Grupo Televisa SAB (TV) 2023 Q4 法說會逐字稿

Good morning, everyone, and welcome to Grupo Televisa Fourth Quarter and Full Year 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 discuss in today's call and in the earnings release. I will now turn the call over to Mr. Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir.

Thank you, Elsa. Good morning, everyone, and thank you for joining us. With me today are Francisco Valim, CEO of Cable; Luis Malvido, CEO of Sky; and Carlos Phillips, CFO of Grupo Televisa. Last year was marked by a more challenging global macro backdrop than initially expected. We also faced some operating issues but achieved several milestones, both at Grupo Televisa and TelevisaUnivision, which Bernardo and I are confident will allow us to improve free cash flow generation in 2024. At Grupo Televisa, we reorganized Izzi's management structure, appointing new hires to our senior leadership team with extensive experience in our industry, including Francisco Valim, as CEO; [Juan Vico], our CFO; and [Nina Mason], our CMO; and Ricardo Noosa as Head of our Enterprise Operations.

We also implemented a corporate restructuring process at Izzi, including a headcount reduction with savings of around 14% of our payroll. We redefined our business strategy, 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 last year with almost 20 million homes passed or a coverage of over 55% of total homes in the country. Under this new strategy, we intend to improve the quality and life cycle of our subscriber base, enhanced profitability, optimize CapEx deployment, expand free cash flow generation and, as such, increased returns on invested capital.

At Sky, we launched an array of disruptive new products, including Sky+ that we are gradually gaining traction in the market. This innovative portfolio not only underscores our commitment to innovation and our efforts to enhance our competitiveness, but also reflect our dedication to deliver the best to our customers. Our digital transformation strategy is underway and is intended to help us gradually stabilize our revenue base at Sky. In addition, we achieved significant progress in spinning off our other businesses, including the soccer team America, the Azteca Stadium, the gaming operations and the publishing and distribution of magazines.

This allowed us to conclude the listing of a new controlling company called Ollamani under the ticker symbol AGUILAS on the Mexican Stock Exchange on February 20. We also delivered progress on our corporate optimization process, including savings in corporate expenses of almost Ps.280 million for the full year, contributing to a year-on-year decline in corporate expenses of around 18%. Moreover, we continue to explore alternatives to keep reducing corporate expenses at Grupo Televisa on an ongoing basis.

Lastly, we decreased our total leverage by around $340 million, allowing us to have savings related to net interest expenses. At TelevisaUnivision, we've been showing that our strategy, our assets and our execution against the differentiated market opportunity can yield superior operational and financial results on a consistent basis. In the U.S., we continue to outperform growth of the broader advertising market in 2023 by around 850 basis points, even against a backdrop of ad market and macroeconomic softness. In Mexico, our ad business had another extraordinary year driven by the combination of a strong and growing economy and an excellent execution by our sales team. This is the first time following a World Cup year that we have been able to deliver absolute year-on-year growth above and beyond the huge World Cup comp. In a market where we represent more than half of both prime time viewership and linear advertising dollars, our sales team continued to onboard new clients and find innovative ways to work with our advertising partners.

Moving on to our direct-to-consumer business. Our service is building and resonating with our audience. MAUs on the free (inaudible) tier continued to grow and in December, we exceeded 7 million subscribers on our premium (inaudible) tier. But perhaps most importantly, as we continue to rapidly scale MAUs, we have increased the engagement of our audience. In 2023, we doubled the amount of total streamed hours and have been consistently increasing consumption per user, which grew 20% sequentially during the fourth quarter.

As a result, in our direct-to-consumer business we have essentially built from scratch in less than 2 years. We closed 2023 with more than $700 million in revenue headed towards near-term profitability. And this was the first full year of operations of (inaudible). When we deliver a profitable streaming service in the second half of 2024, we will achieve the fastest horizon to profitability of any major streaming service in history, a testament to the power of our library, our content engine, promotional power and disciplined execution.

2023 was a critical year for ViX as we saw huge improvements across all major areas of the business, content performance, product stability and features, marketing efficiency and distribution. We exit 2023 with a distribution footprint that is nearly completed in our core markets with a handful of significant partnership spending and in the later stages of execution.

The fourth quarter was critical in our distribution journey. In Mexico, we launched with the #1 e-commerce platform, Mercado Libre, and expanded our cash payment network. In the U.S., after finalizing and launching distribution on all major CTV platforms, we launched our fast channel strategy with Samsung, Roku and Amazon. And the pending majors are expected to follow soon. Our fast channel strategy not only provides incremental reach and monetization but it expands the top of the free funnel which we have used so efficiently to drive down subscriber acquisition costs from the (inaudible) service. On the content side, we now have sufficient audience scale and consumption data to scientifically redefine our content offering. In the fourth quarter, our new original series, El gallo de oro, was the strongest premier to date in terms of U.S. user engagement and one of our ViX original films, Radical, became the highest earning Spanish language movie in the United States in nearly 4 years, winning 11 awards, including the festival favorite at Sundance. Our 2024 content slate informed by our data will be the strongest yet.

We have successfully concluded upfront negotiations with our customers in Mexico with the upfront plan reaching the highest level in absolute terms in our history. We see this as a great base for the year. Moreover, with this being an election year in Mexico, we expect advertisers to hold some of their ad spend for the scatter market, which, therefore, should be higher than normal. Finally, looking more closely at TelevisaUnivision's debt, the company now has no maturities until March 2026. Management has done an extraordinary job in refinancing $1.5 billion of debt during 2023 and an additional $341 million in January 2024. Moving on to Grupo Televisa's consolidated financial performance. In 2023, consolidated revenue reached Ps.73.8 billion, representing a year-on-year decline of 2.3%, while operating segment income reached Ps.26.5 billion, equivalent to a year-on-year decrease of 5.4%, mainly driven by lower revenue at Sky and inflationary pressures in labor and content-related costs.

Turning to our fourth quarter results. Consolidated revenue reached Ps.18.4 billion, representing a year-on-year decrease of 3.8%, while operating segment income reached Ps.6.3 billion, equivalent to a year-on-year contraction of 6% also caused primarily by the factors mentioned before. Valim and Luis will elaborate on the operating and financial performance of each of our core consolidated segments in their remarks. Now let me walk you through TelevisaUnivision's 2023 results released last week. The company's full year revenue increased by 5% year-on-year to $4.9 billion. Excluding nonrecurring revenue of around $200 million in 2022 related to the sublicensing of the World Cup rights in Mexico and Latin America and political advertising around midterm elections in the United States, TelevisaUnivision's full year revenue grew by 9%. Full year adjusted EBITDA of $1.6 billion declined by 4% year-on-year. Excluding the contribution from the $200 million of nonrecurring revenue in 2022, TelevisaUnivision's full year adjusted EBITDA grew by 3%, reflecting a reduction in losses related to our direct-to-consumer business.

Moving on to the fourth quarter. Excluding nonrecurring revenue in 2022, TelevisaUnivision delivered solid operating performance with revenue of $1.4 billion, growing by 6% year-on-year, while adjusted EBITDA of $468 million increased by 16%. On a reported basis, both revenue and adjusted EBITDA for TelevisaUnivision declined by 7% year-on-year due to tough comps on nonrecurring revenue during the fourth quarter of 2022. During the quarter, excluding political and advocacy and the impact of divested radio stations, consolidated advertising revenue increased by 7%. In the U.S., recurring advertising revenue increased by 4% year-on-year, mainly driven by direct-to-consumer as we continue to see strong demand for ViX.

In Mexico, advertising revenue increased by 10% year-on-year, driven by growth in both linear and direct-to-consumer across all sectors. Despite accounting for around 60% of the entire linear advertising market, our sales team continued to onboard new clients throughout the year. During the quarter, excluding revenue associated with sublicensing the World Cup rights, consolidated subscription and licensing revenue increased by 8%. In the U.S., growth of 8% was driven by ViX's subscription tier, while linear subscription revenues decreased low single digits because of subscriber declines that were partially offset by contractual rate increases.

In Mexico, growth of 11%, benefited from ViX's subscription tier and linear subscription price increases, partially offset by modest subscriber declines. For the full year, CapEx was $168 million, including some elevated integration-related costs. In 2024, CapEx is expected to decline to more normalized levels of around $125 million.

To sum up, 2023 was a great year for TelevisaUnivision. We outperformed the industry, accomplished many important milestones, set new records and consolidated many aspects of our business for the future. We continue to benefit from our leading position in a massive and attractive market where the demographic and economic tailwinds are intensifying and the alignment between our 2 core markets, the U.S. and Mexico is increasing. While we are very encouraged by our operating and financial performance of 2023, we are even more excited about what is ahead in 2024. We are positioned to deliver a record political year from the ad sales perspective and a profitable streaming business in the second half of the year faster than any other major streaming service in history, which should then return our company back to overall EBITDA growth and allow us to continue to focus on strengthening our balance sheet through organic deleveraging and by extending and smoothing our maturities. Now let me turn the call over to Valim, CEO of Cable.

Thank you, Alfonso. During the fourth quarter, we continue to implement and execute our strategy to create value by focusing on customer retention and high satisfaction, sales quality with higher speeds and competitive packages, subscriber base management to maximize ARPU, enhancing our video offerings to improve our value proposition, efficiently grow our SME business and a full turnaround of our enterprise operations through an organizational restructuring, a revamped commercial strategy and a renewed segmentation of our client base.

The implementation of our strategy will gradually bear fruit, but I'm glad to share with you that we have achieved significant developments on several fronts, for example. churn already came back to our historical levels after experiencing a short list increase during the second and third quarters of 2023. ARPU already experienced low single-digit sequential improvement due to the better subscriber mix. We relaunched the ViX premium offer in our broadband packages with Internet speeds of 50 megabits per second or more, contributing to increased loyalty from our subscriber base and it continues to deliver competitive gross adds.

And the headcount reduction implemented in the third quarter allowed us to expand our residential operations margin by 320 basis points sequentially in the fourth quarter. This was significantly better than the 200 basis points expansion that we initially expected despite a negative impact on revenue and EBITDA from Hurricane Otis in Acapulco. Adjusting for this, our residential operations margin would have been 370 basis points higher quarter-on-quarter.

Moving on to our operating and financial results. We ended December with a network of 19.6 million homes after passing almost 60,000 new homes during the fourth quarter or over 840,000 new homes passed during the year. Our net adds for the fourth quarter were modest despite having decent gross adds as we need to keep working on further churn reduction to achieve our goals. This will allow us to gradually deliver strong net adds over the coming quarters. During the quarter, revenue from our residential operations decreased by 0.3% year-on-year, while operating segment income fell by 6.7%.

Our residential operations margin of 41.1% contracted by 290 basis points year-on-year, mainly driven by inflationary pressures in labor and content-related costs. However, the headcount reduction implemented in the third quarter allowed us to expand our residential operations margin by 320 basis points sequentially in the fourth quarter. Excluding the negative impact on revenue and EBITDA from Hurricane Otis in Acapulco, revenue from residential operations would have increased by 0.5% year-on-year, while operating segment income would have been 4.9% lower. Moreover, our residential operations margin of 41.6% would have expanded by 370 basis points quarter-on-quarter.

Our enterprise operations accounting for roughly 13% and 6% of our Cable segment revenue and operating segment income, respectively, continue to face challenges. During the quarter, revenue fell by 16.1%, while our enterprise operations margin of 17.8% contracted 140 basis points year-on-year. Still, the enterprise operations reorganization and implementation will position us well to stabilize and grow revenue and operating segment income from 2024 onwards. To sum up, revenue from our cable segment of Ps.12.2 billion fell by 1.8% year-on-year, while operating income of Ps.4.7 billion declined by 7.1%. Though our Cable segment margin of 38.4% contracted by 220 basis points year-on-year. It expanded by 280 points sequentially due to the headcount reduction implemented in the third quarter. Excluding the negative impact on revenue and EBITDA from Hurricane Otis in Acapulco, revenue from our cable segment would have declined by 1.1% year-on-year, while operating segment income would have been 5.3% lower. Moreover, our Cable segment margin of 38.9% would have expanded by 330 basis points quarter-on-quarter.

Thank you, Valim. You're doing a great job in the turnaround of Izzi. Now let me turn the call over to Luis Malvido, CEO of Sky.

Thank you, Alfonso. I'm pleased to present an update on Sky's fourth quarter and full year operating and financial performance. But before getting into the numbers, allow me to provide an overview of our business transformation. In 2022, Sky initiated a transformative journey guided by a new vision structured across 3 key stages. The initial phase focused on strengthening the core business, involved initiatives such as streamlining the product portfolio, now under the unified Strong brand, modernizing the IT infrastructure to mitigate risks and transition to the cloud, enhancing the customer journey through digital technology utilization, diversifying sales channels by revamping the sales commission model and implementing a value-based customer management approach to boost lifetime value. All this while embarking on an ambitious efficiency and simplification program aimed at improving return on investment. In the second phase of our transformation journey, we focused on evolving the core business while persistently enhancing our operational foundation.

In October 23, we launched Sky Mass, an android-based streaming platform that seamlessly integrates Big Premium, Universal Plus, HBO MAX, Disney Plus, Star Plus, Prime Video on Fox, along with our exclusive Sky Sports, featuring highly demanding content such as La Liga, Bundesliga and this year we UEFA Euro 2024, among many others. It also includes all linear channels and our partners' libraries into a unified view and experience on a single screen. All this vast content curated by our experts and are cutting edge recommendation engine based on artificial intelligence.

Sky Mass also stands out as a market sold platform offering the live sports events in authentic 4K quality with the added flexibility to extend this premium customer experience to any mobile device, including cell phones, tablets and laptops. Today, I'm pleased to report that as of yesterday, we have added 77,000 Sky Mass customers and the momentum in sales remained robust.

Also as part of the second stage, early this year, we launched Sky Internet, a new high-speed broadband offering collaboration with Izzi, Mexico's leading Internet provider. Through this partnership, Sky can now provide customers with a bundled offering that combines the most advanced home entertainment TV platform with a reliable and competitive high-speed broadband service.

And third, last phase of this strategic plan starts this year. In this stage, we capitalize on our new portfolio, customer experience enhancement and process digitalization to strategically leverage our entry into the broadband market. This shift will not only gradually offset the decline of the product facing competitive challenges like DTH, but also position us to meet households evolving needs by delivering entertainment and high-speed broadband access to affordable prices.

Now in terms of trading, we experienced a decrease of 161,000 revenue-generating units during the quarter, mostly coming from prepaid. However, this decline was partially offset by the growth of Sky Mass customer base, which reached 60,000 by the end of 2023, along with 2 consecutive quarters of net gain in Central America. Moving to our financial results. Compared to last year, fourth quarter revenues declined 15.3% to Ps.4.2 billion and EBITDA decreased by less than 1%. Fourth quarter EBITDA was particularly affected by the cost and expenses related to the launch of Sky Mass, including, of course, the advertising campaign. For the full year, revenues declined 13.5% and EBITDA 10.7% compared to 2022 and EBITDA margin reached 32.4%. We expect revenues to gradually stabilize over the coming quarters as our new products gain momentum.

Regarding our capital expenditures, we invested $149 million in 2023. This marks a 23% decline compared to the previous year and 39% decrease compared to 2021. This reduction in capital intensity can be attributed to the measures we implemented to enhance return on investment, along with the implementation of the efficiency and simplification program which yield more than Ps.800 million in OpEx and CapEx savings during 2023 or 4 percentage points on revenues. As a result, full year EBITDA minus CapEx increased by over Ps.500 million, reaching a 21% growth compared to the previous year. I'm now turning back the call to Alfonso. Thank you very much.

Thank you, Luis. Moving on. Consolidated capital expenditures were $829 million during 2023, mostly in line with our guidance, even though the Mexican peso was more than 20% stronger than what we used to set our 2023 CapEx target. For 2024, our CapEx budget of $790 million includes $630 million in cable, including the reconstruction of our network in Acapulco after the hurricane, which we expect to be reimbursed by the insurance company to pass close to 400,000 homes with fiber, upgrade our network, increase our subscriber base and support growth. We also are including $145 million deployed in Sky and $15 million for corporate purposes.

Finally, regarding share repurchases, we invested more than $65 million to buy back shares in 2023. To wrap up, Bernardo and I are confident that execution of our digital transformation strategy at TelevisaUnivision and full implementation of our new value-focused strategy at Grupo Televisa will allow us to improve our operating and financial performance in 2024. At TelevisaUnivision, we are very excited about the prospects for 2024. We are positioned to deliver a record political year from an ad sales perspective and a profitable streaming business in the second half of the year faster than any other major streaming service, which should then return our company back to overall EBITDA growth and allow us to continue to focus on strengthening our balance sheet through organic deleveraging and by extending and smoothing our maturities.

And at Grupo Televisa, we have been putting a lot of effort into rethinking our corporate structure to unlock value and restructuring our consolidated businesses to come out stronger from the current environment. These structural reforms are focused on protecting profitability, optimizing CapEx and enhancing free cash flow generation. Initial results have been encouraging, and we expect a positive sequential trend to continue throughout 2024. Now we are ready to take your questions. Elsa, could you please provide instructions for the Q&A...

[Operator instructions]. Our first question comes from Andre Salles with UBS.

I have 2 on my end. Could you please elaborate on the company's expectations involving the competitive landscape in Mexican broadband? How do you see ARPU and net adds evolving throughout 2024? And the second question is about the margins of the company. We saw some sequential improvement, what measures are you taking to keep this momentum going forward?

Andre, yes, I'll ask Valim to answer the question. It has to do with the competitive landscape in the broadband industry.

So on the competitive landscape, as we have been seeing, is very rational. What do I mean by that? We haven't seen any significant price promotions in the market. Actually, what we have seen is since September, October of last year the promotions have been more rational, the discounts have been a lot less and the aggressiveness in the market with price-related promotions is significantly less. Also, we have seen competitors increasing prices. We saw mega (inaudible) increasing prices in October. We already have an announcement from Mega (inaudible) increasing prices now in March. We think that just shows that the market is very rational in terms of how we should go about growing this market. It is a market that has a significant penetration and the different competitors are being very -- positioning ourselves -- themselves, not a price war but more as a service and quality of service offer. So we don't see the market deteriorating in terms of price wars, which is very good news for all of us.

And in terms of margins, Andre, I would say that we're working on the cost and expense side on all fronts. And of course, we're working to become more efficient and reduce those costs and expenses.

The next question comes from Alejandro Gallostra with BBVA.

It's been 3 years since you announced the merger of TelevisaUnivision now, so could you please share your thoughts on the integration between these 2 working cultures and management teams, please? That would be interesting to hear that from you. And the second question, that's probably for Valim as part of the new cable strategy that you're implementing, are you changing the socio-economic level of customers that you are targeting now? Or how do you plan to decrease and keep the churn rates at low levels?

Thank you, Alejandro. Well, I have to basically culture and management of the TelevisaUnivision. I can tell you that Wade, [Indiscernible] and I have been working diligently. We've spent a lot of hours in the integration of the 2 companies. There are 2 very different cultures and management styles at Televisa and Univision. We have moved in the right direction in these years. I believe that the production audiences, networks and revenue teams in both countries, in both companies and in both markets are fully coordinated and work as a team where we focus on our differentiated offerings and products.

So I feel proud about accomplishing that. Wade has done a great job in leading the TelevisaUnivision basically and leading into the future with the lounging of ViX, which, as I mentioned, has become a meaningful business with a revenue run rate of around $700 million in the first full year of operations. And it's a company that now has reached more than 7 million subscribers and 40 million MAUs. So that's the future, and we're working towards integrating the companies more, but we have moved a long way. As to your second question, I'll ask Valim to answer.

Thanks Alfonso. So what we have been seeing is that because of our promotions have been more focused on more value-added, more service related, we have been able to extract from the market what we think are the best customers out there. So with the speeds that we offer, with the content that we offer, with the service that we provide, we have been able to have better clients since we have changed the way we promote ourselves in terms of new subs. Regarding churn, what we have been seeing is since we had the spike in churn in the second and third quarters of last year, we were able to bring it down to historical levels. So as we see the churn level that we are operating in December and January, they are historical levels back to what it was back in 2021. So we are managing the acquisition of new subscribers better, and we are managing and improving the retention of our existing clients in a very significant way.

The next question comes from Vitor Tomita with Goldman Sachs.

2 questions from our side. The first one is if you -- following up on one of the previous questions, if you could give us some more color on the expected pace of margin improvement for MSO over the next few quarters. Could we see continued quarter-on-quarter improvements in the first quarter? And how might wage readjustments and other intra-year factors affect performance across quarters? And the second question on our side would also be a follow-up on one of the previous questions regarding ARPU for MSO cable, how are you changing the strategy for price readjustments for annual readjustments this year compared to last year given all the high churn we saw post readjustments in the second quarter of '23, but also this more benign competitive environment you mentioned for 2024?

Thank you, Vitor. I'll ask Valim to answer about -- I mean, your questions are very good about the pace of margin improvement and ARPU.

So Vitor, we are seeing -- anticipating margin improvement sequentially quarter-over-quarter over the next several quarters. We have several initiatives in place from optimizing processes, reducing -- renegotiating contracts. So all of those are taking place as we speak and so we are anticipating to see margin expansion over the quarters coming forward. On the -- how we manage the environment, if I may. So we are also planning to increase prices. Our -- the way we are doing that is giving clients more for more. So we are giving them more service, we are adjusting prices so that we can have a better ARPU.

What we have been seeing in the market is that every player is basically doing the same or in other words, churn on average has been increasing quarter-over-quarter from all 4 players. So I think that's a trend that we have seen in the market. And a trend we have seen in other markets that is now being reflected here in Mexico as well. Another thing that we are doing, like I mentioned before, is strongly managing the subscriber -- the existing subscriber base and making sure that they have the proper value for the money that they are paying and therefore, (inaudible) in churn, like I just mentioned before.

The next question comes from Marcelo Santos with JPMorgan.

I have 2 questions on the Cable front as well. I just wanted to double click on the broadband net add, the churn. You said that the churn already returned to historical levels but that's in the end of the quarter and beginning of the next quarter. So in the middle of the quarter it was still high. Or is it the case that your gross adds are also a bit lower. Just trying to understand why net adds were almost flat and if you plan to increase sales efforts to bring gross add EBITDA, or it's just a churn management that you need to do? Just want to understand that. And the second question is regarding the network construction that you mentioned that you're going to try to collect from insurance companies. How much could you receive back from insurance companies there? How much could we actually see the CapEx falling on this?

Thank you, Marcelo. Valim will answer both questions about broadband net adds and churn and also the reconstruction in Acapulco and the insurance payments.

So Marcelo, in terms of the market, before we used to be the most aggressive player in terms of price positioning for our promotion. As we change that in September and positioned ourselves in more value for money and better services and more services to our clients. What we have seen is, obviously, there is a slight decrease in gross adds because we are less -- we are less focused on price and more focused on volume of services and content to our subscribers, and obviously, there's a little decrease in terms of gross adds.

But it was compensated, so we adjusted that and obviously, it comes very quickly the reduction on sales because all the sales force were used to sell price, and now they have to sell, like I say, a product. So price is part of the product but it's not the only thing. Before it was just price. So there was a little reduction in terms of gross adds.

But we were able to compensate all of that with a reduction in churn that made the net of those 2 effects close to 0. So the reduction of gross adds driven by less price-oriented promotions gave us less sales, but compensated by lower churn. And we have been seeing churns, like you just mentioned, it has decreased from the September rates to October to November to December. And now December and January, it has been stabilized around historical ratios, just like I have mentioned.

In terms of the Acapulco network, we think that we'll be recovering 100% of the new deployment of network or fiber network that we are doing in Acapulco. So that should cover for 100% of the new construction. But obviously, as you account for that, you have the CapEx and the reimbursement doesn't come on CapEx. So we don't have the CapEx out, it comes in another -- as -- below the EBITDA level in terms of where does it come back to us. So you're not going to be able to see a reduction in CapEx because of that, but you're going to be seeing a nonrecurring income coming from insurance companies.

Just a follow-up on the first question. Going forward, do you think we're going to see more churn reduction or more gross adds on the cable? (inaudible) from now?

Thank you, Marcelo. We're anticipating increasing gross adds, we have been seeing gross adds increasing from every month from October, November, December, January and even February. We're seeing the daily rate of new gross adds increasing almost on a weekly basis. So we anticipate going back to levels that are maybe not equal to what it used to be, but closer to what it used to be and churn leveling at historical levels, which we think will put us back into positive net positive net adds in every quarter of 2024.

The next question comes from Fred Mendes with Bank of America.

I have 2 questions here as well. The first one is a quick one on ViX. In the call of TVUnivision, they were not giving at least or which you don't understand. If you guys are giving the breakdown of subscription and advertising from this $700 million recurring revenue, which seems interesting for the first year of operation of the company. So there's a breakdown here if you have this number, if you give it to the market and/or any trends that you could share? And then on the second one, just on this repurchase program, $65 million, if I understood correctly. Is this a company repurchase program or that's also related to the management buying back shares? I remember that, I think in the beginning of the year, the company disclosed that managed will be buying back some shares, so just wondering if this is already included here or not and if the management buyback was already concluded as well?

Thanks, Fred. As to your second question, it's -- the $65 million was repurchased by the company itself on top of what we -- as (inaudible) is bought personally. So the $65 million is just what the company repurchased. As to your second question, we're not breaking down streaming on the streaming side, on the ViX side between subscription and advertising. However, as to the last part of your question, I would say that in December, on ViX, we surpassed $40 million in use on the free (inaudible) tier, and as I mentioned before, we exceeded 7 million subscribers on the premium tier.

But perhaps most importantly, as we continue to rapidly scale MAUs, we have increased the engagement of our audience. This is really, really important, and we feel very happy and proud about it. In 2003, we doubled the amount of total streamed hours and have been consistently increasing consumption per user, which grew 20% sequentially during the fourth quarter. So as a result, and as I also mentioned before, in direct-to-consumer, a business -- that business we have essentially built from scratch in less than 2 years and we closed 2023 with more than $700 million in revenue heading towards profitability in the second half of 2024. So that is the future of our company, and we are moving in the right direction.

As I mentioned, Wade and the team has done a great job. We are very proud of what we're doing there, especially we have a tremendous advantage being vertically integrated, having launched the platform, but also owning the largest library in Spanish content in the world, owning the IP to produce more content specific for our markets. Of course, only in the factory in Mexico, which is the largest and most prolific factory of content in Spanish in the world, where we produce large quantities of content with a very high quality at a very, very attractive costs. So all those advantages, including also cross promotion of ViX on all our platforms makes it a unique opportunity for us.

Next question comes from Ernesto Gonzalez with Morgan Stanley.

It's just one. Can you provide some color on the trends you're seeing so far in the first quarter and your expectations for the quarter, especially on enterprise Cable and Sky since you already provided good details on residential cable.

Yes, I'll ask Luis to talk about the trends in the first quarter.

Yes. Thank you for the question, Ernesto. Q1 is -- is different from others. On the one hand, we continue to deploy Sky Max. Sky Max is a platform that brings everything together and it's a completely different product from what has been offered in the market. On top of that, Sky Max can play over any broadband network, which is an agnostic platform, which gives us an opportunity to sell to Telemax customers, for example. And on top of that, what I said about this month or this quarter is different because we have just launched Sky Internet. Sky Internet is based on Izzi's network and it's moving very fast, and it's growing very rapidly with the marketing campaign which just launched in February.

We are offering a bundle of Sky Mass and Sky Internet, but also we are offering Sky Mass as a stand-alone. So this is the new offer we have in the market. And we are seeing that -- as we saw in the last 6 months, that prepaid recharges -- prepaid revenues are stable, has been flat for 6 months and we see the same trend at least in the first 2 months of this year. So as I said, this is a good start for the year, very important news from the product perspective but also from revenues coming from prepaid where we struggled last year to protect, especially in Q2.

The next question comes from Matthew Costin with Citi.

I have 2 more on the Cable front. First, we discussed in the last call, it was mentioned a 200 basis points improvement sequentially due to the workforce reduction and it can actually better than that. Can it be attributed to cost cutting like digitalization and can you mention any other efforts in that direction? And also, maybe give some color as to how much headway you still have to improve margins in this year versus 2023? And was any of that impacted by expenses, so above the EBITDA line affected by expenses due to reconstruction from the hurricane? Or was it all booked on the other operational expenses? My second question actually is not on cable. So what can explain the $215 million positive other operational income, considering that you had also expenses related to the hurricane reconstruction that were also booked there according to the (inaudible)?

Yes. Thank you, Matthew. Valim will answer your question.

Matthew, what we have been seeing is, we are working on cost reductions all across the board. We have already implemented the bulk of the headcount reduction in September but we are still seeing opportunities for improvement in that area. Also, we have been optimizing processes so that we can be more efficient in working with different providers to reduce cost. So it is not something that was one shot. This is something that we have been very diligently trying to find better opportunities to decrease our cost. In terms of the impact we have had from hurricane Otis, we have a significant -- an important portion of the revenues.

We basically -- we stopped billing clients for October, November, December of last year. So the revenue has been impacted negatively because of that, but we were able to compensate that with other efforts and cost efforts. As we revamp the network and then reintegrate customers into the network we should see a lot of that recovery. And so in terms of the impact, the impact is fully accounted for already in the fourth quarter. Most of the impact from Acapulco was already reported on the fourth quarter so we should be seeing some improvement moving forward regarding that.

The question regarding it has been -- the building has been paid. Operational income we'll turn it to Carlos, because in you will explain that.

Yes. I think -- correct me if I'm wrong, but I think your question is regarding the other income and expense line in our income statement. And year-over-year, as we have mentioned before, the main factors have been the severance expenses at Izzi, given the reduction that Valim has carried out and the damages caused by Hurricane Otis. But as you heard, there has been some offsetting income as well. Part of it has to do with interest income from our recovery of tax assets that we had. And in particular, in this quarter, there's a lot of recurring income, that has to do with the liquidation of certain of our subsidiaries. This is really just an accounting factor and we've been doing some efficiencies in the corporate in terms of reducing our subsidiaries and cleaning up, and that's a nonrecurring income that also helped during the quarter, offsetting some of the losses from the hurricane Otis costs.

Next question comes from Carlos Legarreta with Itau.

My question is regarding TelevisaUnivision. As you know, during the quarter, the company renewed carriage deal with one of the leading newest cable company. So I was wondering if you can please elaborate on the types of the opportunity with churn? And if there are any other pending deals like this either in the U.S. or Mexico?

Thank you, Carlos. I think it's a great question and it allows you to expand on our new deal with Charter. We feel really good about the partnership that we have with Charter and I think it's reflective of where the pay television ecosystem is likely to head over time for the pay TV ecosystem to stabilize and grow. Consumers need to see a better value proposition and that will only happen through innovation, and that's what our new partnership is all about. It's innovation in the product, innovation in the interface platform, availability, packaging, pricing, et cetera. Charter is pushing this forward and our new partnership enables this offering and a number of these fronts that I described.

First, the rebundling of streaming packages with the basic linear package. This is a section to this new deal. This obviously improves the value proposition for customers, but only to the extent that the content in the streaming service is not redundant to the content in the linear package. And I would say that the second example is us providing our linear services as a cornerstone of Charter's upcoming launch of a lower-priced Spanish-only OTT product, the new packaging and price increase, a valuable choice for price and platform sensitive customers. So this is really important.

This is a big change and this is a new product, a lower-priced product, which we believe will be very successful. And lastly, it's important to mention that this renewal with Charter happened earlier, which is unique in this environment of tension between programmers and distributors. So we're very happy about having been able to close a deal and a new extended partnership with Charter. This is a clear recognition of the uniqueness and value of our service and the ways we can work together with a company of the size and scope as Charter as partners to build their business. So we're very happy about this new and extended partnership.

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

Thank you very much for participating in our call, and we're always ready to answer any questions you might have. If you haven't, please give me a call. Enjoy the weekend. Thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.