In the Context of the Health Contingency, TV Azteca Announces 14% Reduction in Net Sales, to Ps.2,494 Million in 3Q20

MEXICO CITY, Oct. 27, 2020 /PRNewswire/ -- TV Azteca, S.A.B. de C.V. (BMV: AZTECACPO; Latibex: XTZA), one of the two largest producers of Spanish-language television programming in the world, today announced financial results for the third quarter 2020.

"The health contingency has represented an unparalleled challenge for the advertising market in Mexico, therefore, TV Azteca has seen a consequence of this situation in its sales," said Esteban Galíndez, CFO of TV Azteca.

"However, the superior quality of TV Azteca's products, and the recovery of viewership levels among key audiences, generate optimism on the recovery of the advertising market in 2021.  TV Azteca reinforces its commitment to making the best television for Mexican audiences, notwithstanding, with adjustments in the cost structure," he concluded.

Third quarter results

Net revenue for the period was Ps.2,494 million, 14% below the Ps.2,913 million for the same quarter of last year. Total costs and expenses decreased 13% to Ps.2,136 million, from Ps.2,449 million for the previous year.

As a result, the company reported EBITDA of Ps.358 million, in comparison to Ps.464 million a year ago. TV Azteca generated an operating income of Ps.120 million from operating income of Ps.201 million for the previous year.

The company registered net loss of Ps.77 million, compared to a net income of Ps.194 million for the same period of 2019.

Net sales

Advertising sales in Mexico decreased 16% to Ps.2,321 million, from Ps.2,754 million the previous year, as a result of lower demand for advertising space in the domestic media market, in the context of limited economic performance indicators, within the health contingency.

The sum of revenues of TV Azteca Guatemala and TV Azteca Honduras, as well as the company's content sales outside of Mexico, was Ps.60 million, compared to Ps.61 million the previous year.

Azteca Comunicaciones Perú reported revenue of Ps.113 million from Ps.98 million a year ago. The revenue resulted from telecommunications services and reimbursements from the Peruvian government for maintenance and operation of the fiber optic network.

Costs and SG&A Expenses

Total costs and expenses decreased 13% in the quarter as a result of production, programming, transmission and telecommunications services costs unchanged compared to the previous year — equivalent to Ps.1,995 million — together with a 69% reduction in selling and administrative expenses, to Ps.142 million, from Ps.454 million a year ago.

The reduction in selling and administrative expenses reflects the implementation of important strategies to boost operating efficiency, which translate into lower personnel expenses, fees and operating expenses this quarter.

The costs of Azteca Comunicaciones Perú were Ps.85 million, from Ps.94 million a year ago. The reduction results mainly from lower costs from the transmission infrastructure maintenance.

EBITDA and net results

The company's EBITDA was Ps.358 million, compared to Ps.464 million in the same period of the previous year. TV Azteca reported an operating income of Ps.120 million, from operating income of Ps.201 million a year ago.

Significant variations below EBITDA were the following:

Increase in foreign exchange gain of Ps.345 million, from a foreign exchange loss of Ps.177 million a year ago, as a result of the company's net monetary liability position in dollars, together with exchange rate appreciation this quarter, compared to a depreciation of the previous year.

A charge in the provision of taxes for Ps.184 million this period, compared to the benefit in the provision of taxes for Ps.548 million the previous year. The benefit a year ago was derived from the partial release of the deferred tax asset reserve, based on the analysis of the recovery of the company's tax losses.

TV Azteca registered a net loss of Ps.77 million in the quarter, from a net income of Ps.194 million a year ago.

Cash flow

The cash flows generated by operating activities during the period that ended on September 30, 2020, were Ps.913 million; however, the net cash flows from investing activities and the net flows from financing activities, were negative by Ps.154 million and Ps.1,262 million, respectively, so the company's cash in the period decreased by Ps.502 million.

Balance Sheet

As of September 30, 2020, TV Azteca's outstanding debt was Ps.14,410 million, in comparison to Ps.13,455 million in the previous year. The increase results from the effect of the depreciation of the peso on the debt balance in dollars.

The cash and cash equivalents balance at the end of the quarter, was Ps.1,782 million, in comparison with Ps.2,141 million a year ago. As a result, net debt of the company as of September 30, 2020 was Ps.12,628 million, in comparison to Ps.11,314 million in the previous year.

Strategic advisor

Derived from the adverse effects — current and future — from the health contingency on the media sector, the company continues to evaluate the possibility of hiring a strategic advisor to define alternatives that maximize the value of the company in the new environment.

Nine months' results

Net sales for the first nine months of 2020 were Ps.6,813 million, 22% lower than the Ps.8,732 million for the same period of 2019, as a result of lower demand for advertising in the context of deterioration of economic performance indicators, within the health contingency.

Total costs and expenses were Ps.6,585 million, an 11% reduction from Ps.7,368 million in the same period of the previous year, as a consequence of strategies that significantly boost efficiencies in content production and labour productivity, partially offset by the depreciation effect of the peso against the dollar, in costs related to the purchase of content abroad, denominated in dollars.

TV Azteca reported EBITDA of Ps.228 million, compared to Ps.1,365 million in the first nine months of the previous year. During the period, there was an operating loss of Ps.529 million, from an operating income of Ps.567 million a year ago. The company recorded a net loss of Ps.3,560 million, compared to a loss of Ps.82 million in the same period of 2019.

About TV Azteca

TV Azteca is one of the two largest producers of Spanish-language television programming in the world, operating four television networks in Mexico: Azteca uno, Azteca 7, adn40 and a+, through more than 300 owned and operated stations across the country. The company also operates TV Azteca Digital, the operator of several Mexico's most visited websites and social media platforms.

TV Azteca is a Grupo Salinas company (www.gruposalinas.com), a group of dynamic, fast growing, and technologically advanced companies focused on creating: economic value through market innovation and goods and services that improve standards of living; social value to improve community wellbeing; and environmental value by reducing the negative impact of its business activities. Created by Mexican entrepreneur Ricardo B. Salinas (www.ricardosalinas.com), Grupo Salinas operates as a management development and decision forum for the top leaders of member companies. These companies include TV Azteca (www.TVazteca.com; www.irtvazteca.com), Grupo Elektra (www.grupoelektra.com.mx), Banco Azteca (www.bancoazteca.com.mx), Purpose Financial (havepurpose.com), Afore Azteca (www.aforeazteca.com.mx), Seguros Azteca (www.segurosazteca.com.mx), Punto Casa de Bolsa (www.puntocasadebolsa.mx), Totalplay (irtotalplay.mx; www.totalplay.com.mx) and Totalplay Empresarial (totalplayempresarial.com.mx). TV Azteca and Grupo Elektra trade shares on the Mexican Stock Market and in Spains' Latibex market. Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. The group of companies shares a common vision, values and strategies for achieving rapid growth, superior results and world-class performance.

Except for historical information, the matters discussed in this press release are concepts about the future that involve risks and uncertainty that may cause actual results to differ materially from those projected. Other risks that may affect TV Azteca and its subsidiaries are presented in documents sent to the securities authorities.

SOURCE TV Azteca, S.A.B. de C.V.