Q3 2021 Grupo Televisa SAB Earnings Call
Good morning, everyone and welcome to group within that.
That's quite a 2021 conference call before we begin I would like to draw your attention to the press release, which explains the.
The year, so far with Yadkin statesman's and applies to everything we discussed in todays call in the earnings release I will now turn the call over to Mr. I for one so young <unk> co Chief Executive Officer of Grupo Televisa. Please go ahead Sir.
Thank you Sarah good morning, everyone and thank you for joining US with me today are a bit better.
On your own silos CEO of cable, Alex Penna, CEO of Sky and Carlos Philips Antonio Lara Corporate Vice President of Finance and administration, respectively.
During the third quarter.
<unk>, an overall positive economic environment in Mexico, Despite the third wave of COVID-19.
Relatively high inflation and raising interest rates.
The economic recovery continue continues to be led by demand of products manufactured in Mexico from the United States.
We expect while remittances sent by migrants north of the border keep hitting new monthly records and have helped domestic consumers.
In Mexico around 66 million people have received at least one dose of the COVID-19 vaccines accounting for 51% of the population.
While about 48 million people have been fully vaccinated, representing 37% of the total.
This has continued to a more benign outlook for mobility and the new normal normality going forward.
Since the end of August children return to in person classes.
For the 'twenty, one 'twenty two school year.
While labor force is gradually going back to the office.
So we're confident that the Mexican economy will experience a rebound of 6% in 2021, including growth of around 4% in the fourth quarter. Moreover, the economic recovery.
The ground for GDP growth of about 3% in 2022.
Under this environment, our content business continues growing at a healthy pace.
Advertising activity from the private sector continues to be robust.
Cable and Sky continued to perform relatively well.
<unk> said that several factors have led to soft RG <unk> net ads were both <unk>.
Such as an increase in out of home activities price adjustments have cable and is still relatively high unemployment rate in Mexico at the same time. Some of these factors have translated into lower recharges at skies.
We paid packages.
Moving onto our financial results for the quarter consolidated revenue reached $26 1 billion pesos, representing a year on year growth of nine 1%.
While operating segment income reached 11 billion pesos equivalent to a year on.
This increase of four 2%.
But another one.
Glad to see that most of our assets retained positive momentum in the third quarter.
The strategy to turnaround our cable segment in 2021 has proven to be successful and will allow us to deliver year on year revenue.
On year and EBITDA growth for the full year.
We are also excited about the opportunity that we have ahead of us to accelerate cable RG unit adds more evidently in 2022, driven by the aggressive FTE th expansion plan implemented this year.
Now turning to the third quarter financial results in our content Division.
By 15, 8% as the economic recovery is causing a surge.
Activity in most industry verticals fueling an acceleration in advertising.
The private sector.
Most businesses are looking to reconnect their brands and products.
Consumers and Televisa as increased ratings during the third quarter, particularly on Prime time gave us a great advantage.
Private sector advertising revenues were strong.
More than 16% year on.
Now on the other hand government advertising revenues remained relatively weak driven by ongoing austerity.
As we have repeatedly mentioned government advertising has been shrinking over the last couple of years. So today its share of total is already very low particularly for.
<unk> maybe some.
Royalties from Univision of $110 7 million, we're at 22%.
Year on year supported by materially higher ratings and a strong economic recovery in the United States.
Univision robust operating performance was also driven.
By several initiatives implemented by management, including a revamp of the sales team the optimization of advertising inventory and focus on profitability.
New innovations solid revenue growth should continue in 2022 given that historically.
Driven upfront with the highest volume.
And also highest prices.
We are confident that Univision traditional media business will continue to grow in the medium term supported by the initiatives implemented by weight and his team to revamp this operations.
We're also convinced that the global streaming platform to be launched next year will be Univision main growth engine.
All in during the quarter content revenue increased by 13, 4%, while operating segment income grew by two 9%.
Our content margin contracted to 37, 2% due to a difficult comp associated with more production of content, including sporting events related to the Olympics and the Gold Cup in 2020, the COVID-19 lock Downs led us to have less content.
And costs as we broadcast at several of the reruns and many sporting events were canceled.
With advertising revenue up by 24% year on year. During the first nine months of 2021, we are confident that our full year advertising revenue will be very close to pre COVID-19 levels.
Production, we believe this highlights that free to air.
The platform to build and improve brand recognition and to sell products and services in Mexico.
Moving on to the performance of our content during the third quarter.
Of the top.
<unk> programs on Mexico's broadcast television were produced and transmitted vitality Sal.
These included Telenovelas dromos newscasts and comedies.
Televisa stop three programs.
Had audience is between 135 and.
Joining hundred 50% higher than the top rated program our closest competitor.
Throughout the week Televisa's audiences, we're 97% higher than those of the second largest broadcaster while audiences at our flagship network less Australia were 170.
5% higher than those of our closest competitor.
This shows that the audience gap with our closest competitor continues to increase compared to 89% and 151% higher audiences respectively. During the second quarter given the solid result ratings of our program.
Yeah.
During the third quarter, our main newscast had 61%.
And then those of the other two free to air TV broadcasters combined.
Finally, the 10 soccer matches with the highest audiences in Mexico during the third quarter were transmit.
Transmitted by Televisa.
In the U S. Univision ratings on linear TV increased by 16% year on year during the third quarter significantly exceeding ratings growth for all other media companies in the United States we.
And we are very proud to report that the strength of Univision.
Its ratings has been driven by Televisa content.
100% of Univision Primetime programming grid.
These audiences audience metrics in Mexico, and the United States are evidence that Televisa strategy to revamp our content production.
<unk> implemented a couple of years ago has been very successful.
Now, let me turn the call over to Pepitone CEO of cable.
Thank you Alfonso.
During the third quarter, our cable segment delivered year on year revenue growth of five 8%, while operating segment income increased.
<unk>, 556%.
Our residential segment revenue grew by five 8%, while our enterprise segment, which accounts for around 15% of total cable revenue increased by only <unk>, 6%, mostly due to the timing of revenue recognition our COO.
Cable business keeps growing with higher average.
Revenue per user our food in new sales and a strong improvement in the product mix. We added 52000 revenue generating units, reaching a total of $14 4 million RG use at the end of the quarter.
To put this in perspective for the full year 2019, we added 800000.
We use the same number for 2020 was $1 4 million. This reflects that net adds in 2020 were an outlier driven by an extraordinary surge in consumer demand for broadband.
For 2021.
Sal distancing measures have eased and the demand cycle for our connectivity products.
RG because normal net adds have slowed down from a hangover effect so to speak.
Broadband continues to be the highest margin service. So we will continue to enhance its product offerings. We added 25000 broadband RG use during the quarter for a total of $5 6 million.
We turned to the 12th consecutive months, we have been number one in the Netflix ISP speed.
For the <unk> competitive service.
We continue to observe good results with RG use as we added 68000 during the third quarter, we have been very successful at Upselling. This service to our customers.
We had 59000 net video disconnections during the quarter.
Largely due to customers prioritizing broadband services and looking to reduce their monthly bills, we keep strengthening our customer retention programs with particular focus on video.
The fact that many custom customers kept up.
Help in retaining video views in the future.
Mobile customers continue to grow at the end of the quarter. We had 139000 RG use an increase of 18000 from last quarter.
Looking forward as the.
The economy keeps improving we expect demand for our services to increase.
Rice with potential opportunities in our small and medium sized business segment on the other hand, we don't foresee the extraordinary surge in demand we experienced in 2020 because of the pandemic. We are strengthening our sales promotion strategies and our customer retention programs to take over of these simultaneous effects.
In September we made price.
Realignment in two of our flagship broadband product.
<unk> sales by the end of the quarter, we expect this positive trend to continue.
Before turning the call back to our funds so let me see.
2 million homes with fiber this year is on track.
We ended the third quarter was 65 completion of our full year goal up from 25% at the end of the second quarter. This will help us to gradually accelerate RG unit adds from 2022 onwards.
By the end of the third quarter, we had successfully launched fiber to the home services in the cities of what Alex.
Luca do angle, we are convinced that the expansion into selective location makes a lot of sense for easy considering that we have a nationally recognized brand exclusive content and high quality service with competitive office.
Thank you PBT now, let me turn the call over to Alex Penna.
Thank you all forms.
At Sky.
Revenue declined by two 5% year on year during the quarter driven by lower charges of prepaid packages.
Children are going back to school and the workers.
Yes.
Operating segment income fell by seven 2%.
Driven by the amortization of certain sporting events.
Such as the web.
Plenty plenty in the comparable Americas Cup.
Sky.
Seven.
<unk>, despite having 2000 video subs disconnections during the quarter.
On the broadband side.
We added 15000 that you used during the quarter.
Reaching a total of 722000.
To help them to use.
In the aggregate.
Including our <unk> service, which added 13000 odd to us during the quarter.
Cost was approximately $8 2 million RG yields.
Thank you Alex.
Regarding capex year to date, we have invested $919 million of.
Of which $680 million in cable.
As we discussed during the call for the first quarter, our Capex target for 2021 includes $850 million in cable.
200 million.
But more than what we invested in 2020, given that we will pass 2 million homes with fiber.
$250 million in Sky and $75 million in content in other businesses.
Okay.
Im happy to share with you that in September Mexico.
Score regulator <unk> and the antitrust Commission confessing approved the merger of our content assets with Univision.
The transaction is still pending some required regulatory approvals in the United States.
In the meantime, we have been working closely to prepare the integration with Univision.
Third the closing.
Which will allow us to execute a digital transformation strategy and the lounge global streaming platform as planned.
Also on September 13th we announced an agreement with live nation Entertainment to move forward with the sale of our own consolidated 40%.
But his stake in necessity for a total consideration of $5 2 billion pesos.
Although these transactions have already been approved by regulators.
<unk> for its closing castle lapsed. Therefore, we are waiting for new regulatory approvals to close which we expect could be received before.
<unk> equity yearend.
To wrap up with consolidated.
Segment income growing by seven 4% and nine 2% year on year, respectively. During the first nine months.
2021, another and I feel confident that are.
Before generating performance for the full year will show strong recovery.
In addition, the strategic initiatives implemented this year, including the merger of our content assets with Univision that.
Expansion of our Ft Th network and the monetization of noncore assets will material.
<unk> strengthened our competitive position to achieve sustainable growth over the coming years.
Now we are ready to take your questions. Sarah could you. Please provide instructions for the Q&A.
As a reminder, please press star then one on antenna.
If you wish to ask a question.
So your request please press star one.
Again, please press <unk>.
And one on your Jonathan to ask a question.
We will now take our first question from the line of Fred Mendes at Bank of America.
Dennis go ahead your line is open.
Hello, Good morning, everyone and thanks for the call I have two questions here well, Mike went Oh My Oh my.
The first one is capex is increasing obviously it does take some time between.
Get into homes beds, and getting done at ads, but despite.
The strong increase in Capex to reach or go up 2 million homes passed you know net adds even in a downward trend. So how should we expect how do you see.
These net adds as we move forward visited my first question and then the second question on cable as well if there is a major difference that you're already observed in.
<unk> the performers where you have the dth and the performance, where we have cable <unk> basically is having a stronger performance over cable or not thank you.
Yes, Hi, Fred Youre, absolutely right that.
Of course the expansion of.
The FTP H <unk>.
Network and the deployment.
Thanks.
Takes time and takes aggressive investments and so it takes time to pick up the two installed the network to deploy the fiber and pick up the subscribers.
What I can say conceptually is that.
The need.
In between in home connectivity in Mexico is still huge.
And broadband penetration is still very low at around 60%.
These factors plus the additional 2 million homes that were passing with.
<unk> as you described.
This.
Fourth should allow us to accelerate RG <unk> net adds.
And that will because of this lag become more evident in 2022.
I'll ask Donald to expand on this.
Yes. Thank you thank you Fran.
Sure.
One one part.
Thats a bit of background lets remember that the net adds for 2020, we're an outlier and we're suffering from what we call a hangover effect in 2021 lots of people Barra contracted broadband last year, and therefore, we're not having as many people contact contract or higher broadband.
Year to year to put this in perspective.
2019, we added 800000 R&D use while the number in 2020 was.
Rose to $1 4 million.
But.
In 2021, we see two effects on the one hand, the demand for connectivity has returned to pandemic levels.
And on the other.
And the economies bouncing back.
So we're trying to serve these two effects are strengthening our sales promotion and our customer retention programs.
Also a new issue that got.
That kind of explains your question, which is we made a small adjustment in our own.
The election broadband products in September.
And the September number is markedly different than than the number that the net add numbers for the previous four months.
So we expect that the switch or the change in the price and the broadband flagship.
Vaccine product.
The building that we're doing should move us in the future towards more solid.
Net adds in broadband.
But I'd say very very carefully and an eye on thank you.
Thank you.
Okay.
We will now take our next question from the line of Harlan.
But I'll tell Ya Anessa credit Suisse. Please go ahead your line is open.
Hello, My name is Kathy and thanks for taking my question congratulations on the results.
I just wanted to get a little bit more color on the argue your losses and pay TV <unk>.
Accelerate a little bit sequentially.
I was wondering if it was related to a changing in pricing of bad guys or something.
You have mentioned in the past that consumers don't really save a lot when they cut their pay TV subscription within that triple play so it did not.
Color on that would be helpful or may I have another question.
Yes, Hi, Alejandro Alaska, but don't you to talk about.
Via the RG use disconnections.
As we've mentioned before.
The new video platform presented challenges linear television presented challenges not only in Mexico, but all over the world.
In addition, you know the economic environment has been difficult.
Most of our households.
Two points to make on this most of our household continues to be our broadband customers.
Our bundle is competitive offering affordable pay TV services. So we believe that once the economy improves.
This will this will recover.
And we are seeing some incipient results.
Our triple play sales have remained robust in the last few months. So we're very encouraged by that.
As a strategy following the global tendency.
We are continuing to push our strategy to become a content aggregator.
On top of our linear.
TV content, which is pretty popular we're including several streaming services in our cable packages, such as blame Netflix Disney and Amazon Prime.
That way, we're trying to set up some of those offerings.
We I think another issue that is very important.
<unk> is we are strengthening our video platform to improve the customer experience navigating the different stream.
Streaming services and I think that would be a key differentiator for if people can serve the different theming services without having to leave our setup box and then come back in.
Aggregate inputs et cetera, that's going to make a big difference for us So I think.
In all of this we should be able to maintain our video customers in the future. Thank you Alex.
Perhaps just a follow up this one is on the increase in content costs.
Changing E. One that you had already mentioned that we can see it.
That's right.
Significantly then it could be one but I was wondering how much of this is related perhaps to developing the new series for the global streaming platform.
Yeah.
Yes.
Uh huh.
And remember we had a full plan to revamp our content production some years ago.
Of course, we are investing more.
Intent.
We have a new a new series, we have what we have now called <unk>, which is a.
A shorter version and a modernized version of the traditional telenovela stories.
Those have a faster pace those have less episodes.
We have less a little less drama.
And they have proven to be very successful.
Univision.
Prime time as I mentioned in my opening remarks.
Now, it's 100% based on Televisa content, so Univision will rely less on acquiring content from third parties and this content because.
Proved to be very successful if you look at Univision.
No.
Numbers during the third quarter.
So I think of course, we will continue to invest in.
In producing content.
That content will be will be better we have a tremendous advantage of having.
The best and most effective.
<unk>.
Production of content in Spanish in the World in Mexico City, and we'll use that very efficient tool to produce.
More content.
So I think.
Streaming of course, we.
We will produce content ourselves, where the streaming platform and we will.
We'll also.
Produce through third parties.
That will be key to the launching of the global streaming platform together with our with Univision.
You'll be you'll be seeing very exciting products on the streaming platform of course.
Fact.
Quality products so.
I think you'll be happy with the product and we will see a lot of subscriptions in a lot of sales.
Thanks.
Okay.
We will now take our next question from.
The line of Martin <unk> from benchmark. Please go ahead your line is open.
Oh. Thank you congratulations on the results a couple of days ago, Netflix reported fairly modest results for the Latin American region in terms of their additions and I think there's a consensus.
As small as mature businesses mature Inc. Is there any read through there to the potential of your business I mean, clearly you're much more he bought broken student you have more content to Netflix does particularly outside scripted programming, but could you talk a little bit more about the calm down there and do you have any.
<unk> comments on Peacock in the U S looking to do a lot more Spanish language programming programming. Thank you.
Hi, Matt.
Yeah, what I can tell you is that we're very excited about the product of course, we are going to be 100% focused on the Spanish language.
Which.
As we have mentioned.
The second most spoken language in the world.
Type in Mandarin so.
We are focusing on this.
Population, which is which has a GDP of more than seven trillion.
And of that half.
$3 five trillion as just the Mexican economy, and the U S. Hispanic market GDP.
We're going to focus 100%.
And the production of Spanish content.
We have moved a long way in this very few months.
To launch this product this global product.
Next year of course, we're already working on the production of original content.
The new premium subscription tier of our global screening platform will feature more than 6000 hours of Spanish language content.
With more than 30 original productions throughout the next few years.
We are going to feature globally recognized.
Producers creators riders.
Including Mario Duane, Yes Sal.
Early morning.
Even Mario <unk>, who was the novo.
<unk> Literature Award winner.
We just closed our first look deal with advanced schools, the top Chameleon in Latin America Mexican.
So we.
We have basically I mean, we're speaking to renowned.
Accurate.
As actors producers writers et cetera, So we're going to focus 100% of our attention to the Spanish language and we believe that having the huge library of Televisa plus this new premium.
Productions that are going to be during exclusively on our.
Our new platform.
This will be.
Our success throughout the region.
That's great. Thank you.
Okay.
We will now take our next question from the line of Doug I, Yes.
From BBSI.
Please go ahead your line is open.
Hi, good morning, everyone. Thank you.
My questions.
First.
I would like to know if you can make.
Total comments about.
The good performance of the.
Univision, which royalties to increase.
20% this quarter.
And second Covid.
It could be more specific.
About the timing.
To launch the new streaming platform generation.
And how you plan to really do you do if you are planning to launch.
Kris.
So if at all platforms had once able then export or do you plan to do globally.
You plan to launch it in the U S and Mexico simultaneously in the rest of the world.
Later on.
And 40, if I may.
For many.
If you.
Content.
Margins will improve.
Once you launch these streaming platforms genes and stand the jet already.
Pending in producing content for these.
For these new.
Skimming platform that you will be launching next year.
We're still generating revenues out of it.
So I was wondering if <unk>.
Margins should improve once you launch the salaries. Thank you.
Yes, but what I can tell you is we're very excited about what's happening at Univision.
In essence, Wade Davis <unk> revamped.
The whole team, but more specifically the sales team.
He brought.
In Donuts PCI lay from Warner and she is doing a spectacular job in selling advertising and positioning. This advertising of course. This is all based on the tremendous.
Yes.
Of our content of the ratings that the content is producing.
The success also.
The Mexican soccer League games that Univision.
<unk> meeting so we're very excited about what's going on both on the traditional.
So the business of selling advertising and also on what we're seeing in terms of the new streaming platform what I can tell you in <unk>.
Youre absolutely right, we are delighted to see that the royalties from Univision.
Amounted this quarter to 110 million.
And Youre right to point out that they were 20% higher than <unk>.
Last year.
More importantly, because of the easy comp as a result of Covid.
This was 10% higher than 2019.
<unk> for the third quarter.
<unk>.
Only demonstrates that Univision is doing a tremendous job.
In the traditional business.
We believe that this will continue next year, because we saw the upfront results.
They look spectacular.
They were the.
So that the best upfront in the history of <unk>.
The company.
Both in terms of pricing and in terms of volume.
We can compare this upfront to what happened.
In 2016 2017.
So.
We're very enthusiastic also about <unk>.
Next year and.
The advertising side of that business now as to your second part of the question, which has to do with the launching of the screening platform.
<unk>.
We'll be lounged in early 2000.
We had to.
As wealth platform in the second half of 'twenty.
'twenty two.
We will start.
With Mexico, and the United States, and then expand throughout the region and other.
Countries and territories.
Of course as I mentioned.
$20.
The Spanish speaking GDP.
It is our addressable market.
Half of that $3 five trillion is just Mexico and.
Market. So of course, we will begin there and then we will expand to two other places.
Thank you very much.
I was wondering if maybe you could comment on the.
The potential margin improvement in the content Division.
I understand that you're spending and producing content for these new platform.
Thank you and there is still not generating revenues yet.
Yeah I think.
What I can tell you Alejandro we're not giving guidance as to our.
Our margin and.
However, what I can tell you is that.
Emerge with Univision the combined company will see an expansion.
Okay, great. Thank you very much.
Thank you.
We will now take our next question from the line of Gordon Lee BTG. Please go ahead. Your line is open.
Yes. Good morning, Thank you very much for the call.
Most of my questions is on the content side and they've been answered, but I was wondering if you could just give us.
Not precise guidance, but would it be fair to say thinking about capex.
Think going forward at the consolidated level that we should be thinking about a $1 billion annually, that's sort of the new run rate given.
Given the outlook for the cable business. Thank you.
Hi, Gordon.
It will be around there.
Perfect very clear fair enough. Thank you.
Excellent.
We will now take our next question from the line of.
Okay Yeah.
Please go ahead your line is open.
Hi, Good morning, Thank you for the call.
On the closing of the Univision transaction can you provide any.
We're on.
Any potential extraordinary corporate expenses that you might have.
And what is the global it expands like going to look like once the transaction is completed.
So on a press conference.
Call or a couple of weeks ago the precedent.
Mentioned that the.
The goal is expecting around 10 billion peso.
Tax payment for the transaction can you confirm whether this number is.
Final or is it stable.
Thank.
Well as of course, the corporate expenses will be reduced appropriately once we resize.
What we have called the remain co or that is Grupo Televisa.
And you will see the effect next year.
As to the.
The payment of taxes, it will be around there or I mean, a little.
Okay.
Gilbert Al are you still there.
Yes, I'm, sorry, I couldn't hear you thought it would be around there or a little and then it got cutoff.
Yeah, it'll be around there or a little higher than that number.
But around that figure.
Alright, okay.
Understood.
<unk> much.
Yeah.
We have no further questions once again ill start and one to ask a question.
Thank you very much for participating in the call and of course.
Of course as always we're here to answer any other questions you may have.
So.
Thank you very much.
This concludes today's conference call. Thank you for participating you may all disconnect.
[music].