Grupo Televisa SAB Q4 FY2024 earnings call

• Implemented corporate restructuring at Cable segment to improve profitability, optimize CapEx, increase free cash flow, and position for sustainable revenue growth. Cable EBITDA margin improved by over 300 basis points to 39% in 2024. CapEx for Cable was optimized by 37% to almost $400 million in 2024, with CapEx to sales ratio at 15.6%, 740 basis points lower than 2023.
• Integrated Sky with Cable segment, reorganized structure, implemented synergies across areas like commercial, sales, programming, etc., leading to standardized regions, improved customer management, and reduced churn. Sky's OpEx cut by ~10% YOY in 2024, CapEx deployment declined by 44%.
• Spin-off of Ollamani on February 20th, 2024, streamlining operations and unlocking value for shareholders.
• ViX, the DTC business, became a $1 billion direct-to-consumer business and profitable during the third quarter of 2024, leveraging large content library and efficient content production.
• TelevisaUnivision executed an optimization program in late December 2024, reducing headcount by ~1,000 employees, aiming to cut 2025 operating expenses by over $400 million.

In 2024, the Cable segment's operating cash flow was over MXN11 billion, growing nearly 38% year-on-year and accounting for more than 23% of sales. Operating cash flow margin increased by around 700 basis points. Sky's operating cash flow was around MXN3.2 billion, up 3% year-on-year and accounting for almost 21% of sales, with an operating cash flow margin expanding by 300 basis points year-on-year. Grupo Televisa's consolidated operating cash flow was MXN14.3 billion in 2024, growing by over 28% year-on-year and accounting for almost 23% of sales, with the consolidated operating cash flow margin increasing by 600 basis points year-on-year.

• 2024 consolidated CapEx was $493 million, significantly below initial guidance of $793 million due to efficient CapEx deployment, inventory management, and stronger Mexican peso.
• 2025 CapEx budget is $665 million, focusing on growing network footprint by passing close to 1 million homes, increasing subscriber base, and supporting growth.

• Competitive promotional activity by others led to lower than expected gross adds in Cable segment.
• Industry decline in DTH/satellite business affecting Sky.
• Macroeconomic headwinds in Mexico potentially impacting churn rates and business performance.

Q: Can you provide color in the lower than expected CapEx allocation? Should we expect a similar level going forward? And your thoughts on M&A within the Cable space at this point in time?

A: Alfonso de Angoitia mentioned trying to consolidate the industry before but now focused on operating and improving companies. Francisco Valim explained 2024 CapEx reduction was due to efficient deployment, inventory, and less gross adds, and 2025 CapEx budget is $665 million for network growth.

Q: Can you give more color on the competitive landscape in the Cable segment, especially on the disconnections you had in the fourth quarter? And how do you balance the user base between quality client with lower churn and the ones that are more sensitive to price?

A: Francisco Valim said focusing on higher value customers with low churn, competitors' aggressive promo led to lower gross adds, and changes internally to improve gross adds while balancing growth and not sacrificing long-term.

Q: What do you see as additional room for synergies in OpEx and CapEx savings from Sky Operation? And how much are they to expect for '25? And regarding TelevisaUnivision on the DTC business now that the business is ready achieved rate keeping in Q3. How do you see growth perspective versus profitability going forward?

A: Francisco Valim said 2025 will see full impact of Sky synergies on EBITDA and cash flow. Alfonso de Angoitia said ViX is a healthy, growing, profitable business with $1B revenue in second year, expecting more profitability in 2025 through efficiencies between linear and streaming.

Q: You seem to have a pretty large cash position at this moment. You generated healthy cash flows. Just wondering if you plan to use that for the reduction as on a cross basis leverage is quite high at the moment or anything you can share as to what your priorities are for the deployment of this cash particularly given that you have bond maturities in 2025 and 2026?

A: Carlos Phillips said intention is to use cash to reduce gross leverage, net leverage is 2.5x, focusing on cash flow generation and liquidity to maintain investment-grade rating.

Q: On the broadband market, you cited some aggressiveness and some promotional activity from competitors. If you could give a bit more color on that aggressiveness you are seeing from competitors in broadband? And on the macroeconomic context in Mexico, do you see any particular sensitivity in a context like that? Do you see risk of pressure on churn rates? Are there any other measures that you can take on that front?

A: Francisco Valim said competitors' aggressiveness is present, but Cable focuses on selective sales. Alfonso de Angoitia said cable is relatively defensive but macro factors can affect, with churn under control for existing customers and new acquisitions' churn managed.

Q: The first one is about the pricing environment in Mexico. How do you see the outlook for potentially increasing broadband prices, given that AMX is saying that they do not foresee scope for price increase in near term at least? And the second is regarding, a bit of your churn behavior. So just did you say only 2% churn? Just want to confirm that. How has this been trending? How was it before?

A: Francisco Valim said no anticipated price adjustments, ARPU growth via upselling. Churn is below 2%, with low churn for existing customers and slightly higher for new acquisitions, blended below 2%.

Q: You still, I think, have a substantial VC presence in in Mexico. You're certainly one of the top five investors. I know your Liberty Global who CEO is on your board. You know, they like to flash their valuation on their VC portfolio when they report, I think, it's around $3 billion right now. Is there any way to get more profile on that or monetize that further? And secondly, we know ViX has big advantages in the library and the programming volume, and soccer and news, but some of your competitors who have different emphases on their business admittedly, like Amazon and Netflix are getting more aggressive. Ted Sarandos was with President Sheinbaum yesterday when they announced that programming investment. How would you characterize the direction of the AVOD and SVOD competition in Mexico with so many other competitors really being drawn to what's a very attractive market?

A: Carlos Phillips said competition is welcome, ViX has largest Spanish content library and efficient content production. Regarding VC portfolio, investments in top companies like Rappi, Kavak, etc., with monetization expected in near future.