Grupo Televisa Incurs Loss in Q3, Revenues Improve Y/Y
Mexican pay-TV and broadcasting behemoth Grupo Televisa S.A.B. (TV) reported mixed financial results for the third quarter of 2014. Net loss in the reported quarter was approximately $13.5 million compared with a net income of $169 million in the year-ago quarter. Quarterly loss per Global Depository Shares (GDS.TO) stood at 2 cents in contrast to the Zacks Consensus Estimate of earnings of 17 cents.
Quarterly consolidated net revenue of around $1,463 million reflects an improvement of 5.7% over the prior-year quarter. Televisa currently carries a Zacks Rank #3 (Hold).
Gross margin came in at 47.8% compared with 48.3% in the year-ago quarter. Consolidated operating income was $41.3 million, down by a whopping 89% from the prior-year quarter. Operating margin was a mere 2.8% compared with 27% in the year-ago quarter. Capital expenditure, during the reported quarter, was approximately $24.6 million.
At the end of third-quarter 2014, Televisa had approximately $2,304.5 million in cash and marketable securities and $5,701 million of outstanding debt compared with $1,572 million of cash and marketable securities and $4,624.3 million of outstanding debt at the end of 2013. At the end of the reported quarter, the debt-to-capitalization ratio was around 0.47 against 0.43 at the end of 2013.
Content Segment
Quarterly total revenue came in at $628.4 million, down 3.4% year over year. Operating profit was $299.1 million, down 8.5% year over year, while operating margin was 47.6% compared with 50.2% in the year-ago quarter. Quarterly royalty from Univision was a record-high $87.4 million, up 22.4% year over year.
Within this segment, Advertising revenues totaled $445.1 million, down 6.4% year over year. Network Subscription revenues were $53.2 million, indicating a decrease of 17.6% from the year-ago quarter. Licensing and Syndication revenues were $130.1 million, up 17.6% year over year.
Sky Segment
Quarterly revenues came in at $331.3 million, up 9.5% year over year. Operating profit was $158.1 million, up 12.2% year over year. Quarterly operating margin was 47.7% compared with 46.5% in the year-ago quarter.
Telecommunications Segment
Quarterly revenues were $392.6 million, up 21.3% year over year. Operating profit totaled $146.6 million, up a substantial 34% year over year. Operating margin came in at 37.4% compared with 33.8% in the year-ago quarter.
Other Businesses Segment
Quarterly revenues were $143.3 million, up 3.5% year over year. Operating income stood at $11.2 million, down 7% year over year. Operating margin was 7.8% as against 8.7% in the year-ago quarter.
Subscriber Statistics
As of Sep 30, 2014, Televisa had 3,370,286 Video subscribers; 2,165,641 Broadband Internet subscribers; and 1,147,897 Telephony subscribers, which together constitutes 6,683,824 revenue generating units (:RGU) in the Telecommunications segment. The company also had 6,517,735 net active Satellite TV subscribers, up 2.5% year over year. In the reported quarter, the Sky segment added 160,183 net active subscribers.
Our View
Televisa is likely to gain significantly from its ownership stake in the U.S. broadcaster Univision Communications Inc. In 2007, Univision was acquired by a consortium led by billionaire Haim Saban. Other investors in the group were Madison Dearborn Partners, Providence Equity Partners, TPG and THL Partners.
At present, the owners of Univision are exploring strategic options to sell the company and may also consider an initial public offering (IPO) in 2015. Univision’s owners have held talks with CBS Corp. (CBS), Time Warner Inc. (TWX) and Viacom Inc. (VIAB) regarding this, however, nothing concrete has emerged so far. According to industry rumors management is expecting more than $20 billion from the Univision sale.
In 2012, Televisa started investing in Univision and currently effectively holds a 38% (after converting debt into equity) stake in the company. Moreover, Televisa has the scope to buy another 2% stake of Univision within the next three years. Consequently, the Mexican broadcaster is positioned to gain significantly from Univision’s sale.
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