Grupo Clarín S.A. (GCLA) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Grupo Clarin's conference call. Today, the team will discuss results for the full year and last quarter of 2025 as detailed in the earnings release distributed yesterday, March 10. My name is Nick, and I will be your conference operator for today. This call is for investors and analysts only. Questions from the media will not be taken at this time. If you are a member of the media and have questions, please contact FIG Corporate Communications. Comments made during today's call may contain forward-looking statements regarding Grupo Clarin's 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 Grupo Clarin's 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 Grupo Clarin in Buenos Aires at 5411-4309-7104. The webcast presentation is available at ir.grupoclarin.com under the Financial Information section. I would now like to introduce today's speakers, Ms. Samantha Olivieri, Head of Investor Relations. For the question-and-answer session, she will be joined by Mr. Ivan Acevedo, Controller; and Mr. Marcelo Boncagni, Audit Manager. It is now my pleasure to turn the call over to Ms. Olivieri. Please go ahead.

Thank you, Nick. Good morning, everyone. Let me quickly outline the agenda for today's call. We will start with a brief macro overview, followed by the discussion of the company results and financial position. Later, we will review the current ownership structure of the company. Let's move on to Slide 4. In 2025, Argentina's economic performance was shaped by the midterm electoral cycle and the government's goal of consolidating disinflation while maintaining macroeconomic stability. Two key developments supported this process. First, the agreement reached with the IMF in April, securing USD 15.5 billion disbursement, which increased IMF's debt to nearly $55 billion and raised Central Bank's gross international reserves to around $39 billion. At the same time, a new banded floating exchange rate regime was introduced, while FX restrictions were removed for individuals and leased for corporations. Second, the FX stabilization arrangement reached with the U.S. Treasury in October, which included a USD 20 billion currency swap facility. The use of $2.5 billion from this line was key to sustaining the exchange rate regime amid strong FX demand ahead of elections. Two aspects of the economy performance stand out. The first was a preservation of fiscal discipline despite the electoral cycle with the primary fiscal balance estimated at around 1.4% of GDP and the overall fiscal balance posting a surplus of approximately 0.2% of GDP. The second was the continuation of the disinflation process. Consumer price inflation declined significantly during the year, falling from 118% at the end of 2024 to approximately 32% by the end of 2025. However, the adjustment process was not without costs. Uncertainty surrounding the sustainability of the exchange rate regime and the electoral outcome triggered a sharp increase in portfolio dollarization ahead of the elections. This pushed the exchange rate towards the upper limit of the band and led to higher country risk, which climbed to above 1,000 basis points and more volatile peso interest rates slowing activity and private consumption. Despite this episode, real GDP expanded by approximately 4.4% in 2025, largely reflecting the statistical carryover from the recovery that began in the second half of 2024. This growth was mainly driven by financial intermediation, agriculture, energy and mining. While fiscal performance remains solid, developments in the external sector continued to represent a key source of macroeconomic vulnerability. Although Argentina recorded an energy trade surplus close to USD 8 billion, supported by the expansion of oil and gas and production in Vaca Muerta, the overall good trade surplus measured on accrual basis according to index methodology declined by 40% during the year, narrowing from USD 18.9 billion in 2024 to USD 11.3 billion in 2025. At the same time, demand for foreign currency and FX hedging reached record levels following the removal of FX restrictions for individuals. Gross purchases of foreign currency for savings approached $42 billion. Looking ahead, the favorable outcome of the midterm elections and the financial support provided by the U.S. Treasury create a window of opportunity for Argentina in a nonelection year. The main challenge for the government will be to consolidate macroeconomic stabilization while advancing structural reforms to support the sustained economic growth. The recent approval of the national budget, the first of the current administration reinforces fiscal balance and the forbidance of monetary financing of the treasury as key pillars of the economic program. Private sector expectations remain more cautious than official projections. According to the latest REM survey based on the projections of the top 10 participants, real GDP is expected to grow by around 3% in 2026 compared with the government's forecast of 5%. Inflation is projected to reach approximately 27.8% by year-end, above the 10.1% estimated in the national budget. Regarding the external sector, financing needs are expected to remain significant. Although export revenues from agriculture, energy and mining are projected to increase by USD 9 billion, the trade balance could face renewed pressure due to stronger import growth, a widening tourism deficit and the normalization of corporate profits and dividend payments abroad. Under this scenario, external financing through capital markets will remain important. In recent months, foreign currency debt issuance by private companies and provincial government has become an important source of funding, although the sustainability of this channel will depend on global financial market conditions. Restoring sovereign access to debt markets remains a critical factor for the sustainability of the stabilization plan. Although Argentina's country risk has declined significantly following the elections and currently stands at around 500 basis points, it remains above the regional peers. The Central Bank's recently announced reserve accumulation program already in progress is expected to contribute to a gradual normalization of sovereign risk conditions. Finally, it will be important to monitor how changes in Argentina's productive structure affect household income and employment, particularly since sectors such as industry and construction, which have been recovering at a slower pace, remain major sources of employment in the economy. Having gone through the macro overview, please turn to Slide 6 for a quick review of some of the highlights for the full year of 2025. We returned to profitability, reporting a gain of ARS 43,987 million, reversing the net loss recorded in 2024. This performance was driven by a recovery in activity and improved profitability margins. Following a weak period in 2024 after the jump in the FX rate of December 2023 and the initial effects of the government sterilization measures, total revenues recovered as macroeconomic conditions improved. Revenues increased by 16% during the year, mainly driven by a recovery in the advertising market. We had a marked improvement in EBITDA margin, mainly the result of school text book sales in second quarter '25 and higher advertising revenues, albeit compared to a weak 2024. The improvement in economic performance and the decrease in inflation rate had a positive effect on EBITDA and working capital, allowing our subsidiary, AGEA to significantly reduce its short-term debt. In addition, it applied foreign currency liquidity to cancel its cross-border debt. Having gone through the highlights overview, please turn to Slide 7 for a brief analysis of Grupo Clarin's financial performance for the full year of 2025. The company has reflected the effects of the inflation adjustment adopted by Resolution 777/18 of the Argentine Securities Commission, CNV, which establishes that 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 full year and last quarter 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 December 2024 contain the effect of year-over-year inflation as of December 2025, which amounted to 31.5%. In this presentation, we included some figures in historical values for the sake of clarity. Revenues for the full year 2025 increased by 61.8% to ARS 480.1 billion in nominal, above average inflation. Considering IAS adjustment, revenues increased by 16% from ARS 465.5 billion to ARS 540 billion, mainly due to higher advertising revenues in real terms, especially in the Broadcasting and Programming segment and higher circulation revenues. Advertising revenues are the main sources of revenue of the Broadcasting and Programming segment, representing approximately 70% on a yearly basis. EBITDA in nominal terms reached ARS 97.6 billion from ARS 30.4 billion and ARS 109.4 billion from ARS 43.9 billion in real terms, driven by the increase in advertising revenues and the EBITDA generated by the school textbook sales. Revenues for Broadcasting and Programming and for Digital & Printed Publications represented 48% and 45% of total revenues, respectively, while revenues for the other segment represented 7%. Net income for the period attributable to equity shareholders in real pesos amounted to ARS 45 billion from the 2024 negative figure of ARS 5.3 billion. The increase in net income was mainly the result of higher EBITDA, partially offset by higher negative net financial results explained primarily by a negative inflation adjustment result compared to a positive result in 2024 generated by an active net monetary position. Moving on to Slide 8. Revenues for the fourth quarter '25 increased by 34.6% to ARS 135.7 billion in nominal pesos and EBITDA increased to ARS 26,527.6 million in nominal pesos. If we consider inflation adjustment, revenues increased by 2.4%, while EBITDA increased by 47.9%, mainly due to lower cost of sales in the Digital & Printed Publications related to lower printed circulation and cost adjustments carried out in 2024 and higher programming revenues in the Broadcasting and Programming segment from price increases for cable TV services and the renegotiation of some programming agreements, which impacted the revenues and sales of the segments of our subsidiary, AGEA. Net income for the period attributable to equity shareholders in real pesos was ARS 1.1 billion. The decrease in net income was mainly attributable to negative net financial results and income from unconsolidated affiliates versus positive figures in 2024, partially offset by higher EBITDA. The variation in financial results is mostly explained by the negative inflation adjustment versus the positive results in 2024 as a result of an active monetary position. Slide 9, please. As the graphs show, revenues increased 2.4% in real terms, while costs decreased 4.7%, resulting in an expansion of EBITDA margin in fourth quarter '25. The increase in EBITDA was mainly driven by lower cost of sales in the Printed & Digital Publications segment and higher programming revenues. Next slide, please. In Slide 10, we review the revenue breakdown and performance. Our main sources of revenue are advertising, circulation and Paywall and programming. Advertising is typically tied to the performance of Argentina's economy. Advertisers ad spend budget is normally approved at the beginning of the year. The challenging macro scenario during 2024 with a drastic fall of economic activity and the acceleration of inflation, the side effects of the policies implemented by the new administration to correct the inherited economic imbalances and the change in the national government's policy with respect to official advertising resulted in advertising revenues decreasing 40% in real terms in the first half of 2024, while lower annual inflation rate during the fourth quarter and a degree of economic activity recovery resulted in a recovery in the advertising market, a trend that has continued in the first 9 months of 2025, while the uncertainty generated by the midterm elections and the recovery in activity in the fourth quarter '24 resulted in advertising revenue trend reaching a plateau in fourth quarter '25. It is worth mentioning that as advertising in the Printed & Digital Publications is increasingly digital and advertising in the Broadcasting and Programming segment does not have a variable cost, increases in advertising revenue are reflected directly in EBITDA. Circulation and payable revenues include traditional newspaper and magazine sales, optional products and book sales and digital subscription and Paywall among others. The shift in readers' behavior and corporate subs translated in paying digital subs increasingly steadily since the Paywall was launched. The pricing policy for traditional circulation has been to increase newspaper prices on and even above inflation, while copies sold have decreased 9.3% year-over-year in fourth quarter '25. In addition, second quarter '25 includes higher revenues from school textbooks, government biddings. Programming sales include the sale of our TV segments to cable TV operators and OTT platforms and the content production for third parties, which are cyclical. The revenues for TV segments are generally tied to the number of subscribers that pay TV operators have and their ability to increase the price for their service. Thanks to the higher price increases for cable TV services during 2024 and 2025 and the renegotiation of some programming agreements during this year. Programming revenues increased above inflation in this quarter on a year-over-year basis. Please move to Slide 11, where we will discuss the breakdown of costs and expenses. Our main costs are salaries, social security and benefits to personnel, printing and other editorial products costs, including paper and other raw materials, fees for services, programming, coproduction and other costs related to production aired by ARTEAR, maintenance costs and distribution costs of editorial products. As increases to compensate for the loss of purchasing power of the salaries following the high inflation registered during first quarter '24 were granted with a delay during the remainder of that year. Labor costs increased above inflation during the first 9 months of 2025, mainly the result of the carry-on effect of the deceleration of the inflation rate, a trend that reverted in the fourth quarter. Printing and other variable costs and distribution costs decreased because of the lower print circulation and an adjustment in variable costs registered during the fourth quarter of '24, partially offset by higher costs related to the bidding for school textbooks. Programming costs increased due to a more appealing and expensive TV lineup and advertising and promotion expenses increased due to the expenses related to Clarin's 80th anniversary and lower eliminations. Nonetheless, total costs increased below the increase in revenue, resulting in an expansion of EBITDA margin. We will discuss the breakdown by segment shortly, but first, let's review the debt financial position as per Slide 12. The total debt as of December 2025 decreased 13.8% to ARS 19.6 billion. The improvement in operating performance and the lower inflation rate have allowed AGEA to cancel back bank overdrafts and short-term debt incurred in 2024 and to repay the short-term operating debt it had incurred due to the deterioration of the EBITDA at the end of 2023 and beginning of 2024. Furthermore, the decrease in total debt is also explained by lower debt at Radio Mitre. These effects were partially offset by higher debt at Carburando and the effect of the higher increase in the exchange rate relative to inflation on foreign currency debt. Approximately 93.6% of our total debt or $12.6 million and 56.8% of cash and equivalents or $35.5 million are in U.S. dollars. Overall, we continue to show a manageable debt profile with low leverage. Moving on to the segment breakdown. We will begin with Broadcasting and Programming division on Slide 14. Revenues increased by 3.4% to ARS 73.5 billion in constant pesos in fourth quarter '25 compared to ARS 71.1 billion in fourth quarter '24. This was mainly due to higher programming revenues as a result of higher subscription prices charged by cable TV operators to their clients and the renegotiation of some programming agreements. Cost of sales increased by 1.8% to ARS 35.9 billion. The increase was mainly due to higher salaries and social security expenses. Selling and administrative expenses decreased by 7%. As a result, during this period, adjusted EBITDA increased reaching ARS 23.4 billion and margin increased to 31.8% from the fourth quarter '24 figure of 28.9%. Prime time for Channel 13 audience share decreased 2%, while total time audience share decreased by 4.1%, mainly as the result of a better performance of our competitor, Telefe. Our audience performance has allowed us to reach 32.5% of advertising market share. Now let's move on to the Digital & Printed Publications segment on the next slide. Total revenues increased by 0.7% in real terms to ARS 60.7 billion in fourth quarter '25, mainly as a result of higher logistics services of editorial products revenues partially offset by lower circulation revenues driven by books and other optional product sales, lower traditional newspaper circulation and lower output price increases applied during this quarter following the steep price increases carried out in the second half of 2024 for our Digital Services. Advertising revenues remained stable when compared to fourth quarter '24. The segment has been transformed radically as traditional paper gives way to new digital formats. Digital advertising has gained share as a percentage of total advertising share revenue and Paywall revenues are gaining share as a percentage of newspaper circulation revenues. Traditional paper copy circulation showed a decrease from levels for the same period of 2024 to 34,200 average daily copies, while Paywall subs reached 646,500 as of fourth quarter '25, slightly lower than fourth quarter '24. Cost of sales decreased by 18.9% to ARS 30.2 billion in fourth quarter '25 compared to ARS 37.3 billion in fourth quarter '24, mainly the result of lower variable costs in printing and other cost of editorial products related to optional products and the decrease in traditional newspaper circulation and to an adjustment registered in fourth quarter '24, lower salaries and social security expenses, partially offset by higher fees for services. Selling and administrative expenses increased by 4.9% to ARS 25.1 billion in fourth quarter '25, mainly due to higher fees for services, higher bad debt charges and higher advertising and promotion expenses related to the [indiscernible] Clarin's 80th anniversary, partially offset by lower distribution costs. Regarding the other segment, turn to Slide 16. During fourth quarter '25, net sales in real terms increased by 1.2% to ARS 8.9 billion. This increase was mainly the result of corporate fees, which are eliminated in consolidation. EBITDA resulted in negative ARS 1.4 billion. Gestion Compartida is a shared services company and derives its revenues from administrative and corporate services rendered to Grupo Clarin and its subsidiaries, which are eliminated in consolidation. During the last years, it has been increasing the participation of third-party revenues in its total revenues, generating new sources of income. It is also worth mentioning that Gestion Compartida has been expanding its services, finding growth opportunities through joint ventures such as Quanix for HR technology for staff management and Hiberus Argentina, IT consulting, Cloud services, SaaS consulting, software development, digital transformation, data analytics and media technology. Consequently, some of the revenue, staff and costs formerly allocated in Gestion Compartida and AGEA in the case of [indiscernible] are now allocated in these unconsolidated affiliates. Having gone through the segment breakdown, please refer to Slide 18 for a review of the ownership structure. As of today, 80% is owned by the controlling shareholders and total float is approximately 20%. Regarding the composition of the float, as shown on the slide, approximately 19% is represented by GDS and 81% is local. That concludes our comments. We will now take your questions. Nick, we are ready for questions, please.

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

Thank you, Nick. I want to thank you all for your attendance today. We appreciate your interest in our company. Please do not hesitate to contact us if you have any questions. I look forward to speaking with you about first quarter '26 results. Have a great day.

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