Q3 2023 Grupo Televisa SAB Earnings Call
[music].
Good morning, everyone and welcome to Grupo Televisa's third quarter 2023 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 will discuss in today's call and in the earnings.
The release I will now turn the call over to Mr. Alfonzo, Dan Gosha co Chief Executive Officer of Grupo Televisa. Please go ahead Sir.
Thank you Sheila good morning, everyone and thank you for joining us.
With me today are Wade Davis, CEO of Televisa and Univision Francisco <unk> CEO of cable reasonable legal CEO of Sky and Carlos Phillips CFO of Grupo Televisa.
Wade Belem, and Luis will discuss the operating and financial performance of each business they manage in their remarks.
But before doing that I would like to ask <unk> to give you an update on the outlook of Mexico's fixed telecom market and the cable strategy, we are pursuing to achieve our goals.
Under this plan, we are prioritizing free cash flow over an ongoing aggressive cable footprint expansion, particularly considering that we have the largest network in Mexico, excluding the incumbent ending September with $19 5 million homes passed.
Our coverage of over 55% of total homes in the country.
Therefore, my limbs mandate as recently appointed CEO of our cable operations has been to improve quality and lifecycle of our subscriber base enhanced profitability.
Optimised capex deployment expand free cash flow generation.
And as such increase returns on invested capital.
Having said that let me turn the call over to Aleem as he will elaborate on our long range plan.
Thank you Olaf also.
Good morning, everyone. Mexico's fixed income market has already reached a more mature stage with 50 internet penetration at over 70% of homes at the same time customer needs have been shifting towards higher internet speeds improve service quality and digitized offerings.
This changes in customer needs have led to a strategy of high speed fiber networks deployment widely adopted by all market participants, which typically occurs during expensive economic cycles searching that network expansions hinder financial returns, particularly under the current environment.
High interest rates and intensified competition, implying that capex deployment must be strategic prioritizing return on investments.
Search market maturity combined with its current structure is likely to lead potential consolidation, where we think that easy with its strong competitive stance given our strong brand the highest net promoter score in the market solid technological vector architecture, and the second largest customer base in Mexico.
Is well positioned to play a leading role.
The global macro environment and recent changes in the structure of the market, where we operate gulfport reflection on our position and most importantly, our role in the upcoming years. Our conclusion was that we need a change in our company's management and strategy.
Which we have already started to implement.
A deep assessment of our cable business suggest that going forward, we should not focus primarily on rapid expansion and deployment of our network, but rather on an optimization strategy to generate value in our existing businesses, specifically value generation and the market has been focused more on volume.
Less on sales quality.
Manny fasting through aggressive promotional driven by competitive dynamics, resulting in weak revenue growth pressure on profitability and soft free cash flow generation.
And promotions that accelerated gross adds but has been a double edged sword as they have boosted churn and deteriorated CEO quality wire.
While some of our competitors continue to rely on this strategy. We firmly believe that this is on the path to maximize the industry value in Mexico, especially for easy.
This model, which has led some of our competitors the financial challenges becomes unattainable in a competitive and mature market as we've experienced in recent quarters.
In addition, our enterprise operations has failed to maintain one of its key contracts while cost pressures due to inflation have hindered our profitability.
This situation required immediate action to transform what has been a severe impact on our enterprise operations financials into an opportunity from 'twenty four 'twenty 'twenty four onwards.
Over the years easy has positioned itself as a leading player in the telecom market with the capabilities required to redefine the way in which value is created.
Therefore, we believe there are strong brand, having the highest NPS in the market and our almost 613 million loyal customers.
It provides us with a tremendous opportunity to create value by focusing on the following areas first focus on customers' retention and maintaining high satisfaction second pursue sales quality with higher speeds up to one gigabit per second and competitive packages. Thanks to our superb networking for.
Structure third proactively manage our subscriber base to maximize costumers ARPA fourth enhance our video offering to complement our value proposition fifth efficiently grow our SME business and six carryout, a full turnaround of our enterprise operations through an organization.
Restructuring and revamped commercial strategy and the renewed segmentation of our client base.
This is strategic pillars are the core focus of easy and have already become a reality with a reorganization of our imagine structure and the appointment of new hires to our executive committee with extensive experience in telecommunications, including myself as CEO, one vehicle as Chief Financial Officer.
He guardino Horsa as Chief commercial officer of our enterprise operations and the Unum Mason as Chief Marketing Officer change.
Changes in our top management team has been followed by a non growing evolution of the company's operating philosophy supported by five strategic pillars first product offering.
We are shifting our focus to local rather than national strategies growing places, where we have a competitive advantage. We are enhancing our sales quality aiming to provide higher speed bundles and we are creating an unique video value proposition focusing on a seamless segregation of streaming platforms.
Second pillar subscriber base management tools, we are boosting big data and artificial intelligence to have better management of our subscriber base with a more for more strategy and handle churn with a more proficient execution prioritizing long term value.
Third sales channels, we are implementing a structural shift in our distribution channels, emphasizing digitalization, bringing us closer to high value customers and optimizing our subscriber acquisition cost force cost structure, we have implemented an in depth review of our cost structure, both at Opex and Capex levels.
On the Opex front, we have already implemented a material headcount reduction with savings of around 12% of our payroll to be effective from the fourth quarter and the rationalization of third party providers are capex side, we are working on improving inventory management logistics field operations optimization.
The real estate and rationalization on network expansion.
As an example, our real estate optimization in November we will complete the relocation of our headquarters to group Syllabuses corporate building, allowing us to achieve significant rental savings.
Fifth and final pillar enterprise operations in SME segment, where we see great opportunity to leverage our strong capabilities. So far we have reorganized enterprise operational structure with the new leadership team already in place Carryout, a recent mentation of our customer base optimize our cost structure by eliminating duplicate.
<unk> of networks revamped the value proposition of our SME segment and renewed our focus on revenue and EBITDA growth. This changes in the company's philosophy have also been accompanied by a shifting execution launching a war room for the agile implementation of this strategy.
This builders, which represent the core of our strategy resonates very well with our mature markets, especially for players. It's similar market share where value creation lies in growing their share of wallet within their existing footprint in base instead of having an aggressive and suboptimal market expansion.
We are confident to gradually recover the growth path.
And that our turnaround strategy will deliver results by already having sequential stability since the beginning of 'twenty 'twenty four.
And not only growing our subscriber base, but improving our ARPA through both customer base management and higher sales quality. Moreover, sharron experienced in the recent quarters has been proactively addressed and is expected to come back to our historical levels, allowing us to better capitalize our growth.
Altogether, our cost restructuring and the more strategic data driven capex deployment process will contribute to maximize our returns gradually translating into a reversal of EBITDA declines of substantial operating cash flow compounded annual growth rate of around 10% over the next three years.
All in all our 'twenty to 'twenty four 'twenty 'twenty six long range plan considers revenue growth in the low to mid single digits, which is in line with more mature markets driven by subscriber base growth price increases to pass through inflation and product that Sallie.
Profitability is expected to be at around 40% as the initiatives put in place to offset inflationary pressures gain more traction.
Finally.
A more focus on the strategic network expansion plan of up to 400000, new homes per year.
And lower subscriber intake as we focus on sales quality and churn reduction will contribute to gradually take our capex sales ratio down to low twenty's from around 26% this year.
Now, let me walk you through our cable operating and financial performance. We ended September with a network of 19 and a half million homes. After passing almost 90000, new homes during the third quarter.
We also deliver around 381000 subscribers or homes connected gross ads showing that demand for our service continues to be robust. However, we decided to clean up our base given the low quality additions over the last few quarters with subscribers that are very sensitive to price increases this week.
Drivers have skip their monthly payments deadlines and have zero consumption for an extended period, allowing us to disconnect them. This cleanup translated into net disconnections of over 392000 subscribers.
During the quarter revenue from our residential operations increased by one 8% year on year why operating segment income fell by seven point set 3%.
Origination operations margin of 37 nine.
9%.
Contracted by 380 basis points year on year.
Really driven by inflationary pressures in labor and content related cost however, their head count reduction implemented in the third quarter with savings around 12% of our payroll we will allow us to expand our residential operations margin by around 200 basis points in the fourth quarter.
Our enterprise operations accounted for roughly 12% and 7% of our cable segment revenue and operating segment income respectively.
Too faced challenges during.
During the quarter revenue fell by 24%, while our enterprise operations margin of 18, 7% contracted by 680 basis points.
Year on year is still as we discussed earlier the enterprise operations reorganization under implementation will position us well to stabilize and grow revenue and operating segment income from 'twenty to 'twenty four onwards to sum up revenue for in our cable segment of 12.1 billion peso fell by 2% year on year.
Why operating segment income of $4 3 billion peso declined by 12% our cable cable segment margin of 35, 6% contracted by 400 basis points year on year.
Do you believe you've put together a great plan and a great team now.
Now, let me turn the call over to <unk> CEO of Sky.
Thank you foresaw and good morning, everyone I am pleased to present, an update on Sky third quarter operating and financial performance, but he bought before getting into the numbers I am thrilled to announce a significant milestone achieved by sky.
During the quarter, we introduced Sky mass.
Groundbreaking product from Sky, Mexico Sky Mass is an Android based human platform developed entirely in our own laboratories that seamlessly integrates all Sky T V V O D and OTT content in a unified viewing experience on a single screen.
Sky mass eliminates the need for a dish or specific installation requirements and can run over any broadband network. Besides literature on the power authority official intelligence, our cutting edge search and recommendation engine creates content for each member of the households, eliminating the need to switch between multiple OTT.
<unk>.
Furthermore, Sky mass is the only platform in the market that offers life sports event in through four key quality and provides the option to extend this experience to any mobile device, including cell phones tablets and laptops sky mass currently integrate universal plus decent.
Star plus HBO, Max and weeks premium along with all linear channels and old partners entire libraries, solidifying our position as a comprehensive and dynamic content provider and the ever evolving digital landscape.
Sky mass stance as the Premier broadband agnostic platform for the Mexican sports enthusiasts offering a comprehensive collection of all major war wide soccer leagues and tournaments in one place.
Early this month, we successfully launched sky mass marketing campaign targeting new and existing Skype estimates.
This campaign, not only boosted brand awareness, but he social fueling promising sales growth today, we have added 36000 units and the momentum is still on the rice shortly our sky must offer would be boosted when bundled with sky Internet.
Our digital transformation strategy is well underway unveiling an array of disruptive new products that are quickly gaining traction in the market is in nobody portfolio not only underscores our commitment to innovation and our efforts to enhance our competitiveness, but also reflects how dirty.
Acacia to delivering the best to our customers.
Now in terms of trading we experienced a decrease of 227000 units during the quarter, mostly coming from prepay how.
However, this decline was partially offset by 29000 positive net adds of new products and 5000 in Central America, where we score positive net ads for the first time in many quarters.
Now, let me walk you through the financial results for the quarter.
Third quarter revenues declined 13.8 year on year, reaching $4 3 million pesos. This decline was primarily driven by the aforementioned dth ascribe a base drop and a lower recharging frequency, partially offset by the price increase in postpaid video implemented in May.
Furthermore, operating segment income in Q3 decreased by nine 9% year on year, reaching a margin of 35, 7%. This decline is attributed to lower revenues, mostly in prepay, which were partially offset by a drop in cost of goods sold and operating expenses.
Due to the successful implementation of efficiency measures across our operations.
As you May recall last year, we develop an ambitious digitalization and simplification program aimed at improving efficiency and see Lam lean processes across the entire organization, while enhancing customer experience.
So if corona update this program is projected to yield an impact of 805 million pesos in 'twenty, two new three representing over 4% on full year revenues.
Regarding our capital expenditure, we invested $120 million year to date, indicating a substantial 29% decrease compared to the previous year. This reduction in capital intensity can be attribute it to the strategic measures. We ended took to enhance return on investment inventory rationalization along.
With the successful implementation of the simplification program mentioned earlier.
Finally, as a metric that underscores the positive impact of these efficiency measures is EBITDA minus capex year to date. This indicator has witnessed a year on year growth of 16, 7% searching from two two to two points 57 billion pesos. Thank you Luis.
Given the operating and financial performance, our two core consolidated businesses Grupo Televisa's consolidated revenue reached $18 3 billion vessels, representing a decline of 4.9% year on year.
While operating segment income reached 6.4 billion pesos equivalent to a year on year decrease of eight 8%, mainly driven by the lower revenue and inflationary pressures.
Below operating segment income, we had nonrecurring severance expenses of around 830 million vessels related to the head count reduction implemented in cable during the third quarter still this measure will bring savings of around 12% of our payroll, allowing us to expand the risks.
<unk> operations margin in cable by around 200 basis points in the fourth quarter.
Moving onto Televisa and Univision before getting into its third quarter operating and financial results released on Wednesday morning, Let me remind you that our 44% stake in this company is a very important value component for Grupo Televisa shares yeah.
Using proportionate consolidation Televisa and Univision would contribute almost 40% of revenue and EBITDA during the third quarter, making it the second largest proportionate contributor to Grupo after our cable operations.
Televisa and Univision delivered another strong quarter of double digit revenue growth underscoring the strength and flexibility of our unique fully integrated ecosystem across complementary platforms and geographies having.
Having said that let me turn the call over to Wade Davis CEO of Televisa and Univision.
Thanks Alfonso.
I'm really happy to be here with you all and to spend some time discussing to use performance.
It was a great quarter for us, where we hit a number of high watermarks operationally delivered significant progress on our strategic priorities and therefore produced fantastic financial results.
But I wanted to start by highlighting how unique our company is and in particular the unique economic opportunity we're pursuing.
We are the only company at scale touching all Spanish speaking media markets globally.
This is an eight trillion dollar GDP and over half of that is represented by the Mexican and U S. Hispanic markets, where we are the definitive leaders.
And both of these markets are seeing remarkable growth in fact, the LDC and Wells Fargo released their annual U S. Hispanic market report, which highlighted the U S. Hispanic GDP grew double digits to exceed 3.2 trillion dollars last year, making it the loss.
Or just Spanish speaking market in the world the equivalent of the fifth largest national economy, but also the fastest growing economy in the world.
And we are the only scaled company that's a pure play on the global Spanish speaking consumer.
Executing against this opportunity, we delivered double digit revenue growth and an impressive 58% year over year improvement Indeed, a few losses, which led to flat consolidated EBITDA.
And underpinning these financial results was incredible success from an audience perspective.
In Mexico, we held both the number one and number two networks for the first time in history.
In the U S. Our market share reached a nine year high of 65%.
And then streaming we surpassed 40 million monthly average uniques.
This is the remarkable company, we created when we brought Univision together with Televisa's content business, a fully optimized content engine that can power multiple platforms across the global Spanish speaking market and deliver market, leading audience outcomes and we can do it efficiently enough.
To create a new streaming business with hundreds of millions of dollars of year, one revenue and nearly no consolidated EBITDA degradation.
Our 11% revenue growth this quarter was supported by all geographies in the U S business. We saw the highest Q3 revenue in the history of the company.
In Mexico, we posted double digit revenue growth, which.
Which we've done every quarter since our merger.
And if we adjust for the U S is mid term political AD sales from last year, we saw growth across all lines of business in all regions.
Although the overall U S AD market remained relatively soft this quarter, our U S AD sales rose by 3%, excluding political and advocacy.
Which represents an outperformance of the broader market by 800 basis points based on Magna as reports.
This is an expansion from our 600 basis points about performance last quarter.
In Mexico, we had an amazing AD sales quarter, where the combination of new client Activations and new advanced solutions coming online in Mexico led by streaming inventory on VIX drove strong continued growth.
Subscription and licensing revenue grew 18% this quarter and this was driven by VIX is premium tier, which more than offset some linear sub softness.
We're also seeing early growth contribution from licensing our new original programming outside of our core markets.
Our singular focus on Spanish language presents us with significant licensing opportunities globally without putting any competitive pressure in our primary markets.
This quarter, we narrowed our D to C losses by nearly 60% and we continue to have direct line of sight to our target of DTC profitability by the second half of 2024.
This is now only nine months away and when we deliver this VIX will have had the shortest ramp to profitability of any major streaming service in history.
And we can do this because of the unique content costs and the powerful marketing advantages, we've created with the combined Televisa and Univision business.
We have a massively scaled fully vertically integrated business operating across multiple platforms and leading in the largest Spanish speaking markets in the world.
And our relentless focus on efficiency manifests on an overall consolidated basis with the highest operating margins in the industry.
But this will be further underscored as we continued toward D to C profitability, where we believe our margins will also be best in class.
We build one of the world's most efficient and prolific long form video content engines are huge vertically integrated infrastructure has been constantly producing a full capacity guided by sophisticated analytics and insights and optimized to power all of our platforms.
Through innovative windowing and production strategies, and allowing us to maximize the value of our rights and intellectual property.
The volume and efficiency of our content enables us to pursue a strategy of investing in and optimizing both linear and streaming.
And programming each platform for what it does best.
Linear is designed around cultural and habituated viewing with live soccer tent Poles high volume Novellus and appointment viewing like morning, and evening news, while streaming is designed to deliver high intent viewing around our original movies and series a massive volume of live exclusive soccer in dispatch.
The ball for a serious soccer fan and a huge volume and range of niche content to service a more nuanced Latino audience.
For linear this strategy continues to pay off across both geographies in the U S. Our television networks delivered the highest primetime Spanish language market share in nearly a decade at 65%.
500 basis points year over year improvement.
This came from a clean sweep of all four prime time slots with our original scripted nobelist and record setting live events in both sports and music.
Mexico, our content was so compelling that we actually drew audiences back to television and solid levels of total TV usage not seen since the pandemic lockdown.
This quarter, our secondary network channel five registered its highest viewership in five years and on a relative basis surpassed our main competitor for the first time in history, giving us both the number one and the number two broadcast networks in Mexico This quarter.
For VIX. This strategy is allowing us to expand our reach and serve younger audiences that have not been historically well served by linear TV.
And clearly this strategy is working with massive year on year audience growth hitting over 40 million monthly average uniques on the free tier this quarter with 60% of that audience unique to the streaming platform.
And importantly, our two tier ecosystem continues to exceed our expectations in terms of productivity with the free funnel delivering a high watermark of two thirds of our gross new subscribers this quarter.
While we have different programming strategies for each platform, we think of the ecosystem as a whole and how to use the two platforms to complement each other.
In Q3 had some fantastic examples of these two platforms working in concert.
On the entertainment side was like hospitalized for most of our Mexican reality show, where we produced different and complementary content for streaming and for linear.
The linear show was a traditional twice weekly live reality show that are on channel five.
For streaming we produce separate content that was pitch from linear and included multiple live 24 hour feeds that drove always on engagement for the Super fan.
We were able to produce a huge volume of content at a credibly low price points per hour and we're able to cross promote the two platforms and experiences to create enormous reach and engagement on linear where the show propelled our channel five network to the number two position in Mexico and on VIX.
We saw a free tier audience levels that rival the World Cup from last year and it drove the highest level of attributable new subscribers in both Q2 and Q3.
This strategy also works really well for us with sports.
Previously mentioned, we had the gold Cup this quarter.
The rights fees for that property included a massive number of games.
Some of the early games made sense to put on VIX free in front of the paywall to build awareness for the tournament and as we got further into the tournament, we move games behind the paywall and VIX to drive subscribers.
And having use VIX to build engagement and reach with games that we couldnt have otherwise aired on linear because of limited shelf space. We were then able to push a massive audience to linear for the playoffs and final stage games to deliver the highest ratings for any soccer tournament. This year.
Nearly everything we do from a content perspective contemplates a combined linear and streaming ecosystem.
This helped with audience flow cross promotion content efficiency, while maintaining the integrity of the ecosystem with our distribution partners.
Obviously this quarter saw some tension between programmers and distributors in the U S around the levels of content overlap between linear and streaming.
And that's causing the industry to evolve.
The composition and positioning of our platforms as non overlapping and complementary positions us extremely well for these dynamics.
Victor has evolved significantly and progressed operationally since we launched it a little more than a year ago remember, we launched the service a handful of months following our merger, which meant that the underlying service was really launched as a minimum viable product and a real focus at launch was on content quality and programming.
And we've continued to consistently rollout incredible original content, but we're also making significant progress in bringing the underlying product features to basic parity.
Improved content recommendations multiple profiles and casting are all great. Examples really important features that are only coming online now and already having big impacts on incremental engagement and retention.
We also grew our distribution footprint. This quarter previously we only covered about 60% of the connected TV market.
This quarter, we added vizio, LG and highest cents, bringing us to nearly a 100% coverage of connected Tvs.
And this week, we're launching Mercado Libre Mercado Libre is the market leader in E Commerce in Latin America and is one of the largest sources of screaming subscriptions in the region.
As one of the only pure play companies delivering on the massive global Spanish speaking consumer economy, we continue to deliver above market levels of growth and industry, leading profit margins.
Our unique content engine continued to deliver hits at scale, attracting record audiences across all platforms and all geographies.
And our investment in streaming are paying off both in terms of revenue scale and in terms of improved profitability.
To really exciting time to be at to you <unk>.
Incredibly proud of what our team has delivered this quarter and I'm, even more excited for what lies ahead and with that I'll turn it back over to Rob Panther.
Thank you Wade to wrap up the global macro backdrop has been more challenging than initially expected therefore metal Natalie Knight together with the rest of the executive team at Grupo Televisa had been putting a lot of effort on deep rethinking and restructuring of our consolidated businesses.
That will allow us to come out stronger from the current environment. This structural reforms are focused on protecting profitability.
Optimizing capex and enhancing free cash flow generation.
At Televisa and Univision together with our partner Wade Davis, we continued to execute our digital transformation strategy, which has been delivering outstanding results are.
Our top performing content and highly complementary linear and streaming ecosystem position as well to continue outperforming the market in both viewership and financials.
Moreover, we have successfully been scaling our DTC business with revenue approaching over $700 million annually and are on track to deliver profitability next year, which is an unprecedented time frame for any major streaming service.
Now we're ready to take your questions. Operator can you. Please provide instructions for the Q&A.
Yes of course.
To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Jay Your question. Please press Star then two at.
At this time, we will pause momentarily to assemble our roster.
Today's first question comes from Fred Mendes with Bank of America. Please go ahead.
Hello, Good morning, everyone I have two questions here on my side. The first one is related to cable and antibody already in the beginning of the presentation. He addressed some of the points but did.
What is the strategy right. It looks like there has to be a major shifting the strategy, which we do agree with you one.
I'm just I believe that should take some time because I would.
I assume you don't need to change the only the first layer of people that need to change the second layer.
There was more growth now as something more related to cutting costs and increasing free cash flow. So the call 17 years, just how long it's going to take.
For Ya Chu Chu habits completely shifting strategy that start to work out.
On the cable front that would be the first one.
Then the second one that goes to church way, Dave is on the VIX. The numbers are increasing it looks like it's performing well.
Looking for 2024, what are the three main metrics that you'll be looking at that should be looking at in our view.
In the long term, let's say three to five years, how do you see peaks.
For a company that grows high single change it has a large generates cash or it's going to be more like a target for all that for other players larger players there.
If agile India's niche player that speaks operates thank you very much.
Yes. Thank you Fred for your question.
You're right there has been a shift in our cable strategy and I'll ask <unk> to go.
That shift.
The idea here is because we have already done a lot of the the layoffs that were planning to do and we're.
Streaming every every opportunity we should see you know results and materialize starting in 2024.
So it could be the very very quickly and the idea here is to maximize cash flow generation and by still improving revenues and low a low middle single digits.
Moving forward and maintaining margins around the 40% range EBITDA margin I mean, so I think this and there's other things. We think are will be accomplishing it already starting 2024.
So it's all about capex optimization free cash flow generation.
And that's a material shift in the strategy.
And as to your second question wave has done an amazing job at Televisa and Univision and specifically at a lounging VIX.
So Alaska wait to go over our <unk>.
Asked about the three main metrics.
Thanks, I'll pass it on thanks for the question. So I think the first thing I would say is that you should focus on the overall performance of the business as we've said a number of times, we think of and we run VIX is an integral part of our complementary linear and streaming ecosystem that's fully fully alive.
And so the overall focus should be on the performance of the company as a whole from a revenue and EBITDA growth standpoint.
You know VIX is going to continue to be a key engine for revenue and EBITA growth.
The consolidated business going forward.
And so you know.
As that emerges from a reporting standpoint, focusing on on the core revenue and EBITDA of the D to C business inside of the overall business will be important, but if youre looking for more specific.
I'd say the top three operating Kpis for the D to C business I would probably put it in three categories. First is a metric focused on audience engagement second would be a metric focused on marketing efficiency and third would be metrics focused on the effectiveness of our monetization.
Nation of the audience.
And as we get into 2024 will be we'll be rolling out metrics that cover those three areas.
Just to help investors understand the consistent and predictable march towards the profitability targets that we.
We have Uh huh.
Laid out.
There was a second part of your question about VIX, which I didn't understand could you repeat that.
Perfect. Thank you basically I mean, the long term.
You'll see a fix.
The project.
Citrix as a stand alone player, let's put that way.
Let's say high single digits and generating cash.
That's essentially the future <unk> will not be of great value for other players larger players given the niche okay. Its benchmark.
Benchmark that he operates and equaled 30, Chihuahua and eliminate target strong from other players. Thank you.
Well look VIX is an integral part of the business there.
There there won't be a yes, there wont be a tel Aviv Univision without VIX, just like there won't be a TV distribution without the linear business day as we've always said our strategy is designed.
Around the two platforms programming them for what they are good at and.
And delivering a comprehensive programming solution, that's relevant to the broadest possible consumer market.
You know VIX long term is as I said going to continue to be an engine of growth.
Televisa and Univision earnings call I highlighted that as we are in our core business.
We believe that <unk> will be delivering best in class operating margins for streaming.
We will hit those best in class operating margins.
On a two to three year ramp following turned to profitability.
In the second half of next year I guess you know.
The last part of your question I mean.
We don't think of this as a niche market.
This is a trillion dollar GDP on a global basis Theres never been a company in the history of Spanish language media, that's been able to touch the Spanish language consumer on a global basis.
As it relates to whether or not you know VIX would be an M&A target I think the real question is that if anybody has aspirations for.
Uh huh.
To be.
Overall international.
Media leadership, there's no way to truly accomplish that without leadership.
Against the global Spanish language audience, which as we've said before represents the second most widely spoken language in the world.
And you know we are over 60% market share in the U S. Hispanic audience, which is the largest Spanish speaking market in the world.
A similar level of market share in the country of Mexico, which is the most populous Spanish speaking market in the world. So you know if anybody has aspirations to be a truly global media company. They can't do so without thinking about the Spanish language market and the asset that we have is it replicate Abel.
Perfect very clear. Thank you. Thank you what do you think helpful. So anybody.
Thank you.
The next question comes from Vitor Tomita with Goldman Sachs. Please go ahead.
Hello, Good morning, and thanks for taking our question two questions from our side first one is if you could give us some color on that on the percentage of our cable base that might still be benefits from temporary cause customer acquisition discounts. Following recent churn and cleanups and second question was.
Just a quick clarification on the previous response you Fred you mentioned in a previous response that cable results should improve starting in 'twenty 'twenty four does that to me is to anticipate some pressure in the fourth quarter of 2003. Thank you.
Yes.
We think there will be still some pressure on the.
The third.
Third quarter, because we are just starting to implement the adjustments we've just finalized.
The head count reduction and you still have a few things that we need to implement.
Okay.
And then after that we are anticipating it to be.
Like I said in the.
14, 40% range of EBITDA.
We expect that to be revenues to grow low single digits, you know for the next two or three years.
Well, we see a sequential.
At this.
For the foreseeable future.
Next question Hello next question. The next question comes from Cesar Medina with Morgan Stanley. Please go ahead.
Hi, Thanks for taking my call.
Feedback this is a great start.
Starts are communicating the plan and the turnaround that I had two questions. The first one is you mentioned.
As the potential for market consolidation in Mexico can you expand a little bit on that I don't know if there is a room for revising some of the talks that you've had.
But the firm had a while ago with Merck I believe that's the first question and then the second this is more a John question to wait onto 12 fun for them. If you look at the capital structure of the joint venture how do you see the path for raising capital and what would be that that the persistence of Tel Aviv.
So I will take into that started even for a capital raise it. Thank you.
You said that.
As to consolidation of the cable industry in Mexico, and I mean, you know we tried very hard to do that.
But under the table, a very attractive offer a stock for stock deal, which.
What I believe.
It'd be great for both the Grupo Televisa shareholders and.
The other shareholders. So we tried very hard however, we could not complete that transaction.
And believe that and you expand.
Market, yes so.
This market.
As you know.
Player market.
Last very long.
Some of our competitors are already.
Facing financial challenges. So we think that there will be a consolidation.
When is a question that we have a I also would like to be able to answer, but but conceptually I think this will happen.
Sooner rather than later given.
Some of the constraints that we have already seen.
And some of the players are deploying.
Fiber networks like Crazy with.
Not the equivalent growth to be able to pay back for those for those investments. So we see a challenging market for whoever wants to be in depth American and our strategy is like we have described just recently today.
Is that we're gonna be preserve cash and keep on focusing on the alert are our largest asset which is our $6 3 million customers high level one of the.
Clients are in the country and we think we can work with them and grow and Osha star not only a subscriber base, but also very strategically and very focused of our network and so I think that that's a stretch and moving forward and consolidation will happen eventually.
And as to your second question Wade.
Look our our single minded focus and everything that we've been doing since we formed this this.
This joint venture and the transformative merger that created a fundamentally new and differentiated company is focused on maximizing shareholder value. So when you think about whether or not.
Timing of raising incremental capital at the right time for us to maximize shareholder value from an equity raise standpoint will be once we've actually delivered direct to consumer profitability, which is right around the corner as we've said a number of times.
Pretty much every media company.
And the industry has talked about direct to consumer profitability, one only Netflix to date has delivered that.
When we deliver profitability.
Within the next nine months that will its Alfonso has said represent the fastest ramp of profitability of any major streaming service in the history of the industry and that it'll be a very material inflection point and the value of the company, we have plenty of cash.
And liquidity on hand at the moment as we reported a couple of days ago, we have.
Just under $300 million of cash on hand, we have $900 million of liquidity from our revolver and our AR facility.
And so.
There is plenty of cash for us to be patient.
Around.
What the right timing is for for tapping.
The equity markets.
When we do that it'll be focused on accelerating the deleveraging of the business. Obviously is return streaming to profitability.
Next year, the organic deleveraging of the business is going to start and accelerate.
Looking forward.
But at the right time, I think I've kind of outlined the parameters that go into that we'll look at it at raising equity to accelerate the deleveraging of the business.
I know for the intention of Televisa to participate on an on Delta infection.
We're not considering at this point putting.
More money into Televisa and Univision.
Of course.
It was describing thats, a wait and see but that's what we're I.
I mean, we're not considering that at this time.
Crystal clear gentlemen, thank you so much.
I mean, how fast it's going to be really expensive.
I think the only thing youre going to need to think about.
We already were.
Already one.
44% so.
Of course, the largest shareholder and.
We feel great about our investment at the.
Let me say Univision.
Thank you.
The next question comes from Carlos <unk> with Ito. Please go ahead.
Hi, Thank you I have two questions on my side the first one on cable.
Total number of unique subscribers and debate with the base cleanup if possible.
Possible can do this global household penetration between your legacy and new territory.
And then secondly, sorry, if I may just it just as a follow up.
So from what I gather from your comments is that the limit is not considering a larger speaking let me take intervention in order to consolidate it right.
Carlos as to your last question, we're not considering that at this time and that's to your first so we have a unique unique users of our households, 6.2526 million to 152000.
Unique users are households.
After the cleanup.
In terms of household penetration.
The the more let's just let's say legacy if you want.
Customers, we the RFA aspiration is close to 40% and that represents.
Around.
We're talking about almost 80% of our subscriber base.
With a high very high penetration and then with the LOE in the newer cities it's between <unk> 10.
Turning to any you know 15 28, that's the penetration we have in the newer cities.
Thank you so much for a while but it won't be on epic.
Ballpark.
Thanks.
The next question comes from Marcelo Santos with JP Morgan. Please go ahead.
Hi, Good morning, Thanks for taking my questions I have two questions for volume at the fed.
First if you could comment a bit on the competitive environment. If you haven't seen a deterioration in the regions.
I know your legacy regions or into new regions that you have entered and the second is when you look at your network structure and network infrastructure do you see any need to upgrade parts of its cable to fiber or are you fully happy with what you have now thank you.
In terms of a market competition, while we have seen in the market is a very pricewise very stable market. So we compete on promotions, which is basically what everybody does everywhere in the world.
And this business. So there is no price deterioration there is a lot of promotions, but we have seen pricing is very stable over the last you know.
Several several quarters in terms of.
The network, we have a network that can deliver up to one point or one gigabit per second in terms of our internet speeds and in 200, plus video channels and I think that that's more than enough for the kind of clients we have.
<unk> targeted.
The deployments of fiber that we have already done in the past and that will keep on doing in the future for more affluent our residential areas will always be an hour.
An hour.
To do list and our Capex. So that's how we see this evolving.
Perfect. Thank you very much.
The next question comes from Eduardo <unk> with UBS. Please go ahead.
Sure.
Hi, everyone. Thanks for taking my question could you. Please provide some color on the tax impact with sudden squad and we've ensured our cultural sort of fixed costs on next page and secondly could you give more color on how we should see capex and leverage going forward.
Can you repeat the question again about taxes.
Okay.
So as you saw in our press release, the income tax line increased to $975 million in the third quarter.
And Thats basically due to a noncash nonrecurring expense of approximately 988 million and this expense was due to the reduction of our historic income tax deferred asset that we had on our books. So as I mentioned, it's a noncash and nonrecurring.
And.
The other question was.
The Capex. The Capex are we think it will go from the 26% of revenue.
<unk> is running today to close to 20%.
So as as we mentioned, it's all about Capex optimization and generation of.
Our free cash flow.
Okay. Thank you very much.
This concludes our question and answer session I would now like to hand, the call back to Alfonzo, Dan Gershon for closing remarks.
Thank you very much well great. Thank you for participating in our call.
Please.
Give us a call if you have any additional questions or comments.
Have a great weekend.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your line.
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