis of our financial performance.