Cablevisión Holding S.A. ($CVH)

Good morning, and welcome to Cablevisión Holdings Conference Call. My name is Danish, and I will be your conference operator today.[Operator Instructions] Today, we will discuss Cablevisión Holdings First Quarter 2023 results. This call is for investors and analysts only. Therefore, questions from the media will not be taken at this time. However, if you are a member of the media and have questions, please contact FIG Corporate Communications following the call. I will now introduce our speaker, Ms. Samantha Olivieri, Head of Investors and Mr. Ignacio Solari, Senior Analyst. Additionally, Mr. Ignacio Driollet, Executive Director and Chairman, will also be available for today's Q&A session. The team will be discussing the results as per the earnings release distributed last Monday, May 11, if you have not received the report or need any assistance during today's call, please contact FIG Corporate Communications in New York at (917) 691-4047 or the company in Buenos Ares at 54 (11) 4309-3417. CVH has also posted the webcast presentation that could be found at www.cablevisionholdings.com/investors. Comments made by management may contain forward-looking statements about Cablevisión Holding future performance, plans, strategies and targets. Such statements are subject to uncertainties that could cause Cablevisión Holding actual results and operations to differ materially. Such uncertainties include, but are not limited to, the effect of the impact of new or ongoing industry and economic regulation, possible changes in demand of Cablevisión Holding products and services and the effect of more general factors such as changes in general market, economic or in regulatory conditions. Please refer to the disclaimer in the earnings report or presentation for additional information regarding forward-looking statements. It is my pleasure to turn the call over to Ms. Samantha Olivieri. Please go ahead.

Thank you, Danish. Good morning, 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 statements and operating results, followed by a review of the financial position. I will now pass the call to Ignacio for the macro overview.

Thank you, Samantha. Good morning, everyone. Please move to Slide 4 for the macro overview. Argentina's economic performance in 2025 was largely defined by the government's effort to consolidate this inflation while preserving macroeconomic stability in the context of the midterm elections. Fiscal discipline and disinflation stood out as major achievements. The primary fiscal balance closed 2025 with a surplus of 1.4% of GDP, marking two consecutive years of fiscal consolidation. Inflation fell sharply, dropping from 118% at the end of 2024 to about 32% by year-end 2025. Despite volatility around elections, real GDP grew on average by 4.4%, mainly driven by agriculture, energy, mining and financial intermediation and largely reflecting the statistical carryover from the recovery that began in the second half of 2024. However, external accounts remain a source of vulnerability while energy exports generate the surplus, the overall goods trade surplus narrowed from USD 19 billion to USD 11 billion and demand for foreign currency surged following the easing of FX restrictions, accumulating USD 31.2 billion over the year. In 2026, Argentina's economy is navigating under global uncertainty linked to the Middle East conflict. Inflation is accelerating beyond expectations, while private consumption and overall activity have remained so far this year. Nevertheless, the current equilibrium in public accounts and the current account of the balance of payments placed Argentina in a stronger position than in previous episodes against external shock. Despite a decline in the official exchange rate and no growth in the money supply, monthly inflation in March reached 3.4%, marking 9 consecutive months of increases. This acceleration in consumer prices was mainly driven by adjustments in regulated tariff, seasonal factors and higher international oil prices amid rising geopolitical tensions in the Middle East. However, March is expected to representative of this inflationary surge with April figures likely to show moderation. Economic activity, measured by the monthly economic activity estimator reached historical record high in January, rising 9% compared to December 2023 before declining by 2.6% in February. However, the February drop is less representative given the shorter number of days in the month. Overall, the level of activity in the first quarter of 2026 is expected to be broadly similar to that observed in the last quarter of 2025, reflecting a significant divergence across sectors. Fiscal discipline has so far been preserved as the primary balance posted a surplus of approximately 0.5% of GDP and the financial balance a surplus of around 0.2% of GDP in the first quarter, despite real tax revenues continuing to decline, marking 9 consecutive months of contraction. On the external front, Argentina remains strong, supported by robust inflows from both trade and financial channels. It is worth noting that in January, the Central Bank moved toward a more flexible exchange rate regime with inflation adjusted banks designed to avoid further real appreciation. This framework serves as an intermittent step toward a greater exchange rate flexibility, supported by a reserve accumulation program that is advancing faster than anticipated. The Central Bank has purchased more than USD 7 million in 2026 and gross international reserves have increased by approximately USD 4.5 billion during the year. Despite that, the peso has gained strength with official exchange rate appreciating around 4% year-to-date. However, the outlook will depend on the recovery of the economic activity, seasonal FX inflows and critically the demand for foreign currency for savings and tourism in a year marked by the FIFA World Cup. Recurring foreign access to the markets remain a critical factor for the sustainability and digitalization program. Although Argentina's country risk has declined significantly following the elections, it remains above that of regional peers and has shown resistance to breaking below the 500 basis point level. Looking ahead, the 2026 outlook offers a window of opportunity in a nonelection year to further consolidate macroeconomic stability and advance structural reforms. However, partly due to uncertainty stemming from the Middle East conflict, projections for key fundamentals such as inflation and economic activities have been revised. According to the latest Central Bank survey, based on the projections of the content participants, inflation in 2026 is expected to reach 33%, while GDP growth is projected to average 2.5%. The inflation forecast is probably similar to 2025, implying a pause in the disinflation process. Yet this pattern is not unusual compared to other successful stabilization programs such as Israel in the mid-1990s and Uruguay in the early 2000s, which on average, took more than 7 years to bring inflation down to single digits.Our activity, if growth materializes as projected, Argentina will achieve two consecutive years of disinflation and expansion under fiscal balance, an unprecedented outcome in historical perspective. Still, heterogeneity of growth across sectors and regions and its impact on employment will be critical in shaping social approval of the economic program. Having gone through the macro overview, I will now pass the call back to Samantha.

Thank you, Ignacio. Slide 6 shows the highlights for first quarter '26. On February 24, 2025, our subsidiary, Telecom Argentina announced the acquisition of shares representing 99.999625 of Telefónica Móvil Argentina or TMA, a company incorporated in Argentina, which provides mobile and fixed telephony, fixed broadband and video services nationwide in Argentina. Consequently, figures for the first quarter '26 contain the full effect of the incorporation of TMA results, while figures for the first quarter of 2025 include only one month. EBITDA, excluding TMA increased compared to 2025, resulting in a higher EBITDA margin of 38% in first quarter '26, up from 33.6% in first quarter '25, in part the result of the deconsolidation of the fintech subsidiary, Micro Sistemas as a result of the joint venture with Banco Macro, which represented a 1.4% margin impact. Telecom continues to exhibit a solid financial position following the indebtedness for the acquisition of TMA and the liability management transactions carried out in 2025 and the first quarter '26. During first quarter '26, CVH shareholders resolved to pay a dividend in time for the total of the Global bonds 2030 received as dividend from Telecom and a cash dividend for USD 4 million. The payment was made on March 5 in the local market for a total gross market value of ARS 413.81 per share with a total market value of approximately $53 million. Slide 7 shows the key financials for the first quarter '26. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Comision 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 quarter of 2026 include the effects of the adoption of inflationary accounting in accordance with International Accounting Standard 29. For comparative purposes, the results restated by inflation corresponding to March 2025 contain the effect of the year-over-year inflation as of March 2026, which amounted to 32.6%. In this presentation, we included some figures in historical values for the sake of clarity. In addition, the reported figures corresponding to the first quarter of 2026 include the effect of the incorporation of the results from TMA from 1st March 2025, hence, the results for the first quarter '26 are comparable to the results of the first quarter '25. We included some figures excluding the effect of TMA acquisition for comparison. CVH owns 39.08% stake in PO and a controlling shareholder of Telecom Argentina, it consolidates 100% of its operations. Revenues in nominal terms increased 72%. In constant currency, revenues grew for first quarter '26 to 30.5% from ARS 1,806.1 billion to ARS 2,357.7 billion, mostly driven by the incorporation of revenue from TMA and by higher mobile ARPU in real terms in Argentina, thanks to the effective pricing policy and the decrease in inflation rates, partially offset by lower equipment sales and fixed telephony and data services revenues and the de-consolidation of Micro Sistemas. EBITDA reached approximately ARS 814.2 billion in constant currency, a 36.9% increase compared to first quarter '25, mainly driven by the incorporation of TMA's EBITDA for the fourth quarter and by cost reductions, resulting in a higher EBITDA margin of 34.5% in first quarter '26 compared to 32.9% in first quarter '25. EBITDA nominal amounted to ARS 819.1 billion, 83% higher than nominal EBITDA for the first quarter, while average inflation for the same period was approximately 32.7% at the end of period year-over-year inflation amounted to 32.6%. Net income resulted in ARS 628.9 billion from ARS 115.1 billion reported during first quarter '26. This increase in net income is mainly explained by financial net results, mainly due to higher positive foreign exchange differences as a consequence of the appreciation of the peso against the dollar reported during the first quarter of 2026, combined with inflation, generating positive exchange differences in liabilities consolidated exchange differences on liabilities in that currency greater than those reported in the previous year when inflation exceeded the exchange rate difference of the currency and a higher positive charge for inflation adjustment, partially offset by higher interest on loans given the increase in financial debt, the EBITDA from the incorporation of CMA for the full quarter and cost efficiencies at Telecom stand-alone level. These effects are partially offset by higher income tax and higher amortization from the incorporation of CMA. The equity shareholders' net income for the period amounted to ARS 234.7 billion and are mainly the result of CVH stake in Telecom, the personal assets tax at CVH level following the change in criteria established by the fiscal authority in December 2024 regarding the basis for its reactivation, negative financial results from holding of bonds collected from telecoms in kind dividend payment during 2025 and negative FX results as a result of the peso appreciation on foreign currency assets at CVH level, partially offset by positive inflation adjustments and interest gains. Now let's continue on Slide 8 for a discussion of the operating results for the first quarter '26, excluding the effect of the incorporation of TMA results. Revenues in the first quarter '26 increased by 0.2%. 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 in mobile services even in spite of the acceleration of the inflation rate over the past months. Revenues from equipment sales decreased 39.7%, mainly as a result of prices of equipment sold increasing below inflation and lower quantities sold. Fixed telephony and data services revenues registered a decrease of 10.4%, explained by a decrease in fixed telephony copper accesses and lower ARPU for these services, which cannot match inflation, while other revenues from services decreased mainly as a result of the de-consolidation of Micro Sistemas following the joint venture with Banco Macro. The main source of our revenues is our fixed infrastructure. Broadband, Pay TV and fixed telephony and data services amounted to 49.6% of the total. Mobile service participation has been increasing, reaching 46.3% from 42.6% in first quarter '25, driven by the decrease in share of equipment sold over total revenues and higher ARPU increases for mobile services. EBITDA in real terms increased 13.5% and margin increased to 38%, higher than the 33.6% margin of first quarter '25, mainly as a result of cost efficiencies obtained by the company and the de-consolidation of Micro Sistemas. On Slide 9, we review some of the effects of the incorporation of TMA. The consolidation from the moment of the acquisition by Telecoma's TMA operation includes results for the full quarter of 2026 and 1 month of the first quarter 2025. As of March 2026, TMA had 19.2 million mobile subscribers, including machine-to-machine subs, 1.6 million broadband subs, 2.1 million fixed telephony subs, including IP lines and 410,000 pay TV subs. Revenues of TMA included in the first quarter '26 consolidated figures amounted to ARS 853.5 billion and EBITDA resulted in ARS 241.9 billion with a 28.3% 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 higher. Now let's move on to Slide 10. Mobile revenues included TMA represented approximately 52.4% of our revenues and increased 50.3% in real terms when comparing first quarter '26 versus first quarter '25, mainly explained by the incorporation of TMA and higher ARPU in real terms in the quarter in Argentina, excluding this effect, thanks to the decrease in year-over-year inflation and the carry-on effect of price increases done during 2025 and first quarter '26. and an increase in mobile revenues in the Paraguay operation due to the appreciation of guarani versus the Argentine peso. Mobile prepaid subs, which generate less revenue decreased as a result of the effect of the change in criteria regarding how many days can elapse without a client recharging his credit before it is disconnected with little to no effect on revenues for this service. Excluding the effect of TMA, mobile services revenues reached ARS 696 billion in constant currency and increased 9% in real terms. Personal Argentina clients decreased 8.9% to 19.4 million, of which postpaid clients amounted to 41%, mostly the effect of the before mentioned change in criteria. As of March 2026, TMA had 19.2 million mobile subscribers, including machine-to-machine subs, 49.3% of the clients are postpaid. In Argentina, in a highly competitive environment, Personal ARPU restated in constant currency increased by 18.8% to ARS 10,766.4 in first quarter '26. Monthly churn increased to 2.4% from 2% in first quarter '25. Please turn to Slide 11. Revenues for fixed services, including broadband cable TV and fixed telephony and data services increased by 18.9% in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, revenues for fixed services remained relatively stable, decreasing 1.8%, mainly due to lower fixed telephony and data services and lower other revenues from services following the de-consolidation of Micro Sistemas, partially offset by higher Pay TV revenues. Legacy copper fixed voice services continues experiencing a reduction in accesses, partially offset by an increase in IP telephony lines. On the B2B services, telecom 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 center and application services through sales, consulting, management and specialized and targeted postpaid customer services. Internet services revenues increased 19.1% year-over-year in real terms, mainly driven by the incorporation of TMA. Excluding the effect of TMA, Internet services revenues remained at similar levels than the previous year. Broadband subscribers increased 3.3% to 4.2 million, while monthly churn increased to 1.3% in first quarter '26 from 1.2% in first quarter '25. There is growth in the fiber-to-the-home segment, resulting in an increase in average fee. ARPU in real terms for first quarter '26 decreased to approximately ARS 28,389.6. As of March 2026, TMA had 1.6 million broadband subscribers, of which more than 95% are fiber-to-home. 98% of customers have accesses with speeds of 100 megabytes or higher versus 90% in first quarter '25. Moving to the cable TV subscribers. The customer base increased to 3.5 million, mainly explained by the success of Flow Flex, which is 100% digital with no decoder or installation needed. Flow unique customers achieved 1.8 million, a 16.5% increase from figures observed over a year ago. For its proposal as a content aggregator, flows includes not only linear TV, streaming services, series, on-demand movies, documentaries and co-productions, but also music, gaming and exclusive events such as Lollapalooza. During this quarter, Flow announced the first exclusive partnership with Netflix, incorporating the OTT as a new option within Flow Plus. ARPU in real terms increased by 0.3% to ARS 20,077.8 during first quarter '26, mainly due to the decrease in year-over-year inflation and the carry-on effect of price increases done during 2025, lower discounts granted to customer -- according to customer retention policy and premium services revenues. Monthly churn increased to 1.6%. As of March 2026, TMA contributed with 410,000 pay TV subs. Now let's move on to Slide 12 for a review of the cost structure before we discuss quarter-over-quarter EBITDA performance. Among the most significant operating costs and expenses are salaries, fees for services, maintenance, materials and supplies costs and taxes and fees with the regulatory authority. On Slide 13, we show the performance of EBITDA and the behavior of the different components of revenues and costs. The company continues with its cost management efforts and has positive results and gained productivity. Before the effect of TMA, operating costs, excluding the cost of equipment and handsets decreased in real terms, 4.9%. This is a result of efficiencies obtained by the company, mainly lower fees for services, maintenance, materials and supplies, lower interconnection and transmission costs, lower commissions and advertising and lower salaries and severance payments, partially offset by higher expenses related to the increase in revenues such as taxes and fees with the regulatory authority and programming and content costs and by other operating expenses, including bad debt. Cost of equipment and handsets before the effect of TMA decreased 31.6% as a result of lower cost of handsets sold and lower quantities and total operating costs, including the cost of equipment and handsets before the effect of the incorporation of TMA decreased 6.5% with an increase in revenues. Thus, EBITDA margin before the effect of the incorporation of TMA reached 38%, higher than the 33.6% margin of first quarter '25, explained by cost efficiencies and the de-consolidation of Micro sistemas. EBITDA from the incorporation of TMA for the first quarter '26 resulted in ARS 241.9 million with a 28.3% EBITDA margin, lower than the margin before this effect. Therefore, consolidated margin resulted in 34.5%, it should be noted that these results include the effect of new employment termination agreements and severance expenses. Excluding this effect, the margins would have been higher, while EBITDA margin for TMA stand-alone before severance payments has increased versus 2025 as a result of cost optimization efforts. Slide 14, please. First quarter '26 investments as a percentage of revenues was 21.8% or 18.4% before considering rights of use from leases, significantly higher than the same period of previous years, highlighting the commitment of the company for 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 the last quarter, the company continued with the deployment and upgrading of existing sites and expansion of the fiber-to-the-home network, including the 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 March 2026, we have reported a total financial debt of ARS 5,487.6 billion and net debt of ARS 4,400.6 billion, equivalent to USD 3.2 billion, relatively stable when compared to March 2025, even with higher debt in foreign currency, mainly the effect of lower FX variations versus year-over-year inflation. Of the total debt, 68.8% is mostly cross-border dollar denominated, but includes hard dollar local emissions, 20.6% is in Argentine pesos, including dollar-linked local emissions and the rest is in Juaranias and renminbi. During the past years, Telecom has been accessing the local and international debt markets for its financing needs and will do so for future potential needs. Exhibit 21 reflects the debt profile after the issuance of the Class 27 international note for $600 million. This transaction allowed the company to extend the average life of its debt and lower 2026 maturities, significantly improving its debt profile. Overall, the maturity profile of Telecom's debt is well balanced and manageable, reducing refinancing risk. Consolidated net debt over adjusted EBITDA coverage ratio as of the end of March 2026 was 1.5x, a significant achievement considering the new indebtedness for the acquisition of TMA, a testament of the company's resilience to changing macroeconomic conditions. Next slide, please. Finally, it is worth mentioning that thanks to the efforts to increase productivity and efficiency and the ability to increase prices as macroeconomic variables improve with the disinflation process, 2025 resulted in the first year with positive year-over-year trend in both revenues and EBITDA even before considering the acquisition of TMA, a turning point for the company and a trend that has continued in first quarter '26, which exhibits one of the highest margins since the merger with Cablevisión in 2018. That concludes our comments for today. We are now ready to take your questions. Danish?

[Operator Instructions] We have no questions. At this time, I would like to return the program to Ms. Olivieri for closing remarks. Over to you, ma'am.

Thank you, Danish. Thank you all for your attendance to this conference call today. Should you have any questions in the future, do not hesitate to contact our IR team. Have a great day.

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