Q4 2021 Grupo Televisa SAB Earnings Call
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Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines will be placed on music hold thank you for your patience.
[music].
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Good morning, everyone and welcome to Grupo Televisa's fourth quarter and full year 2021 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 discuss in today's call and in the earnings release I will now turn the call over to Mr.
F on Saudi and quota.
Co Chief Executive Officer of Grupo Televisa. Please go ahead Sir.
Thank you Tommy.
Good morning, everyone and thank you for joining US with me today are Pep Antonio Gonzalez CEO of cable.
The reason why levo CEO of Sky and Carlos Phillips CFO of Grupo Televisa.
Before reviewing Grupo Televisa operating and financial performance I am delighted to share with you some exciting news about Televisa and Univision after effectively closing the merger on January 31.
It has been almost one year since we announced a transformative combination of television social media and content business with Univision to create a new company Televisa and Univision. These union has created a world, leading Spanish language media and content company.
Business without comparison in the global media landscape that will exclusively focused on the massive market opportunity that exists with our global Spanish speaking audience of almost 600 million people.
We are very fortunate to have a group of amazing partners that came together to help create this unique platform and pursue our digital transformation strategy.
Wade Davis CEO of delays of Univision and founder of ports like Eric Center Hartford at search site.
And Softbank, Google and Raymond those teams have helped us a lot.
In preparation for this merger, both Televisa and Univision have made significant progress transforming their businesses across all dimensions. Both teams have built upon our brands and deep connection with our audience to deliver levels of viewership that these two companies common seen in years.
Univision portfolio of television networks.
Highest audience shares since 2014 and television content performance and audience delivery in Mexico was equally impressive.
Univision completely reinvented its AD sales business and both companies experienced above market advertising revenue growth in 2021 and.
And most importantly, we have completely transformed our organization strengthening our already exceptional teams.
By emerging TV content and media business with Univision, we have created an unprecedented platform.
Let me start Univision now reaches over 60% of the respected television audiences in both the United States and Mexico clothing, leading positions in both markets.
We have reached over 100 million Spanish speakers everyday across TV digital streaming and audio.
The most prolific long form Spanish language content engine in the industry and the most powerful Spanish language library and intellectual property.
So let me start Univision is already delivering results that neither company could have achieved independently and.
We're just getting started one of the most exciting things created by this historic merger is the largest ever Spanish language global streaming platform wins.
With the assets and resources of Televisa and Univision, we are on the cusp of launching something extraordinary.
The history the brand the reach and trust with our audience.
Content engine and library of the combined companies have come together with two new ingredients.
Massive capital commitment of several hundreds of millions of dollars for Spanish language content multiples of what any other service expense in the language and our next switch extreme conviction in the opportunity for the worlds first large scale streaming platform to exclusively serves the Spanish.
<unk> World.
As we announced on February 16th.
Our new streaming brand will be the first of its kind global streaming product with two very distinctive experiences advertising video on demand or Avon and subscription video on demand or as but all in one single app easily accessible for everyone across all major platforms in the <unk>.
<unk>, Mexico in 19 countries across the rest of Latin America.
The benefit of having two tiers and one is that we will be able to easily up so our premium service to able to users.
<unk> subscribers will be able to enjoy this distinctive experiences each with its unique content proposition seamlessly.
Eva tier VIX launches on March 31, and promises are users of linear like experience that includes live news and sports and a significant amount of entertainment content across all genre available in the form of linear channels as well as video on demand.
Advertising supported and importantly for free.
At the same time, the <unk> tier fixed plus which will launch in the second half of the year is a premium paid experience our mission and our promise is to deliver a compelling original content producing the Spanish language and since this is our only focus we want.
To be the Spanish speaking world go to platform.
These two experiences Biggs and big plus in our first year alone. We will have an unprecedented offering of more than 50000 hours of free and premium content in the subscription service specifically, we will launch at least one high quality new movie or series every week.
For the entire first year.
<unk> plus will feature content developed exclusively for us by some of the master storytellers of Spanish language content, including one of the industry's most respected and popular.
And producers Salma Hayek and as our production company went on a Rosa U S superstar singer and actress Selena Gomez Peruvian writer in literature Noble Prize winner Mario Monica, The Olson, Spanish Otter media, Duenas, and Mexican comedian Kenyan reverse among many others.
We are very excited about the achievements we've had so far since announcing the merger and look forward to sharing with you the future success of Televisa and Univision.
Three strategic factors lead us to believe and have confidence that we are much better positioned than other traditional media players migrating to screaming and that we will deliver on our digital transformation strategy first we have a sizable traditional media business.
Growing double digits and generating strong free cash flow to fund the lounge, our global streaming platform second we have the largest Spanish language content factory in the world that can produce premium content in a cost effective way.
We also have the most powerful Spanish language library and intellectual property.
And last but not least we have a world class executive team and we have built one of the best streaming teams in the industry.
Over the last 12 months, we far exceeded our initial growth expectations and our prospects for 2020 to look equally as impressive.
On a platform basis, Televisa and Univision revenue for 2021 reached around $4 2 billion.
Representing year on year growth of almost 15%, while EBITDA reached more than $1 6 billion equivalent to a year on year increase our approximately 11%.
We expect a strong revenue growth trend to be sustainable in 2022, driven by several factors, including one record volume share.
And great upfront performance as both in Mexico, and the United States two additional partnerships to lounge, our content on digital multichannel video programming distributors three the monetization of the World Cup and for the launch of our global screening platform.
We expect EBITDA to remain relatively stable this year as we invest in the strong foundation for our next phase of growth, including Lounging, our global screening platform acquiring streaming users and delivering higher revenues.
With that let me spend some time on milestone achievements.
Last year, the Mexican economy expanded by around 5% year over year.
The improving economic environment helped drive solid growth in our content segment as advertising activity from the private sector remained very strong throughout the year the strategy to turn around our content segment proved to be successful, allowing us to deliver revenue and EBITDA growth of 10, 2% and <unk>.
11, 5% year on year, respectively.
Looking us back to pre Covid levels.
Our cable segment also performed relatively well and our initiatives to expand our fiber to the home <unk> footprint by 2 million homes. In 2021 was already starting to show and it has already started to show initial results on the other hand and increase in out of home activities.
Software net additions of revenue generating units or <unk> use of sky and lower prepaid recharges at the same time, Scotty experienced elevated costs related to the higher number of leaving of live sports events that were canceled in 2020, putting significant pressure on margins.
All in our full year consolidated revenue reached $103 5 billion pesos, representing year on year growth of six 3%. While operating segment income reached 43 5 billion pesos equivalent to a year on year increase of seven 3%.
Turning to our fourth quarter results consolidated revenue reached $28 8 billion pesos, representing a year on year increase of three 7%. While operating segment income reached $12 3 billion pesos equivalent to a year on year growth of three 1%.
Bernardo and I are pleased to see that most of our assets delivered solid operating performance in 2020 . One we are also confident about the opportunities to keep growing in 2022.
Now, let me address the fourth quarter financial results in our content Division.
Advertising revenue increased by seven 2% as the economic rebound has been driving up marketing activity and advertising spending across the private sector. Most of our clients are looking to position their brands products and services in front of their consumers and Televisa solid ratings during the fourth quarter.
<unk> early on Prime time created a great advantage.
During the fourth quarter royalties received from Univision of $110 million were relatively flat year on year Univision solid operating performance during the fourth quarter was particularly offset by tough comps given Kevin political AD spending in the same period of 2020.
Yeah.
In sum during the border content revenue increased by 4% while operating segment income grew by one 3%.
Our content margin contracted to 47, 1% due to the difficult comp associated with more production of content in 2020, the COVID-19 Lockdowns.
Led us to have lower content production costs as life programs, such as sporting events were canceled and we broadcast on several of the reruns.
Moving on to the full year content revenue grew by 10, 2% year on year, mainly driven by an increase in advertising sales of 17, 2% in.
In 2021, our advertising sales reached $19 2 billion vessels and we're close to pre pandemic levels.
Operating segment income in our content business was up 11, 5% compared to 2020 translating into a 38, 3% margin. This is an increase of 40 basis points from 2020, and the highest margin since 2016.
Regarding our upfront I am very pleased to say that our negotiations with our customers have successfully concluded we expect advertising deposits to grow by around 13% year on year, representing the best performance in television history. We are optimistic that this will help sustain.
<unk> advertising revenue growth at a solid pace in 2020.
Okay.
During 2021, our main newscast had great audiences and we're very proud of this achievement.
In the U S. Univision ratings on linear TV, we're the only ones to grow year on year during 2021, allowing it to increase its overall portfolio share with Spanish language and total TV in the United States.
We're very proud to report that the strength of Univision ratings has been driven by Televisa content, which currently occupies most of Univision primetime programming grid.
This audience metrics in Mexico, and the United States are evidenced that Televisa strategy to revamp its content production, which was implemented a couple of years ago has been very successful.
Now, let me turn the call over to <unk> CEO of cable.
Thank you very much Alfonso during the fourth quarter of 2021, our cable segment saw an important turnaround in operating metrics. It was the strongest quarter in the year net add coupled with a solid financial performance and strong profitability in the fourth quarter closed with 2000 and 1006.
Revenue generating units or <unk>, and 17000 mobile RG use it was the strongest quarter of 2021 and the highest since the second quarter of 2019, including the pandemic quarters the year closed.
$14 6 million RG use.
The result was largely trip was largely driven by both the realignment of some of our flagship products as well as the homes passed expansion plan, we implemented last year.
Cable business keeps growing due to our higher levels of sales.
Product mix, which also brings a higher average revenue per user.
In video we turned it around and had the first positive quarter since the second quarter of 2019, including the pandemic quarters.
We reached an inflection point and added 11000 video RG use during the quarter. Thanks to our improved product mix from the product realignment process.
75% of sales, our triple play and the strengthening of our retention programs.
In broadband we added 58000 RG use the second strongest quarter of the year for a total of $5 7 million RG use.
Broadband continues to be the highest margin service. So we will continue to enhance its product offering.
Now for the financial metrics during the fourth quarter, our cable segment delivered year on year revenue growth of 4%, while operating segment income.
<unk> eight 3%.
Our residential segment revenue grew four 8%, while our enterprise segment, which accounts for around 15% of total cable revenue increase.
Increased 10, 4%, mainly due to the timing of revenue recognition.
For the full year revenue growth at our cable segment was five 8% and operating segment income grew seven 3%, reaching a margin of 43, 2%. We expect that the full impact of our strong operating results to materialize in the coming quarters.
During 2021 capital expenditures reached $855 million.
We're gonna to 36, 1% of sales these investments allowed us allowed us to successfully achieve our plan to Paas 2 million homes, ending the year with $17 8 million homes passed.
Which more than 65 are passed by fiber to the node or fiber to the home.
Yeah.
By the end of the fourth quarter, we have successfully launched fiber to the home services in the cities of Guadalajara, Toluca Dangle Master plan and recently the peak.
This will help us to accelerate <unk> net adds from 'twenty two onwards.
Before turning the call back to our fund so let me say that we are convinced that the expansion who selected location makes a lot of sense for EG.
We have a nationally recognized brand exclusive content and high quality service with competitive offerings.
Thank you very much.
Thank you Patrick told you before turning the call to a reasonable level, let me remind you that.
He was appointed CEO of Sky's since the beginning of the year I'll expand on who was a great executive for us decided to retire and.
Took over <unk>.
<unk> is a seasoned executive with over 25 years, holding CEO rose mainly in the telco sector. You guys publicly listed in private companies across geographies, including Latin America, and Central Europe before joining sky, He was chairman and CEO of our linear.
Previously he worked for over three decades.
Telephony Telefonica group, where he held the position of executive director of Japan South.
We also spent five years as chairman and CEO of Telefonica, <unk>, Czech Republic, two years as CEO of telephony, because wireless operation in Brazil, three years, as president and CEO of Telefonica, Venezuela and over six years, as Vice chairman and CEO of Telefonica mortgages, They Argentina, having said that let me turn.
Turn the call over to Luis.
Yeah.
Hey, good amounts of a pencil.
At Sky revenue declined by four 4% year on year during the fourth quarter, mainly driven by lower recharging prepaid packages.
Klein in home confinement related to the pandemic.
Operating segment income fell by 13, 9% due to the amortization of certain sporting events, although revenues sky.
Sky had 73000 odd you use these connections mainly driven by the loss of a detox in video subs during the quarter.
On the broadband side, we added 5000 odd you used during the quarter, reaching a total of 727.
7000 customers.
T a slowdown is in.
In broadband net adds is mostly related to the financial difficulties.
But on the expected delays in the public's expansion.
In the aggregate, including our ambient Air service, which added 3000 agent used during the quarter, we closed with approximately $8 2 million that you use for.
For the coming year.
The news that Sky declined 2.5 right.
Operating segment income fell by $6 nine driven by as I said, an increase in the amortization of certain sporting events, resulting in a margin of 38, 6%.
Now before turning back to our phone so I want to share more color regarding sky opex structure over the coming years.
Excluding 2022 when we will have a nonrecurring cost of around $15 million related to the Densification transmission rights and production of FIFA World Cup Sky operating costs unexplained it should be similar to those seen plenty plenty one in real terms.
Okay.
Thank you Lisa welcome to the team.
Thank you I'm moving on.
Moving on consolidated Capex, we're about $115 billion during 2021, which was slightly lower than our guidance for 2022, our capex target of $860 million includes <unk>.
$620 million in cable to past 700000 homes with fiber.
We increased our subscriber base and support growth.
$200 million deployed in the Sky and $40 million in our other businesses.
Finally, I'm happy to report that our board of directors approved the payment of our regular dividend in 2022. This will be presented for approval at our annual shareholders meeting.
To wrap up 2021, Mark that historic moment for Grupo Televisa and our industry as we announced the merger of our content and production assets with Univision.
It is an unprecedented business in the global media landscape.
Over the past year, both companies have transformed themselves reaching levels of financial performance and audience resonance that it has not been seen for many years.
We have hit the ground running in 2022.
The power and momentum of our core business is truly unique and will be a springboard for the upcoming lounge as a preeminent Spanish language screening platform.
At our cable segment, we have laid the groundwork to achieve sustainable growth in the medium term by.
<unk> the expansion of our ft ph footprint in Israel. This should allow us to remain the leading high speed Internet service provider in Mexico.
2022 will continue to be a year with significant opportunities for Grupo Televisa and we will remain focused on delivering solid results for all our stakeholders.
But none of them are very optimistic about 2020.
First we will continue to capture the upside from the significant growth potential of Televisa Univision by remaining its largest shareholder with an equity stake of approximately 45% and.
And second.
It is very important in every housing connectivity is very important in every household and we are benefiting from this trend. So we will continue to invest and grow in our broadband operations.
Now we're ready to take your questions.
Thank you if you would like to ask a question. Please do so by pressing star one on your telephone.
While your question press the pound key please standby, while we compile the Q&A roster.
Your first question comes from the line of Marcelo Santos with Jpmorgan.
Hi, good morning, Thanks for taking my questions I have two the first one is if you could please comment a bit on the performance of the blame in Mexico. During 2021 anything you could share would be very interesting and the second question is if the upfront already includes advertising on the Vod platform or if it is debt.
Traditional media thank you.
Yes, Thank you Marcelo as two to blame it's a very different.
Platform than what the mix will be.
Blameless basically.
As both platform. However, we launched last year enabled.
Version.
And it's a good precursor to what.
<unk> will be.
We touch the waters in Mexico through to blame to look at that market.
Blaine.
<unk> has been able to deliver more than 1 million subscribers, which will be transferred to biggs.
And in terms of users of the <unk> platform.
It's an incipient platform since we launched it last year and I can tell you that it has.
Around 4 million users this platform.
Delivered exceptional.
Engagement by the users. So we're very happy to see those those results as I have been mentioning victories.
<unk> is another platform, both VIX and VIX plus the <unk> <unk>.
Platforms will will.
It will be something very different than what we or.
Our Univision lounge.
<unk> in the past in terms of the upfront and did include.
Sales of advertising on the Avon platform on.
VIX.
Perfect. Thank you very much.
Yeah.
Our next question comes from the line of Alejandro cholesterol with BBVA.
Hi, Yes, good morning Alfonso.
Thank you for taking my questions. The first one just related to the cable business.
Hi.
Could you just provide you that.
Yes.
Capex guidance for the year.
And then you can see that yeah.
Capex what are your cable business yeah.
Substantially lower than the amount that you spend.
One.
And most of the Mark to our team.
We've seen anybody 'twenty sundar.
Could you please hold the line.
FPGA chips Spansion plans could be next two three years.
Expansion.
We continue to be new regions and how many homes you plan to Paas.
What will be the overall capex requirements to meet those goals that would be my first question.
Yes. Thank you Alejandro we will continue to invest.
In our cable segment, especially on the FTE Th front.
As I mentioned before we have a full plan and prepare I'll ask Don to go into that.
However for this year, we are optimizing our capex.
And.
Can you share with us.
The expansion planning, where we are investing please thank you.
The first thing I would say is that you know.
Capex in absolute terms for 2022.
It's basically the same as it was.
Prior in the prior year's excepting 2021.
2021, well was an extraordinary year and it was based on a very ambitious expansion plan of 2 million homes. This this surge in investment was needed.
Islam some surge in investment was needed because we entered very large metropolitan areas.
<unk>, which is either the second or the third Metropolitan region in Mexico, and Peru Cup, which is also one of the top five.
However, one of the things I want to say that with this investment easy covers nine out of the 10 biggest cities in Mexico City, which account for over half of the GDP of the country.
And more importantly, we cover the three largest with either <unk> or fiber to the node.
So we're going back to us to our stable way of of our.
Our stable level of Capex investment every so often we have extraordinary years like last year or like for like 15 or 16.
The second thing is wondering Alfonso mentioned, we've been working on improving our making our construction parameters more efficient that's the way we will continue our <unk> expansion with higher efficiency and next capital intensity.
This will allow us to focus our resources in other in other areas.
Moving forward we will.
We're going to continue to be laser focused on upgrading our network as we have in the past and we will be opportunistic on how we do in choose the places in the areas.
Expanding our footprint based on competition consumer consumption capacity potential penetration are.
Our pools et cetera.
Right and we want to do this rather than giving general statements about increasing or doubling the size of our company.
Relative to sales. However, we believe it is likely that we will see capex declining from the levels. We've seen over the mid to high <unk> in 2020 due to low to mid 'twenty in the medium term. So I think with this we have a good case, we have a nationally recognized brand with a good name that provides us with good.
Putting to continue to grow in the future.
Thank you.
That's a good explanation on in terms of homes passed you should call you suspect that a lot of things.
2 million homes passed you.
Sure go ahead.
Absolutely. We are we are expecting to do 700000, which is not a small number either.
Uh huh.
Last year was a it wasn't as I said, an extraordinary year, because we entered very large metropolitan areas.
In this past year very successfully I would say.
700000 is what we're projecting for this year.
Okay, great. Thank you and my second question also related to cable.
I would like to continue from you about the dynamics that you are experiencing.
Regions that you've been entering we'd have P. P H E.
The last few quarters last year.
That's competition pricing and attrition rates that'd be helpful. Thank you.
Well I mean, I think the competitive landscape of the cable market has been changing in the last few years. He has become a lot more competitive.
So we have to be very efficient and very competitive in our products in the last in the.
In the last quarter, one of the reasons, we had a significant turnaround in our in our sales and our increasing net ads was because we repackaged our problems and we repackaged, especially our flagship products to make them more competitive vis vis the competition, having a national.
Having national coverage means that in some places we compete against one company on in other places we compete.
With another in some places we compete against both or three of the companies. So we have to be very regionally oriented to try to get the best in each of the market and I think the story of the fourth quarter is perfectly sustainable I'm going to you know I would say that for the first time.
In over a year did we have positive net adds in video which is a very good story and most of our sales are triple play. So the product mix is allowing us to increase our <unk>.
Solidly and sustainably.
Great. Thank you very much for your explanations.
Our next question comes from the line of Gordon Lee with BTG.
Hi, Good morning, Thank you very much for the call and congratulations on the closing of the transaction.
A couple of questions the first.
During the quarter in the press release, you discussed a couple of <unk>.
I guess, where reassessment from the tax standpoint for previous years I was wondering if you could give us maybe a little sense of the magnitude and more importantly, whether that has already been taken care of or whether some of this will spill over into 2022 as well.
And the second question.
With the transaction hasn't been closed with the $3 billion par.
Partial monetization of our content business likely to hit your balance sheet this quarter.
And the fact that the.
Let me start Univision will really fund its own investments with its own internal cash flows could.
Could we expect that the televisa level to maybe see more cash being returned to shareholders either via a step up in the buyback or maybe beyond this year and increase in ordinary dividends.
Are you.
Thank you Gordon as to.
Your second question.
Sure.
We're going to be opportunistic.
About.
Deployment of capital of course, we will invest as we have been mentioning.
In MTT age through easy.
That's a priority of ours.
And then we will.
The leverage we will be.
We will be paying down debt also opportunistically, so youll see more of that happening very soon.
Those are the two.
Two priorities, but in terms of buybacks, we have been buying stock and we will continue to buy stock.
And.
Those those are our priorities as to your first question in Alaska.
Carlos periods too.
To answer it.
Hey, Gordon Thanks for the question regarding your two questions I guess, you're referring to the changes in income taxes for the quarter and as you mentioned. These these were adjustments that were made for in one case it would be some tax from prior years, whether within the assessment from the Texas sort of 30, and we have to do an adjustment and the second one was a partial write off of the.
First income tax that we had from 2014. So both of those items. If those were the ones that you were referring to are one offs.
We wouldn't expect to.
To continue in the future.
Perfect. Thank you very much.
Our next question comes from the line of Leonardo Olmos.
With UBS.
Hi, Good morning, everyone. First question I have two quick follow up questions. The first one is the bulk cable.
You discussed homes passed.
In a previous question my questions now regarding homes connected how should we think about homes connected in 2022 can we expect over 15000 net adds require to again. Thank you.
But sonya.
Thank you I think what we see and what we are what we expect is to continue the trend we had in the fourth quarter.
So we are seeing an acceleration from quarters, two and three.
And this should be this should be sustainable and this should be steady with a gradual acceleration.
I have been.
Happening what we are seeing as I said is that changing our product mix. So we should expect the the speed to be gradually accelerating from the fourth quarter, but at that level.
What was that was that clearly in a row.
Very clear thank you.
Good news.
The second question is regarding upstream. So you mentioned that you had around 1 million subs and believe they will all be switches. So the advertising video on demand so that the regular VIX.
Can you can you provide any type of metrics that we could sink in that track regarding the subscription video on demand.
Product, meaning is there any way, we can think of how many subscribers.
You know potential. Thank you can have in there fixed plus thank you.
Yes, it will.
Of course.
Total addressable market is huge.
It's 600 million people that speak Spanish in the world.
The addressable market of course, we're going to focus as I mentioned before our.
Attention first.
Mexico, and the United States Hispanic market and after that.
Latin American markets and then other places such as Spain.
So thats the total addressable market.
We will approach.
It's a seven trillion dollar GDP.
In the past and the good thing is that $3 five trillion of those seven are just the GDP associated with the U S. Hispanic market and.
Mexico's GDP. So we believe that we have the strength to capture.
Those subscribers as.
As I mentioned, we're launching the Eva.
Products. So we can.
Scale, we can upsell them.
The subscription product.
Both of them are going to be very attractive.
Our main focus.
Our mission is to deliver.
To have a platform that delivers.
The most important content in the Spanish speaking world.
And the most content in Spanish in the World.
Also the more soccer games.
The Mexican soccer League another important relevant tournament.
So we will have more soccer than any other platform in the world. So.
We believe that.
Yeah.
I mean, what we're seeing is really exciting of course will start to announce.
The number of subscribers once we launched the platform.
<unk> plus so that will happen in the second half of the year.
Thank you very good.
Quick follow up.
About the advertisers you were having a very successful for 2022 is that transferable to the advertising video on demand are you having conversations with advertisers to fund this type of fun learning fast and these type of or the new product how should we think about the advertising being transferred.
So thanks.
Yes, well that's a very good question.
I think the upfront with the.
The best upfront in the recent history of Televisa as I mentioned.
I think that the upfront has to do with several factors.
The first one better economic activity.
The second is that we are experiencing and that.
As <expletive> ratings.
Audience growth.
In our <unk>.
Flagship channel and also on channel five, but especially on prime time, which is what.
Where you sell it.
At higher rates.
Third I would say that we have a revamped.
Sales team sales organization, and that's helping a lot and we're being much more efficient in terms of selling advertising.
I can tell you for us.
We're focusing on selling the unique reach that <unk> can deliver.
Two.
Clients to our advertising partners and fifth getting to your question. We have included the Ava product, which looks amazing and is going to be really successful. So clients are now focusing on enable I would.
Say that it's the same in the United States, where.
Sure.
The biggest product was included in the upfront sale and.
Gain traction, it's looking great as well in terms of advertising sales.
Sounds great.
Thank you very much happy Friday, everyone.
Thank you.
Our next question comes from the line of summit data.
Hi, there and thanks very much I have two or three quick questions. Please.
Firstly.
10000 T V can you give any.
Sensitive to this.
The sort of size of the the.
Subscribe to pay.
All the other user base I think the narrative has been very favorable but it would be it would be great to get a sense as to how that is.
Scaling.
Secondly, just on the on the asphalt launch I think on the on the Univision called EMEA.
I misheard this but I thought when he mentioned early Q3 launch can I, just kind of clarify whether that was right.
Right or not.
And then thirdly, please just a bit of.
Take title on the P&L from Q4 please.
I think the.
Other operating line. There was there was a gain booked through obviously, which was significant but if we strip that out there was quite a large negative in this quarter.
It looks to be kind of you know.
Financial advisory legal fees legal fees, some some merger costs as well I think the corporate expense line was a bit higher as well. So it would be great just to get a sense as to what exactly was it was buried in that number it seemed a fraction higher than it would normally be thank you.
Yeah. Thank you great questions as always.
As to your first question that has to do with with branding.
I think it's important to mention that our strategy and progress have been hugely benefited by having but in the television.
The market for three quarters of 2021.
And with brand in the market and we were able to put full distribution in place across all platforms.
Key Mvpds and major CE manufacturers and get those partnerships up and running so.
That has been great because it has helped US a lot in terms of our launch of VIX.
With the brand the life, we were able to test different content and programming strategies and also refine the relationship between TV and the streaming platform.
We were also able to take branded.
Through the 'twenty, one 'twenty two upfront as I mentioned before.
And established premium pricing and build a significant base of advertisers so they looked at.
And of course, they saw the attractiveness of it and so now we have a very good base of advertisers to.
To bring into.
VIX and.
So we have activated 45% of our linear advertisers on the TV platform.
This this is great as we prepare to transition them into picks so I could tell you in general that.
With a huge benefit for us in getting a head start and refining our strategy I could tell you the same thing as to the Avon product that we launched in Mexico.
We're to blame.
Last year and so.
So that is a base that we will transition into VIX.
As to your second question.
As Wade mentioned.
The launch will be in early Q3.
Yeah.
As to your third question and I'll ask Carlos to answer and please yes.
Yes, hi.
As you mentioned there were a couple of moments and we're interesting in the other income line.
As you mentioned there was a positive movement, which was related to our salmonella.
Which was a positive number but that was offset partially because there were also other gains that we had the previous year, including the sale of our radio business and the reimbursement of legal outcome that we have with them.
Another company and so those kind of matched in terms of the corporate expenses Youre right. I mean, we did have some nonrecurring increases in legal and advisory expenses. We also had because of the transaction with with Univision and the restructuring and separation process, we had a little bit slightly higher than normal severance.
And those were in the content business and we also had a little bit more in our cable business and then there is another matter.
Nonrecurring corporate.
<unk> expense in that line, which is related to one of the previous questions was about income taxes.
Given those assessments. We also had an increase in surcharges related to those income taxes from a couple of years before but again most of these are non <unk>.
Recurring in nature.
And just very quick follow me, putting that altogether do we think that line will kind of normalize from from Q1.
Is there a.
Yes, the deal closed a bit more to come.
Yeah, I don't know, but it should normalize in the sense that we're not going to have another sale of a sensor in the future, but again. This one is subject to two <unk>. For example, one now that we have the closing of the transaction you would expect to have.
Again for example in that in that line because of the content merger and we still would have a few other.
Legal and advisory items that would be nonrecurring for this quarter, probably but but yes, we would expect it to normalize most of these changes were nonrecurring.
That's great. Thank you very much.
Thank you Sumit.
Our next question comes from the line of Matthew Harrigan with Benchmark company.
Oh. Thank you I was curious if you could talk a little bit about your venture capital business since you're one of the top five participants in Mexico now I know most of it is funded through on air advertising and clearly.
Vic.
Paul.
Google and Softbank he'll help you there are perceptually.
I know that isn't that that margin item at this point, but it does feel like it's an interesting area that sometimes it doesn't get a lot of discussion. Thank you.
Yes, Thank you Matthew great.
Great question.
It's something that we feel really proud about especially in Mexico and now we're taking this.
To the United States through Univision.
Basically media for equity this module in place.
Changing available advertising time slots for an equity stake in high growth startups.
Or business to consumer companies that have not had the opportunity to advertise on free to air television and other platforms from ours.
Select companies based on their potential basically.
That are in early stages of that.
Relevant.
Usually companies that could not afford strong advertising campaigns on free to air television on pay TV and other platforms, but would certainly appreciate good advertising deployment too.
Precision their promise to precision their brands to position their companies.
So.
See this is a great opportunity.
First of all just to show the market the relevance of free to air television to create and precision of brand.
Top of mind, and also I could say to optimize the use of our available inventory and of course. This gives us the opportunity to invest in companies with high growth potential.
Without any type of cash outflow.
In recent.
The stories of success using this mechanism we have invested in come back we have invested and raffi.
One on <unk>.
Chip.
And.
We're doing this basically together hand in hand, with Softbank and in certain other cases with general Atlantic as a partner.
They are the ones that.
Identify the opportunities and.
Of course do extensive due diligence extensive analyses as to the opportunities.
The industry as the clients et cetera. So so far we have closed eight investments in seven companies.
Four of which are unicorns and Thats why we feel proud of the companies we have identified early on.
This has been great as I mentioned, we are taking this to the United States as well.
Model and we're starting to close.
Deals through Univision as well. So this will continue to grow we have a pipeline of around 20.
New investments of course, we're very selective and careful about dose as I mentioned, we always do those hand in hand, with Softbank General Atlantic and now with others. So we'll be very strict and careful about those but it's basically using our.
Unsold inventory for purposes of.
Promoting this.
Startups this new company, so up to now and it has been amazing to be able to invest and come back Rafi you are not clip.
In others I mean, as I mentioned four of these have become Unicorn. So we're very happy about this venture.
Thank you so much.
Our next question comes from the line of Alejandro <unk> with credit Suisse.
Hi.
Thanks for taking my question and congratulations on the results.
Most of my questions have been asked already.
Just a little bit more color on sky.
There was a big.
And importantly, the loss of subs in B deal, perhaps you could tell us what are you doing about it.
Do you think perhaps there is a possibility of reducing prices.
Premium pricing.
Some subscribers and what are your targets for doing.
This is what I would do aiming to achieve.
Thanks.
Yes, Thank you I think.
What happened in the case of Sky.
Scribing.
And that platform we have.
The challenging quarters as the economy recovered, but mostly as people left their homes and.
So the recharge rates on our debit product.
Lower than we experienced when.
When we have the lockups.
So.
We believe that.
The Sky is a fantastic company.
Fantastic brand in Mexico, and Paas are great.
Theme throughout.
All of the country.
And it has.
Also great product.
Especially through Covid.
Which is a prepaid.
That is based on recharges.
Zinc.
The Sky product is based on the strength of our content that it has specifically.
The soccer.
Meant that we have been able to.
To secure.
There so we believe that.
It's a company that of course is challenged but.
It's a company that.
It's going to be there for the long run.
It has a great market.
Right. Thank you so what youre, saying is that perhaps.
The disconnections were because of people that you didn't do reach I guess for me rather than leucine, let's say.
New subscribers.
Yes.
Our focused basically on.
On recharging.
Lower recharge rate.
Alright, so going forward, what we should expect.
At least a normalization in this line.
That is correct.
Great. Thank you very much congratulations again.
Thank you.
Our next question comes from the line of Carlos League Arena.
Hi, Thank you Alfonso and team.
Just a couple of questions on cable.
Firstly I was wondering if you could talk about why the margin in the cable segment less so high during this quarter I mean that was a positive surprise for sure and secondly, how should we think about opex in that segment for 2022. Thank you.
Brian .
Thank you very much Alfonso.
Thank you very much Carlos for the for the question I think that the margin for the expansion in our margin for the quarter is explained by two by two one.
As I said in my previous intervention. It was a significant turnaround in the net out in net adds in sales so that increased our revenue, but we're also having.
Some of them hit the end results on cost containment measures that we're doing we're improving our procurement practices and containing our general opex.
So the combination of these two.
It's what increased the margin.
For us procurement practices very competitive bidding makes a big difference because our capital expenditures are so high.
It not only in the expansion part, but also for the operating platform equipment in the homes et cetera. So we are we have instituted.
We instituted some better procurement practices and bidding processes that have allowed us to contain some of the increases in costs. So that's why the margins have.
Have increased.
Regarding to Opex then.
Our budget for 2022.
We are we have proposed we contained.
Opex increases.
More or less two zero. Besides the fact, the increases that we have having salaries et cetera, opex was constrained to not have any increases to absorb the growth in our <unk> with our existing.
15.
A number of Workovers et cetera, So we hope and expect D C.
Profitability plan to stay the same and gradually improve.
Okay.
Yes.
So that should be sorry flat in nominal terms real terms just to understand better.
No.
We have some salary increases so I mean for sure it's going to be flat in real terms, but the way we targeted the budget, what we tried to make it flat in nominal terms other than salaries and an expenditure that pass throughs, yes.
Does it have to increase Theres nothing we can do.
<unk> and other <unk> expenses.
City all of the other services that we buy but all the discretionary opex, let's call. It that we've put it flat in nominal terms, but if you look at it you will see some increases as I think it's normal.
Of course, thank you for your comments.
Thank you.
Yes.
Our last question comes from the line of Fred Mendes with Bank of America.
Hello, Hello, Good morning, everyone and thanks for the call I have two questions, which are kind of a follow up as well. The first one on cable you mention that you know the two reasons for the improvement.
In the margin, but that was also assume that as you extend your extra changed quite rich I am assuming that you charged a little bit more let's.
Let's say high quality partners.
We need to have higher margins.
No in fact.
All these platforms is highest J J 's presentation I need to read through.
<unk> thousand that'd be the sports fashion.
And then the second question that you just quoted very strong against a 2% year over year, but I mean, when I look too.
Uh huh.
We understand that the type of content that you will be.
The platform is quite different than the content that you're producing now, especially the target split so just want to confirm this.
It makes sense.
Deep lineup. Thank you. Thank you.
Okay.
Okay.
Can you.
I'll repeat exactly what the explanation on your margin was I didn't quite get it what what the addition was.
Well perfect I'm, sorry, yeah, I'm, sorry about that.
One of my lines.
No.
You mentioned the previous question two reasons why the margins on cable was so much higher on this quarter right.
I was assuming that you know as you expand your extra change coverage, which is a high quality problem you'd be able to charge a little bit more and consequently, you have higher margins taxes, you know cables, but could you that national debt.
That's a benefit for the margin. So I'm just wondering if you can.
Things that once you rollover you ought to change these margins should naturally be.
You called that the provinces by Martin.
Okay.
Sure absolutely.
Ft Th.
Where we stand with the PTH the margins are higher so, let's let me confirm that but I think the results for the quarter are not quite.
<unk> done for that but we should expect as I said the.
Profitability to very gradually improve.
And as our footprint in PTH increases our margins should increase also gradually.
With a corresponding capex that we have to do with it.
Perfect perfect.
And then and then the second question about the.
As well.
I think the important touching on the content, let me share with you.
The combination of.
Televisa and Univision is so unique that if you look at it as you look at the prospect of numbers.
The core business of both Televisa and Univision if you look at the Upfronts in both countries that are historical.
Is growing double digits. So the core itself is growing double digit.
And we generate a lot of free cash flow, both in Mexico and in the United States and this is unique for a content company such as ours, such as a combined win because then.
Using that free cash flow, we will be able to finance the expansion into into streaming. So the quarter is growing double digit that generates a lot of free cash flow and we are.
With that we can.
Invest in the future.
Streaming so that's pretty unique.
Our media and content company.
In the world.
As to the content.
First of all let me touch on on the experiences.
We will have as I mentioned, VIX and VIX plus.
So this will be in the first year this year in 2022.
And there will have a an offering of more than 50000 hours of free and paid premium Spanish language content.
This will include all genres.
Movies series live sports as I mentioned more specifically soccer.
<unk> news and of course, the current Televisa and Univision chips as well as access to the huge library.
Televisa has adult franchise convention and formats from the time, we start.
Volt.
Going to your question in the subscription service specifically, we will launch at least one high quality new movie or series every week for the entire first year.
As I mentioned at the beginning big Splash with feature.
Content developed exclusively for that platform.
This includes some heightened competitive production company.
So in a Goldman Sachs.
We're producing.
We mentioned one of the best Novellas.
Written by Mario Biogas Yorkshire.
We have engaged <unk> some downward as mone.
Tom Mexican Chameleon in Kenya database, and many many others that are producing content specifically for VIX plus for that platform. So we will see a lot of content going into into VIX into the platform.
As I mentioned before the results that we're seeing in terms of selling targa.
<unk> targeted advertising on that platform.
Included in the upfront in both countries are great.
And then on <unk>, plus we think that the engagement will be great and we will be able to capture a lot of subscribers starting this year with this premium content.
Perfect perfect Alfonso density or thank you.
We did have someone come into the queue. Our next question comes from the line of Guillermo.
Yes got.
Got you can you hear me.
We can.
Great perfect.
A question.
One maybe on cable given them.
But then you said that you had challenges these years, Mike pushing for inflation.
Especially with Mexico, 6% inflation. So how comfortable are for the next year that youre going to be able to pass through at least inflation in the cable company then maybe on the second one you were mentioning something about the use of capital.
From being opportunistic.
So so so your bonds or are most of the all the foreign denominated bonds are trading above par with charter they sort of expensive one and.
And the ones in the local currency in August spread versus the pag is not very far away from Gordon funding conditions.
So how would you define which.
Debt to prepay or not.
And when we take a look.
Two the stock, especially given the quarter note that adjusting the nonrecurring at some day in the EBITDA decrease of course, then it seems like the Navy cyber Lake is close to zero in La So it's also not profitability on that part so how would you define buying your own stock.
To your first thing right or more detail on the on the opportunistic definition that you are mentioning maybe you are expecting any structural change and they really COVID-19 .
The vehicle maybe another question for the peaks.
The hang of it advance Sunday in the once you with each week.
B deal.
For the first year.
Because we are watching Netflix not pushing.
Pushing out 25 billion in all these names 60 million in Opex. So what is going to be our range for the important figures.
First of all thanks, and just finally on the investments that private equity investments that you mentioned.
Go back one night.
Or you believe that you want to.
Upon bichon phone or argued thinking.
We ask for those investments equal or what is the targeted thresholds.
Thanks morning dose and dosing bad things, so all sorts of four points the cable.
The use of the Olympics and the IRS.
Yeah.
Or any other threshold for the private equity investment.
Alright, Thank you very much again.
What we will do in the future as we were looking at our competition all the time, so it will depend on the market environment and how how all of this evolves and how the country evolves.
One of the things that we have done and one of the reasons.
We are happy that we see a turnaround in the fourth quarter, what we repackaged.
Our products and we've tailored our products regionally and depending on where the demand on the consumer acquisition power was so I think that was successful and we're going to continue to do this.
In the future.
Depending on how the market conditions, we'll make those decisions as we go along.
Is that.
As to the.
Repurchase of.
But that's part of the cable right.
Correct, that's what the cable guys Thats that is correct.
As to the repayment of debt.
Alaska kind of has to answer that question, Yeah, Guillermo to your point I think there as well.
When we say, we're going to reduce debt opportunistically.
It's a couple of features and we're looking to accomplish.
Can imagine.
One of the ones that we want to address is to reduce our interest expense as much as possible. So we will try to focus part of the big reduction in the part of the debt that we could reduce at part obviously bank debt things like that but as you mentioned in your question. There is there is a couple of other securities that we have out there that are fixed rate and vessels in <unk>.
Some of which are peso ones in particular of the Gulfport and the dollar ones are pretty high priced so I guess, we're going to be monitoring in the next.
Orders in months is going to be how the curve the interest rate curve in Mexico and in the U S moves so that we can do these these repurchases in the most optimal way for us to.
To reduce our interest charge offs.
We also have to take into consideration the balance, which we will end up in terms of currency as well as the maturity of the extension that we ended up.
So I think it is it's a complicated answer in the sense that there is one factor that we have to take into consideration we have to take into consideration maybe in.
Some of which are more in the markets.
Hours more in terms of how rates and FX moves.
But the idea definitely used to reduce our leverage with our with most of the proceeds from the from the transaction.
So there is lots of your body between bonds.
Buy back book, but Jeff you're gonna be tactical right.
Yes, that's correct I mean, we are going to be reducing debt thats for sure.
Okay.
As to the Opex.
VIX.
I would say that I would say that.
I mean, the Univision has not disclosed what the.
That figure will be what I can say is that.
We will invest.
<unk> of millions of dollars this year.
And those are being as I mentioned before before financed.
By both synergies.
That has to do with the combination of Televisa and Univision and second because.
<unk>, the free cash EBITDA and free cash flow.
The Televisa and Univision.
Combination will deliver.
Keep in mind that Univision paid Televisa.
2021 $417 million.
<unk>.
Royalty in terms of the program license agreement is that it will be collapsed into Televisa and Univision.
On top of the synergies that I have mentioned so.
This is.
What I have mentioned in terms of the uniqueness of the company in terms of.
Growing double digits on the core business and having.
The free cash flow generation.
Finance, our future to finance screaming.
As to your question that has to do with the media for equity deals.
We don't do them through.
Yes.
Vision fund or any of those funds we make those.
Investments directly in the equity of those companies.
Of course, I mean, the IRR it depends on the industry depends on the company itself depends on the stage.
<unk> is a company et cetera, so I mean.
It's very difficult to.
To have one.
<unk>.
And Thats basically what.
What we're doing there.
At this time there are no further questions do you have any closing remarks.
Well, thank you very much for participating.
We're very very excited about the prospects of Televisa and Univision the launching of the streaming service VIX and VIX plus.
Also about cable and.
And sky.
As some of our other businesses hopefully as a result of.
The loosening of the restrictions that have to do with with Covid, We will see a much better result, this year. So thank you for participating.
Call Us if you have any additional questions.
This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Okay.