Cablevisión Holding S.A. (CVH) Q3 FY2025 Earnings Call Transcript & Summary

Good afternoon, and welcome to Cablevisión Holdings conference call. Today, the team will discuss Cablevisión Holdings results for the first 9 months and third quarter of 2025 as detailed in the earnings release distributed on November 10. My name is Drew, and I will be your conference operator today. This call is intended for investors and analysts only. Questions from the media will not be taken at this time. Members of the media with inquiries may contact FIG Corporate Communications. Comments made today during this call may contain forward-looking statements regarding Cablevisión Holdings' future performance, plans, strategies and targets. Such statements involve risks and uncertainties that could cause actual results or operations to differ materially. These uncertainties include, but are not limited to, the impact of industry and economic regulations, changes in demand for Cablevisión Holdings' products and services and broader market, economic or regulatory conditions. Please refer to the disclaimer in the earnings report or presentation for additional information regarding forward-looking statements. If you have not received the report or require assistance during today's call, please contact FIG Corporate Communications in New York at +1 (917) 691-4047 or Cablevisión Holding in Buenos Aires at + 54 (11) 4309-3417. The webcast presentation is available at www.cablevisionholding.com/investors. I would now like to introduce today's speaker, Mrs. Samantha Olivieri, Head of Investor Relations. For the Q&A session, they will be joined by Mr. Ignacio Driollet, Executive Director and Chairman. It is now my pleasure to turn the call over to Mrs. Olivieri.

Thank you, Drew. Good afternoon, everyone, and thank you for joining us. Today's call will begin with a brief macro overview and continue with a review of the company's income statement and operating results, followed by a review of the financial position. Please move to Slide 4 for the macro overview. When the current administration took office at the end of 2023, Argentina faced triple-digit inflation, negative net reserves and significant relative price distortions. Since then, the government has implemented a stabilization plan focused on fiscal consolidation, monetary discipline and correcting relative prices, which have shown progress so far. However, risks persist and continue to require close monitoring. The fiscal anchor remains at the core of the stabilization plan. In the first 9 months of 2025, the national public sector accumulated a primary surplus equivalent to 1.3% of GDP. The administration's goal is to reach a 1.6 surplus in 2025, which is the commitment made with the IMF and would imply a second consecutive year with a positive fiscal balance, something not seen since 2008. Inflation continued to ease, moving from 211% in 2023 to 118% in '24 and reaching 31.8% year-on-year as of September 2025. This disinflation process is taking place despite the partial removal of currency controls and the introduction of a banded float system, which implied a higher official exchange rate. The banded float system continues to operate as a transactional framework toward some more market-based FX regime. Although the official exchange rate has been -- has remained within the established limits. In the past few months, it has been particularly challenging to keep it below the upper limit. In addition to interventions by the Central Bank and the Treasury, support from the U.S. Treasury, including the activation of a currency swap line, played a central role in defending the bank amid heightened political uncertainty ahead of the October midterm elections. This episode took place after several months of gradual stabilization and economic recovery. According to the monthly Economic Activity Index, the economy bottomed out in April 2024 with a 3.1% year-on-year decline. From that point onwards, activity improved steadily, closing 2024 with an average contraction of 1.3%. However, the pace of recovery has been uneven across sectors. Agriculture and energy have led the improvement, while construction, manufacturing and mass consumption remained weak. In addition, despite increases in gross wages, disposable household income continues to be under pressure as real wages gains were insufficient to offset higher living costs. In the months leading up to the elections, however, negative expectations increased, money demand fell sharply and investors increased their exposure to the U.S. dollar. According to Central Bank data, pre-election portfolio dollarization reached an amount equivalent to 40% of Private Sector M2, which is currency in circulation plus transactional deposits, exceeding $20 billion. This occurred despite higher peso interest rates and aimed at stabilizing money demand, leading to flat economic activity and weaker private consumption, while country risks climbed above 1,000 basis points. As a result, growth expectations were adjusted downwards. For 2025, GDP is now expected to grow close to 4%, reflecting the carryover effect from the rebound that began in the second half of 2024, but slightly below the early year projections of around 5% according to the last REM survey. The outcome of the October midterm elections marked a turning point. Voters sent a strong signal of support for the government, effectively validating the direction of the economic program. This result is critical as it provides the political support needed to advance a new package of structural reforms in Congress starting in December, including labor, tax and pension fund modernization, all considered crucial for Argentina's economic growth. Market reaction was immediate and strongly positive. Country risk fell by nearly 400 basis points in a single day and currently stands at around 600 basis points. The official exchange rate also retreated to pre-election levels and peso interest rates began to normalize towards more moderate and sustainable values. This improvement brings Argentina closer to regaining access to international debt markets, a process further supported by the historic backing of the United States following the announcement of a 20 billion currency swap rescue package for the government and discussions around an additional 20 billion facility for sovereign debt repurposes. The current banded tag regime remains unchanged and continues to operate similarly to the previous crawling framework. This scenario could help the Central Bank strengthen its international reserve position, improving the macroeconomic outlook and supporting the continuity of the economic program. Slide 6 shows the highlights for the 9 months of 2025. On 24th February 2025, our subsidiary, Telecom Argentina announced the acquisition of shares representative of 99.999625% of Telefónica Móviles Argentina S.A., TMA, a company incorporated in Argentina, which provides mobile and fixed telephony, fixed broadband and video services nationwide in Argentina. The total amount involved in the operation reached USD 1,245 million and was financed by 2 loans for a total amount of USD 1,170 million. As of this date, our subsidiary Telecom has made the regulatory filings and necessary procedures were initiated with the regulatory authorities in order to obtain the conformity of the Secretary of Industry & Commerce or such other authority that succeeds it as enforcement authority of Law #27,442 to the economic concentration produced as a result of the acquisition of TMA and the conformity of ENACOM to the change of control occurred in TMA as a consequence of the acquisition of TMA by the company. Both administrative proceedings are currently pending. Excluding fixed telephony services, all Telecom's ARPUs present significant increases. EBITDA, excluding TMA increased compared to 9 months '24, resulting in a higher EBITDA margin of 33.1% in 9 months '25, up from 28.8% in 9 months '24. Even considering the indebtedness for the acquisition of TMA, net debt-to-EBITDA ratios remains healthy. On November 10, Telecom announced a dividend payment to its shareholders for a total market value of approximately USD 150 million. Slide 7 shows the key financials for 9 months '25. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comisión Nacional de Valores, CMV, which establishes the re-expression of figures must be applied to the annual financial statements for intermediate and special periods ended as of and including December 31, 2018. Accordingly, the reported figures corresponding to the first 9 months of 2025 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standards 29. For comparative purposes, the results restated by inflation corresponding to September 2024 contain the effect of year-over-year inflation as of September 2025, which amounted to 31.8%. In this presentation, we included some figures in historical values for the sake of clarity. In addition, the reported figures corresponding to the first 9 months of 2025 include the effect of the incorporation of results from TMA from 1st March of 2025. Hence, the results for the 9 months aren't comparable to the results for the 9 months of 2024. We included some figures, excluding the effect of TMA acquisition for comparison. CVH owns 39.08% stake in TEO and as controlling shareholder of Telecom Argentina, it consolidates 100% of its operations. Revenues in nominal terms increased 114%. In constant currency, revenues for 9 months '25 grew 49.6% from ARS 3,758.2 billion to ARS 5,622.6 billion, mostly driven by the incorporation of revenue from TMA and the higher ARPU in real terms in most of the services in Argentina. Thanks to the effective pricing policy and the decrease in inflation rates, partially offset by a decrease in fixed telephony copper accesses and the effect of the lower ARPU on fixed telephony and data services in real terms and by lower mobile revenues in the operation in Paraguay. EBITDA reached approximately ARS 1,705.9 million in constant currency, a 57.8% increase compared to 9 months '24, mainly driven by the incorporation of TMA's EBITDA and by higher revenues, excluding TMA, resulting in a higher EBITDA margin of 30.3% in 9 months '25 compared to 28.8% in 9 months '24. EBITDA in nominal pesos amounted to ARS 1,632 billion, 122% higher than nominal EBITDA for 9 months '24, while average inflation for the same period was approximately 46.4% and the end of period year-over-year inflation amounted to 31.8%. Net income resulted in a loss of ARS 279.6 billion from a profit of ARS 1,248.2 billion reported in 9 months '24. This decrease in net income is mainly explained by financial net results, mainly due to negative FX differences as the exchange rate increased above inflation for this period. Following the partial liberation of the exchange restrictions in April, while 9 months '24 and especially in the first quarter, financial results were highly positive as inflation was high following the steep devaluation of the Argentine peso in December 2023. These variations in financial results were partially offset by higher EBITDA and lower income tax. The equity shareholders' net loss for the period amounted to ARS 120.1 billion and is mainly the result of CVH stake in Telecom, the personnel assets tax at CVH level following the change in criteria established by the fiscal authority in December 2024 regarding the basis for its calculation and by negative financial results from the holding of bonds collected from Telecom's in-kind dividend payment, which had an overshooting in their valuation before the end of the fiscal year 2024, partially offset by the revaluation of foreign currency credit at CVH level. Now let's continue on Slide 8 for a discussion of the operating results for the third quarter of '25, excluding the effect of the incorporation of TMA results. Revenues in third quarter '25 increased by 1.7%. Price increases for our services in Argentina, management of commercial discounts granted according to customer retention policy for some of the services and lower inflation have had positive results in terms of revenues. Revenues from equipment sales decreased 41%, mainly as a result of prices of equipment sold increasing below inflation. Fixed telephony and data services revenues registered a decrease of 8.3%, explained by a decrease in fixed telephony copper accesses and lower ARPU for these services, which cannot match inflation. The main source of our revenues is our fixed infrastructure. Broadband pay TV and fixed telephony and data services amounted to 50.3% of the total. Mobile service participation increased slightly, reaching 44.7% from 40.8% in third quarter of '24, driven by the decrease in share of fixed telephony and data services revenues over total revenues. EBITDA in real terms increased 26.5% and margin increased to 33.7%, higher than the 27.1% margin of third quarter '24, mainly as a result of the increase in revenues and cost efficiencies obtained by the company. On Slide 9, we review some of the effects of the incorporation of TMA. The consolidation from the moment of the acquisition by Telecom's TMA operation includes results for the months of March through September 2025. Telecom and Telefónica's networks have a great degree of complementarity. Telecom leads in the north of the country, while Telefónica is stronger in the south and most of the overlapping occurs in the center. This strategic acquisition enhances Telecom's capabilities and positions and will allow us to expand coverage and service quality across the entire country. Telecom has the fastest mobile network and is the first operator to deploy 5G. Telefónica has the fastest fixed network in the country with a large fiber-to-the-home customer base with approximately 7,000 mobile sites and more than 3.5 million fiber-to-the-home homes passed. As of September 2025, TMA had 19.1 million mobile subscribers, including machine-to-machine subs, 1.6 million broadband subs, 2.1 million fixed telephony subs, including IP lines and 395,400 pay TV subs. Revenues of TMA included in the 9 months 2025 consolidated figures amounted to ARS 1.8 billion and EBITDA resulted in ARS 441.6 million with a 25.1% EBITDA margin. Revenues of TMA included in the third quarter '25 consolidated figures amounted to ARS 747.4 million, and EBITDA resulted in ARS 201.3 million with a 26.9% EBITDA margin. It should be noted that these results include the effects of new employment termination agreements and severance payments. Excluding this effect, the margins would have been significantly higher. Now let's move on to the next slide. Mobile revenues included TMA represented approximately 50% of our revenues and increased 95.9% in real terms when comparing third quarter '25 versus third quarter '24, mainly explained by the incorporation of TMA and higher ARPU in real terms in this quarter in Argentina. Excluding this effect, thanks to the increase in year-over-year inflation and the carry-on effect of price increases during 2024 and 2025, partially offset by a decrease in mobile revenues in the Paraguay operation due to a decrease in ARPU related to the widespread use of Wi-Fi networks, which affects data consumption. Mobile prepaid subs, which generate less revenue and had decreased quarter-over-quarter in first quarter '25 following price increases at the end of 2024 were subsequently adjusted as a result of the full effect of a change in criteria regarding how many days can it last without a client recharging its credit before it is disconnected with no effect on revenues for this service. Excluding the effect of TMA, mobile services revenues reached ARS 589,422 million in constant pesos and increased to 11.6% in real terms. Personal Argentina clients decreased 5% to 20.3 million, of which postpaid clients amounted to 39%, mostly the effect of the before mentioned change in criteria. As of September 2025, TMA had 19.1 million mobile subscribers. Excluding machine-to-machine subs, 49.5% of clients are postpaid. In Argentina, in a highly competitive environment, personnel ARPU restated in constant currency increased by 13.6% to ARS 8,171.1 in 9 months '25. Monthly churn increased to 2.1% from 1.5% in 9 months '24. Please turn to Slide 11. Revenues for Fixed Services, including broadband, cable TV and fixed telephony and data services increased by 38.5% in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, revenues for Fixed Services remained relatively stable, decreasing 0.9%, mainly the result of lower fixed telephony and data services related to a reduction in fixed telephony clients and the lower ARPU for the services and lower internet service revenues in real terms, partially offset by higher cable TV revenues and higher other service revenues. Legacy copper fixed voice service continues experiencing a reduction in accesses, partially offset by an increase in IP telephony lines. On the business-to-business services, Telecom's strategy is to position itself as an integrated service provider for large customers by offering convergent ICT solutions, including fixed and mobile voice, data, Internet, multimedia, data centers and application services to sales, consulting, management and specialized and targeted post-sale customer services. Internet service revenues increased 31.9% year-over-year in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, Internet services revenues decreased 0.7%. Broadband subscribers increased 2.5% to 4.1 million, while monthly churn dropped to 1.2% in 9 months '25 from 1.6% in 9 months '24. There is growth in the fiber-to-the-home segment, resulting in an increase in average speed. ARPU in real terms for the 9 months of '25 increased to approximately ARS 25,041.5. The effective pricing policy implemented, lower promotional discounts and higher Internet speeds sold to our customer base allowed Telecom to increase broadband ARPU in real terms in the 9-month period, while in the third quarter, there is a slight decrease in ARPU. As of September 2025, TMA has 1.6 million broadband subscribers, of which more than 90% are fiber-to-the home. 97% of customers have accesses with speeds of 100 megabytes or higher versus 87% in 9 months '24. Moving to the Cable TV subscribers. The customer base increased slightly to 3.4 million, mainly explained by the success of Flow Flex, which is 100% digital with no decoder or installation needed. Flow unique customers achieved 1.7 million, a 12% increase from figures observed over a year ago. Through its proposal of content aggregator, Flow includes not only linear TV series, on-demand movies, documentaries and co-productions, but also music, gaming and exclusive events. ARPU in real terms increased by 3.2% to ARS 17,264.4 during 9 months '25, mainly due to the decrease in year-over-year inflation and the carry-on effect of price increases done during 2024 and 2025 and lower discounts granted according to customer retention policy. Monthly churn decreased to 1.5%. As of September 2025, TMA contributed 395,400 pay TV subs. Let's move to Slide 12 for a review of the cost structure before we discuss quarter-over-quarter EBITDA performance. Amongst the most significant operating costs and expenses are salaries, fees for services, maintenance, materials and supplies, cost and taxes and fees for the regulatory authority. On Slide 13, we show the performance of EBITDA and the behavior of different components of revenues and costs. The company continues with its cost management efforts and has shown positive results in gaining productivity. Before the effect of TMA, operating costs, excluding cost of equipment and handsets decreased in real terms by 4.7%. This is the result of efficiencies obtained by the company, mainly lower salaries and severance payments, lower bad debt expenses, lower interconnection and transmission costs, lower commissions and advertising and lower fees for services, maintenance, materials and supplies, partially offset by higher expenses related to increase in revenues, such as taxes and fees with the regulatory authority and programming and content costs by the change in criteria for the personnel assets tax at CVH level and by other operating expenses. Cost of equipment and handsets before the effect of TMA decreased 45.3% as a result of the lower cost of handsets sold with higher quantities. And total operating costs, including cost of equipment and handsets before the effect of the incorporation of TMA decreased by 7.5%, with an increase in revenue. Thus, EBITDA margin before the effect of the incorporation of TMA reached 33.7%, higher than the 27.1% margin of third quarter '24. EBITDA from the incorporation of TMA for the third quarter '25 resulted in ARS 201.3 million with a 26.9% EBITDA margin lower than the margin before this effect. Therefore, consolidated margin resulted in 31.3%. It should be noted that these results include the effect of new employment termination agreements and severance payments expenses in TMA. Excluding this effect, the margins would have been higher. Slide 14, please. In third quarter '25, investment as a percentage of revenue was 18.5% or 16.4% before rights of use from leases, a similar level as the same period of the previous year related to the expansion of both fixed and mobile networks, particularly fiber-to-the-home and 5G infrastructure. Technical CapEx was mainly allocated to network and technology and customer premise equipment, or CPE. The balance was allocated to our international operations in Paraguay and Uruguay. During this last quarter, the company continued with the deployment and upgrading of existing sites, the expansion of the fiber-to-the-home network, including overlay over the HFC network and adding 5G sites. The CapEx program will continue evolving according to Argentina's economic condition, network performance, expansion objectives and customers' requirements. Going to the debt financial position as per Slide 16. As of September 2025, we have reported a total financial debt of ARS 5,120.9 billion and net debt of ARS 4,427.6 billion, equivalent to USD 3.2 billion, mainly as a result of the debt to finance, the acquisition of TMA and by the effect of higher FX variation versus inflation year-over-year. Of the total debt, 66.3% is mostly cross-border dollar-denominated, but includes the hard dollar local issuance of 2024, 24.2% is in Argentine pesos, including dollar-linked local emissions and the rest is in Guaraníes and renminbi. During the past year, Telecom has been accessing the local and international debt markets for its financing needs and will do so for future potential needs. From 2025 to 2033, debt maturities remain manageable. Net debt to adjusted EBITDA coverage ratio as of the end of September 2025 was 2.2x, a significant achievement considering the new indebtment for the acquisition of TMA and that the adjusted EBITDA used in the calculation of this ratio only includes 7 months of TMA EBITDA, a testament of the company's resilience to changing macroeconomic conditions. On Slide 17, we review CVH individual financial position and Telecom's dividend payment. As of September 25, CVH had a cash and cash equivalents balance of ARS 5.9 billion, equivalent to USD 4.3 million, of which $4.1 million are denominated in dollars. On November 10, 2025, Telecom's Board, by powers delegated at the Annual Shareholders' Meeting approved a dividend in kind and in cash for a total market value of ARS 220.5 billion or approximately $150 million at a ratio of 0.091837 2030 global bonds to be paid immediately and ARS 13.633 to be paid on November 25 for each share of Telecom. As of today, CVH through its interest in Telecom received 160.7 million 2030 global bonds with a market value of ARS 74.7 billion or -- I'm sorry, I think I got the number wrong there. But as of today, CVH through its interest in Telecom received 2030 global bonds with a market value of approximately ARS 74.7 billion and $51.8 million. In turn, pursuant to the current foreign exchange regulations Section 3.16.3.7 and to ensure Telecom's right to access the official exchange rate as has happened in 2024, CVH's Board of Directors has decided not to exercise the power that the shareholders have vested in the Board at the Annual Ordinary and Extraordinary Shareholders Meeting held on April 2025 to reverse the reserve for liquid results and in due time, call an extraordinary shareholders' meeting so that the shareholders' chance to reverse partially the reserve for illiquid results for the payment of dividends once the 90-day period of set regulations have elapsed. That concludes with our comments. We are now ready to take your questions. Drew?

[Operator Instructions] It appears that we have no questions at this time. I would like to return the program to Mrs. Olivieri for closing remarks.

Thank you, Drew. I'd like to thank you all for your interest in CVH. Should you have any questions in the future, do not hesitate to contact our IR team. Have a great afternoon.

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