Good morning, everyone, and welcome to Grupo Televisa's Third Quarter 2024 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 that we discuss in today's call and in the earnings release. I’ll now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Valim, CEO of Cable and Sky; and Carlos Phillips, CFO of Grupo Televisa. Before discussing our third quarter operating and financial performance, let me share with you what we believe are the key milestones achieved so far this year, both at Grupo Televisa and TelevisaUnivision. First, the corporate restructuring process at our Cable segment intended to improve profitability, optimize CapEx, increase free cash flow generation and position us well to achieve sustainable revenue growth over the coming years is already delivering results. The measures implemented so far have allowed us to improve profitability by almost 400 basis points to 39.4% relative to the third quarter of 2023 as we are confident that our Cable EBITDA margin will continue to expand gradually over the coming years due to ongoing efficiencies. Regarding CapEx optimization, our year-to-date cable investments of almost $290 million have declined by around 38% year-on-year, while our Cable CapEx to sales ratio of 14.4% is over 800 basis points lower than that of the same period of 2023. This streamlining of cable investments has been driven by a more disciplined subscriber acquisition approach focused on value customers and a more efficient and rational expansion of our fiber network. During the first nine months of the year, operating cash flow from our cable segment, which is equivalent to EBITDA minus CapEx was over MXN8.8 billion, growing by almost 40% year-on-year and accounting for around 25% of sales. This implies that the operating cash flow margin for our Cable segment has increased by 750 basis points so far this year. The fourth quarter of the year is expected to be heavier in terms of CapEx deployment, but we expect to end the year below our revised 2024 CapEx budget for our Cable segment of $590 million, including $30 million for the reconstruction of our network in Acapulco, which we expect to be reimbursed by the insurance company. Second, the integration of Sky with our Cable segment to strengthen our competitive and financial position. On this front, we have already reorganized the structure of the combined company, allowing us to retain top talent and optimize duplicated roles. We have also started to implement synergies and efficiencies across several areas, including commercial, sales commissions, programming, IT, technology, finance and marketing, among others. This integration will also allow us to standardize regions, sales channels, and commissions, have better customer management, increased productivity, achieve cross-selling and upselling, improve penetration of triple-play services, and gradually reduce churn. The Sky restructuring and integration process has allowed us to cut OpEx by around 8.5% year-on-year during the first nine months of the year, while our CapEx deployment of $62 million has declined by 45%. Therefore, Sky's operating cash flow of over MXN2.5 billion was basically flat year-on-year but accounted for 22% of sales. This means that the operating cash flow margin for Sky has expanded by 240 basis points year-to-date. All-in-all, Grupo Televisa's consolidated operating cash flow was around MXN11.3 billion, growing by about 27% year-on-year and accounting for around 24% of sales. This implies that our consolidated operating cash flow margin has increased by 620 basis points during the first nine months of the year. So far this year, the OpEx and CapEx efficiencies obtained in our two consolidated businesses and a leaner corporate structure have allowed Grupo Televisa to generate over MXN6.3 billion in free cash flow. We view this as a great achievement as it represents a nine-month free cash flow yield of around 25% for our consolidated operations. And our third major milestone has been to turn our direct-to-consumer business VIX profitable during the third quarter of this year. Our DTC business is growing and scaling with our most important metrics trending in the right direction, with most of them ahead of plan. We added users and subscribers, grew engagement, reduced churn, and generated significant marketing savings driven by our efficient customer acquisition funnel through our free tier. Therefore, during the third quarter, we already delivered the major milestone of a profitable DTC business only two years after launching the service, compared to five to six years for our peers. Achieving this milestone was an essential step in our transformation phase for TelevisaUnivision. Now, the next big opportunity for value creation is to build on this foundation through further integration and operational optimization of the business. There is significant value to be unlocked in this new phase, but the opportunity comes with unique challenges. With this in mind, we initiated the TelevisaUnivision succession planning process earlier this year, looking for a leader with a unique combination of skills and expertise that is not easy to find in an executive. Someone who speaks Spanish, has vast business experience across the U.S., Latin America, and Mexico, in particular; has a track record managing large-scale global enterprises; and has deep knowledge of the media and technology sectors. We are thrilled that Daniel Alegre has joined us as TelevisaUnivision's new CEO. 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. First, let me walk you through the operating performance of cable operations. We ended September with a network of 19.9 million homes after passing around 86,000 new homes during the quarter. In the third quarter, we continued to execute our strategy to focus on value customers rather than volume, while working on customer retention and satisfaction. Our third-quarter broadband net adds remained relatively stable on a sequential basis at 11,000. On the other hand, we lost 55,000 video subscribers. During the quarter, net revenue from our residential operations, which account for around 89% of Cable revenue decreased by 1.6% year-on-year, as we lost some revenue due to the cancellation of the Afizzionados video package during the second quarter and due to the ongoing negative impacts from Hurricane Otis in Acapulco, as some customers are not paying their bills yet. Net revenue from our enterprise operations, which account for around 11% of total Cable revenue declined by 22.6% year-on-year, as we didn't renew an important government contract during the quarter. However, on a sequential basis, net revenue from our enterprise operations remained relatively stable for a third consecutive quarter. Now let me walk you through Sky's operating performance. During the third quarter, Sky's product portfolio continued to be under review from the content and pricing standpoint, translating into a softer commercial activity. Therefore, we lost 270,000 revenue-generating units, mostly coming from prepaid subscribers that had not been recharging their services. We are looking to reactivate our commercial strategy after integrating our product portfolio, commercial regions, and sales channels with our Cable segment. This should contribute to gradually reduce churn by having better customer base management and allowing us to take advantage of cross-selling and up-selling opportunities. The Sky third-quarter revenue of MXN3.7 billion fell by 13.2% year-on-year, mainly driven by a soft commercial activity. To sum up, segment revenue of MXN15.4 billion fell by 6.3% year-on-year, while operating segment income of MXN5.7 billion declined by 4.7%. Our operating segment income margin of 37.1% expanded by 60 basis points year-on-year, mainly driven by the efficiency measures that we have been implementing since the third quarter of 2023. Regarding CapEx deployment, our total investment of MXN2.4 billion during the third quarter fell by 17% year-on-year. So, our CapEx to sales ratio of 15.8% was over 200 basis points lower than that of the third quarter of 2023. Finally, operating cash flow for Cable and Sky, which is equivalent to EBITDA minus CapEx was MXN3.3 billion in the third quarter, increasing by 7.2% year-on-year and accounting for 21.4% of sales. This basically means that our operating cash flow margin increased by 270 basis points year-on-year.

Thank you, Valim. Now let me walk you through TelevisaUnivision's third quarter results released on Tuesday morning. The company delivered another quarter of top line growth, with revenue of around $1.3 billion, increasing by 2% year-on-year and EBITDA of $427 million growing by 4%. This shows solid improvement over the first half of the year as we have moved to consolidate EBITDA growth, mainly driven by achieving profitability in our direct-to-consumer business during the third quarter. FX neutral, TelevisaUnivision's revenue and EBITDA increased by 6% and 7%, respectively. Moving on to the details of our revenue performance. During the quarter, consolidated advertising revenue increased by 3% year-on-year. In the U.S., advertising revenue was 5% higher, driven by growth in DTC and record-setting third-quarter political ad dollars, which added 300 basis points to our top line growth. Within ViX, a strong soccer lineup helped drive a 30% increase in ARPU even as we continued to expand our user base. Sellouts on ViX remain at around 90%, and we effectively leveraged cross-selling opportunities, achieving an 80% attach rate with linear advertisers during the quarter. In Mexico, advertising revenue declined by 1% year-on-year, driven by the depreciation of the Mexican peso. FX neutral advertising revenue in Mexico increased by 10%, reflecting the third-party ad inventory we acquired at the start of the year, which contributed approximately half of this growth. During the quarter, we took advantage of top-performing content across sports and entertainment. In sports, we had strong demand for Copa America, while revenue from the Olympics almost doubled compared to the last cycle. In Entertainment, Season 2 of La Casa de los Famosos Mexico broke viewership and engagement records with over 50 million viewers tuning in throughout the season. During the quarter, consolidated subscription and licensing revenue grew by 1% year-on-year. In the U.S., subscription and licensing revenue grew by 6%, driven by ViX where we posted strong subscriber growth. This more than offset a low single-digit decline in linear subscription revenue. In Mexico, subscription and licensing revenue fell by 12%, mainly due to the depreciation of the Mexican peso. FX neutral, subscription and licensing revenue in Mexico declined by 4%, primarily driven by global content licensing, all of which runs through Mexico. This decline reflects some strategic decisions made not to sublicense certain sports content to other platforms. We also experienced weakness in linear platform subscribers, partially offset by subscriber growth in ViX's premium tier. Looking ahead, the TelevisaUnivision's next phase will be focused on further integration and operational optimization. And we already have a clear path to achieve this. First, we need to drive further efficiency and integration across products and geographies. Second, we have to evolve to a content-first company that is platform agnostic. We need to be prepared to connect with our audiences wherever they choose to engage, particularly as cord cutting structurally changes the value proposition of linear. This means more efficient content windowing strategies and evolving our sales and marketing organizations to be more solutions-oriented than platform-oriented. Third, we need to evolve into a more data-driven company that monetizes our differentiated audiences and the rich data and insights on these consumers. All of this will require hard work, but it will bring substantial opportunities for growth and improved efficiencies. Having said that, we're conducting a detailed review of our investments and operations, identifying areas where we can streamline and optimize resources. As a more integrated multi-platform company, we believe there are considerable efficiencies to be unlocked, allowing us to enhance profitability while maintaining our competitive edge. This focused approach will position us to invest in key growth areas, further innovate, and achieve better results. To sum up, we have a clear mandate from the TelevisaUnivision Board to increase efficiencies, generate cash flow and reduce leverage. Daniel, Juan Pablo, and I are focused on all of those efforts and on getting them executed. To wrap up, Bernardo and I are confident that this year's focus on free cash flow generation at Grupo Televisa and the implementation and execution of our next phase focused on further integration and operational optimization at TelevisaUnivision will allow us to create greater value for our stakeholders. At Grupo Televisa, we will continue to be laser-focused on integrating Sky with our cable segment, streamlining our combined operations, strengthening our competitive position, and enhancing free cash flow generation. A more efficient CapEx deployment focused on higher investment returns leads us to feel confident that free cash flow generation for the full year will remain strong. And that at TelevisaUnivision, now that our DTC business has achieved profitability, we are confident that additional value can be unlocked through further integration and unification of both our content business and our geographies. Now we are ready to take your questions. Elsa, could you please provide instructions for the Q&A.

We will now begin the question-and-answer session. Our first question comes from Marcelo Santos with JPMorgan. Please go ahead.

Hi. Good morning. Thanks for the opportunity to ask my questions. I have two. The first is on TelevisaUnivision. I think you mentioned right now that efficiency in the deleveraging are the key objectives you expect to achieve. Could you please just give us a bit more color on how to implement this? So that's the first question. The second question is about the competitive environment in broadband. Maybe to Valim. So how is this unfolding? And could you please discuss a bit deeper the trends in churn and how they evolved from the second quarter when you saw an uptick? Thank you.

Thank you, Marcelo. I'll ask Valim to answer the second question. As to your first question about TelevisaUnivision, what you have said is correct. The efficiency and the deleveraging will become our top priorities. This is an important turning point, I would say, and the beginning of a new phase. We have to reinvent and rethink the way we run the company. This means we will no longer grow at any cost. We should have abandoned that some time ago, but we didn't. This requires a refocusing and repurposing of our business. We need to implement broad cost-cutting initiatives across the board to materially improve free cash flow generation and to be able to reduce leverage over the coming quarters. So this is going to be Daniel Alegre's top priority. And I'm going to be focused also on that. As to your second question, please, Francisco, can you answer?

Marcelo, in terms of the competitive environment, we see a very rational environment here in Mexico. Prices are stable. Some competitors are even increasing prices at given speeds. So we see a rational market, very competitive where all players are trying to maximize revenue growth. As for churn that you mentioned, we had a spike in churn due to our price increase, which is typical. However, they are already going back to historical levels.

Perfect. Thank you very much.

And our next question comes from Vitor Tomita with Goldman Sachs. Please go ahead.

Hello. Good morning, and thank you for taking our questions. We have two questions from our side. The first one is on operating segment margin for the quarter. If you could give us some more color relative to the margin performance in this quarter relative to the second quarter, especially regarding the progress of efficiency initiatives concerning Sky and how much the restructuring at Sky has already benefited this quarter and how much you believe it could further or start to benefit results in the next quarter at the margin level? Also, could you give us a sense of how bad debt provisions are behaving for Cable and Sky, I guess, and whether bad debt has been a relevant factor for margin performance this quarter. Thank you very much.

Thank you, Vitor. Yes. Francisco can expand on this, but I would say that bad debt has not been an issue and has not affected our margins materially. Our operating segment income margin has expanded by 60 basis points year-on-year due to the ongoing efficiency measures that we have been implementing since the third quarter of 2023 in our cable segment when Valim took over. In addition, the headcount reduction implemented in the second quarter of this year following our acquisition of AT&T's minority stake in Sky and other synergies and efficiency measures that we implemented have allowed us to cut our OpEx structure by over 7% year-on-year during the third quarter. This is a significant figure considering the OpEx structure of the companies. Going forward, we're likely to see gradual margin expansion as we improve our sales channels' mix from digital to physical and cable and also as we continue integrating Sky with our cable segment and renegotiating contracts with content providers. On a sequential basis, our operating segment income margin contracted by 60 basis points as the pace of sequential revenue decline at Sky was faster than the realization of synergies. However, I believe this will change in the coming quarters as further synergies should be obtained.

I think that's exactly the perfect answer.

Thank you very much. Just a follow-up, if I may. Do you have a sense of how much of the efficiencies were already realized in this quarter from the Sky integration? And how much is still left to be realized in further quarters?

By the end of the year, we should have all of our platforms integrated. So when we see the full year of 2025, that's when you'll observe the full benefit of the synergies between izzi and Sky. Obviously, right now, we are incurring additional expenses while we integrate those two companies.

Our next question comes from Phani Kanumuri with HSBC. Please go ahead.

Thanks for taking my question. So the first one is regarding your free cash flow generation, in terms of free cash flow from operations, it seems that you have done very strongly in 9M 2024 versus 2023 with about $22 billion of free cash flow from operations. So can you guide me on how you're able to generate such strong free cash flow from operations despite your EBITDA decreasing? That's the first question. And is there any one-off in this free cash flow generation? The second question is about price increases. Do you see any scope for price increases this year?

Thank you, Phani. Yeah, I'll ask Carlos Phillips to answer your first question. As you have seen in our numbers, our top priority this year was in respect to free cash flow generation. I think we have obtained amazing results, and you can see that in the numbers, and you'll see that in the fourth quarter as well. But Carlos can expand on that. And then as for your second question concerning prices, I'll ask Valim to answer.

Well, thank you for the question. As you pointed out, our free cash flow has strengthened significantly in the past couple of quarters, especially when you compare it versus last year. If you go from the top to the bottom, the most important aspect has been and as Alfonso and Valim had also mentioned many operational efficiencies we've been working on regarding the execution and operation in Cable, in Sky, and the corporate and izzi. So that has led to an increase in the operating cash flow. That resulted in leaner operations, better inventory management, and more efficient working capital management. Two very important factors in terms of cash flow to get to the free cash flow are CapEx efficiency. We've discussed this in many previous calls; we’ve been laser-focused on being highly efficient regarding CapEx deployment. That boosted our free cash flow significantly. Additionally, we've streamlined our corporate organization and tax expenses in terms of cash. So, that's contributed to significant improvement versus last year. When you combine all of those factors, that explains the significant improvement in free cash flow that we had so far this year compared to the year-to-date results last year.

And Francisco?

In terms of price increases, we have seen price increases here and there. We had our price increase in March of this year. What we anticipate moving forward is by adding new products, which we are already bringing to market now in October and November, just like revamping mobile, having a more engaged selling strategy. So, those things will add to our revenue pool in terms of increasing ARPU more so than simply passing through inflation. That's the plan at this point.

Okay. Just a couple of follow-ups. In this quarter, I think you seem to have a lower cash tax than in Q2. So, has there been a tax credit in terms of cash this quarter? And in terms of CapEx, you said that you're expecting it below your budget. Do you think that is kind of sustainable going forward?

Yes. I'll answer your second question, and then Carlos will answer the one that relates to cash tax. As to CapEx, a more efficient deployment focused on higher investment returns has led us to feel confident that our CapEx requirements for the full year will be $650 million. That includes $550 million in cable, $90 million in Sky, and about $10 million for corporate purposes. This year, most of our CapEx has been sales-related. Therefore, if we maintain subscriber growth at a reasonable level and further reduce churn, we should achieve low single-digit subscriber base growth in the medium term with rational CapEx intensity. Having said that, we believe CapEx to sales this year should be around 20% in 2023. CapEx to sales had already declined to 23% from nearly 27% in 2022. Valim has done an incredible job rationalizing CapEx, and this has been the outcome. Regarding the tax question, I'll ask Carlos to answer.

Yes. As you could see from our third quarter press release, there was a decline in our income taxes this quarter, but the decline has to do with a non-cash expense recognized in the third quarter of last year that had to do with taxes from previous years that we needed to discount. So, that was a non-cash charge that was included in the previous year. But in terms of cash flow, we are seeing a decline in cash tax payments quarter-by-quarter compared to last year.

Thanks.

Our next question comes from Carlos de Legarreta with Itau. Please go ahead.

Hi, thank you, and good morning. I have two on my end, please. The first within Sky, I was wondering if so far during October, you have seen any signs of stabilization at the top line level? And secondly, within cable, can you give us some color regarding what has driven the soft trends within the enterprise segment? And I was wondering if you can detail what strategies you are undertaking to regain market share? Thank you.

Yes. Valim?

For Sky, you have to understand that we have an issue with technology, meaning with the expansion of the networks in Mexico, as more people are being offered different services. And this has happened worldwide. BPH had a rate of decline. So I don't think stabilization will be the word, but I think we are focusing on reducing the decline speed of a technology that will eventually, in the next five to ten years, have fewer subscribers than it has today. As for enterprise, the reason why the growth is not as significant is that we lost a bidding process for a major government entity in Mexico. That's the most significant impact we have had on enterprise. So those are the two factors diminishing the rate of subscriber reduction at Sky with new products, and also regaining lost market share at the enterprise level.

Well, thank you, Francisco. But let me follow through on Sky. I mean, I think we're all very well aware of the secular trends ongoing within BPH, but my question is specifically during the month of October. Have you seen any signs of stabilization in subscriber disconnections, or are you seeing similar trends as what we have observed so far year-to-date? Thank you.

Yes. As I mentioned, we are relaunching some of those Sky mass products now in early November. So we believe that will help us compensate for some of the losses we have had related to the revenue base generated mostly by prepaid subscribers at Sky.

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

Thank you. I'm sure you're well aware, Netflix set a mild subscriber lawsuit in LATAM. Some of that was attributable to price increase. I know that you're much more AVOD centric already, and you've got huge advantages on sports with football as well as news. But can you comment on competition on DTC, including in the U.S. with Xfinity making efforts on the Telemundo side? And lastly, I know this is pretty peripheral right now, but is there anything interesting going on with your ventures portfolio? I know you're much more focused on improving the core business, but I was just curious if there might be anything happening there that's worthy of note. Thank you.

Yes, Matthew. On the direct-to-consumer side, I think we have done great with ViX and our digital offerings. You're right in the sense that ViX has become a very powerful offering in terms of AVOD. However, the subscription side of the business has also proven very successful. There is more competition, both in terms of streaming service offerings in Spanish and the production of Spanish-language content. However, I think two of the greatest assets we have are the Televisa library, which is the world's largest library of Spanish content, and the large-scale content production capabilities we have in Mexico at attractive costs. I believe that considering those assets, even with more intense direct-to-consumer competition, we will succeed. Now, ViX has become the largest streaming platform in Spanish worldwide in just two years, and we feel proud of our accomplishment because for the second quarter in a row, this platform has achieved profitability.

Sorry, Matthew. You're referring to the deals we've made and continue to pursue in media-for-equity and creating this venture portfolio. We have expanded our previous efforts and have a very attractive portfolio of assets, specifically owning stocks in companies, particularly technology companies, especially in the financial sector in Mexico, with new banks. We will continue to widen our engagement in media-for-equity-type deals.

Our next question comes from Eduardo Amico with JPMorgan. Please go ahead.

Hi. Good morning. Thanks for taking my question. I wanted to discuss capital allocation because I see your cash flows are obviously stronger now. You do have a sizable cash position, but your gross debt is also high. I was wondering if you are considering reducing the gross amount of debt or how you're thinking about keeping such a large cash position? Thank you.

Eduardo, thank you for your question. I will ask Carlos to respond.

Yes. Hey, Eduardo. This will be consistent with what we’ve said in the past couple of quarters. Most of the cash flow generation and the cash flows we have are directed at strengthening our balance sheet and reducing debt. Ever since we did the transaction with Univision when we received the proceeds, we've been deploying that cash to reduce our net leverage. And the intention is to keep moving in that direction. We enjoy a strong liquidity position, as you point out, and we have a large cash balance primarily denominated in dollars. However, we also have a net debt leverage ratio of around 2.5 times that we want to make sure to keep there or below. As we have mentioned in the past, maintaining our investment-grade ratings is very important to us. As you've seen from rating agency actions recently, they also focus on deleveraging, which will be our key objective for cash generation moving forward.

Got it. And then just a follow-up. I guess you're comfortable with the net level, but on the gross level, you're also comfortable where you are right now?

Yes. As we begin to deploy cash to reduce that, it naturally moves down, but our primary focus is mainly on net debt levels.

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

Thank you very much for participating in our call, and let us know and call us 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.