Grupo Televisa, S.A.B (NYSE:TV) Q2 2019 Earnings Conference Call Transcript

Jul 09, 2019 • 11:30 am ET

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Grupo Televisa, S.A.B (NYSE:TV) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, everyone, and welcome to Grupo Televisa Second Quarter 2019 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.

Executive
Alfonso de Angoitia Noriega

Thank you, Helena. Good morning, everyone, and thanks for joining us today. With me are the heads of our two key business segments, Salvi Folch, CEO of Cable; Patricio Wills, Head of Televisa Studios. We will talk -- walk you through the highlights of our 2019 second quarter results. And following our opening remarks, we will answer all your questions.

I will start by addressing the many factors that impacted our second quarter results, particularly as it relates to advertising sales. First, the economy continued to soften. For example, according to INEGI, Mexico's National Institute of Statistics during April industrial production contracted by 2.9% year-over-year. According to the Mexican Institute of Social Security, in May, formal job creation declined year-over-year by 88%. In June, also according to INEGI, sales of automobiles posted a year-over-year drop of 11.4% following a similar drop in the prior month. Finally, according to Mexico Central Bank, expectations for GDP growth this year have come down to 1% from twice that level just one year ago.

Second, as we have said in the last two quarters, the new administration is implementing a number of public policy measures to make funds available for other initiatives. One of these measures is the reduction of its overall investment in advertising spending, which the government has said it will cut by about 50%. So far, the reduction during the first half of the year has been much steeper than 50%. As a reminder, sales to government entities represented 11% of total advertising sales last year.

Third, during the second and third quarters last year, we transmitted the World Cup with the majority of the matches taking place in the second quarter. This benefited our Content business in two ways. First, during the second quarter, we had non-recurring revenue of approximately MXN1.7 billion that resulted from the licensing of the broadcast and digital rights of the World Cup in Latin America. Second, also, advertising sales were particularly strong with budgets concentrating heavily in the second quarter. These two effects make the comparison to second quarter last year very challenging.

Also, during the second quarter last year, the transmission of the World Cup fueled strong growth in revenue generating units or RGUs both Cable and Sky. In the particular case of Sky, it benefited from the gross additions and from advertising and special event sales. This fact makes the comparison to last year more difficult. Finally, this year, the Easter Week holiday took place during the second quarter instead of the first quarter like it did last year. That meant that fewer people