CETV Central European Media Enterprises Ltd

SECOND QUARTER - Net revenues increased 1% at actual rates and 8% at constant rates to US$ 183.6 million - - Operating income increased 21% at actual rates and 29% at constant rates to US$ 60.5 million - - OIBDA increased 21% at actual rates and 29% at constant rates to US$ 73.3 million -

SIX MONTHS - Net revenues decreased 3% at actual rates but increased 5% at constant rates to US$ 330.2 million - - Operating income increased 18% at actual rates and 27% at constant rates to US$ 88.1 million - - OIBDA increased 16% at actual rates and 25% at constant rates to US$ 111.4 million -

Central European Media Enterprises Ltd. (“CME” or the “Company”) (NASDAQ/Prague Stock Exchange - CETV) today announced financial results for the three and six months ended June 30, 2019.

Operational and financial highlights:

• TV advertising revenues in the quarter were broadly flat at actual rates, but increased 7% at constant rates.
• Carriage fees and subscription revenues in the quarter increased 3% at actual rates and 11% at constant rates.
• Costs charged in arriving at OIBDA in the quarter decreased 9% at actual rates and 3% at constant rates.
• OIBDA margin in the quarter increased by 650 basis points to 40%.
• Cash generated from continuing operating activities in the first half of 2019 increased 76% at actual rates to US$ 140.3 million.
• Unlevered free cash flow in the first half of 2019 increased 52% at actual rates to US$ 146.0 million.
• CME repaid a total of EUR 100 million of debt in the first half of 2019 using cash generated by the business.
• Net leverage ratio declined to 2.6x at the end of June, down from 3.5x at the start of the year.

Michael Del Nin, Co-Chief Executive Officer, commented: "We could not have hoped for a stronger set of results this quarter. This unique portfolio of assets has delivered another impressive performance, once again exceeding our expectations and demonstrating the extraordinary growth potential of our businesses. In fact, in terms of constant currency revenue and OIBDA growth, this was the company’s strongest Q2 in four years. OIBDA margins expanded in every one of our country operations and reached a remarkable 40% across the group. But even more impressive was the greater than 50% surge in cash generation so far this year, which allowed us to further reduce our debt, bringing total repayments in 2019 to EUR 100 million and pushing our borrowing cost to its lowest level ever."

Christoph Mainusch, Co-Chief Executive Officer, added: "We were selective and strategic when designing our program grids so costs were lower overall while the main channel in each territory increased its audience share in prime time this year, and we increased the gap between us and our closest commercial competitor in prime time audience share in four markets. The TV ad market in the Czech Republic saw its strongest first half of the year since 2015 and spending on advertising rebounded in Romania during the second quarter. Year-to-date, we have seen double digit growth in carriage fees and subscription revenues in three of our segments."

In this release we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow, unlevered free cash flow and constant currency percentage movements. Please see “Non-GAAP Financial Measures” below for additional information, including definitions and reconciliations to US GAAP financial measures.

Consolidated results for the three months ended June 30, 2019 and 2018 were:

(US$ 000's, except per share data)

For the Three Months Ended June 30,

(unaudited)

2019

2018

% Actual

% Lfl (1)

Net revenues

$

183,599

 

$

 

181,908

 

0.9%

 

7.9%

Operating income

60,462

 

50,017

 

20.9%

 

29.0%

Operating margin

32.9%

 

27.5%

 

5.4 p.p.

 

5.4 p.p.

OIBDA

73,342

 

60,845

 

20.5%

 

28.6%

OIBDA margin

39.9%

 

33.4%

 

6.5 p.p.

 

6.4 p.p.

Income from continuing operations

44,078

 

23,675

 

86.2%

 

97.6%

Income from continuing operations per share - basic

0.12

 

0.06

 

89.4%

 

102.5%

Income from continuing operations per share - diluted

$

0.12

 

$

 

0.06

 

101.6%

 

115.5%

Consolidated results for the six months ended June 30, 2019 and 2018 were:

(US$ 000's, except per share data)

For the Six Months Ended June 30,

(unaudited)

2019

 

2018

 

% Actual

 

% Lfl (1)

Net revenues

$

330,158

 

$

338,617

 

(2.5)%

 

5.0%

Operating income

88,099

 

74,598

 

18.1%

 

27.1%

Operating margin

26.7%

 

22.0%

 

4.7 p.p.

 

4.7 p.p.

OIBDA

111,399

 

96,169

 

15.8%

 

24.6%

OIBDA margin

33.7%

 

28.4%

 

5.3 p.p.

 

5.3 p.p.

Income from continuing operations

55,829

 

30,431

 

83.5%

 

97.4%

Income from continuing operations per share - basic

0.15

 

0.08

 

76.2%

 

92.4%

Income from continuing operations per share - diluted

$

0.15

 

$

0.07

 

106.4%

 

125.3%

(1) % Lfl (like-for-like) variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.

Teleconference and Audio Webcast Details

CME will host a teleconference and audio webcast to discuss its second quarter results on Tuesday, July 23, 2019 at 9 a.m. New York time (2 p.m. London and 3 p.m. Prague time). The audio webcast and teleconference will refer to presentation slides which will be available on CME's website at www.cme.net prior to the call.

To access the teleconference, U.S. and international callers may dial +1-647-689-5402 ten minutes prior to the start time and reference conference ID 2558065. The conference call will also be audio webcasted via www.cme.net. It can be heard on iPads, iPhones and a range of devices supporting Android and Windows operating systems.

A digital audio replay of the webcast will be available for two weeks following the call at www.cme.net.

Forward-Looking and Cautionary Statements

This press release contains forward-looking statements. For all forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of which might not even be anticipated. Forward-looking statements reflect our current views with respect to future events and because our business is subject to such risks and uncertainties, actual results, our strategic plan, our financial position, results of operations and cash flows could differ materially from those described in or contemplated by the forward-looking statements.

Important factors that contribute to such risks include, but are not limited to, those factors set forth under "Risk Factors" in our Quarterly Report on Form 10-Q for the period ended June 30, 2019 as well as the following: the effect of changes in global and regional economic conditions; the impact of ending the quantitative easing program implemented by the European Central Bank; the economic, political and monetary impacts of Brexit in our markets; the outcome of our strategic review and its impact on our business; the impact of changes in local tax legislation; levels of television advertising spending and the rate of development of the advertising markets in the countries in which we operate; our ability to refinance our existing indebtedness; the extent to which our debt service obligations and covenants may restrict our business; our exposure to additional tax liabilities as well as liabilities resulting from regulatory or legal proceedings initiated against us; our success in continuing our initiatives to diversify and enhance our revenue streams; our ability to make cost-effective investments in our television businesses, including investments in programming; our ability to develop and acquire necessary programming and attract audiences; and changes in the political and regulatory environments where we operate and in the application of relevant laws and regulations.

The foregoing review of important factors should not be construed as exhaustive. For a more detailed description of these uncertainties and other factors, please see the "Risk Factors" and “Forward-looking Statements” sections in CME's Quarterly Report on Form 10-Q for the period ended June 30, 2019. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

This press release should be read in conjunction with our Quarterly Report on Form 10-Q for the period ended June 30, 2019, which was filed with the Securities and Exchange Commission on July 23, 2019.

We make available free of charge on our website at www.cme.net our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Please note that we may announce material information using SEC filings, press releases, public conference calls, webcasts and posts to the Investors section of our website, www.cme.net. In the future, we will continue to use these channels to communicate important information about CME and our operations. Information that we post on our website could be deemed material. Therefore, we encourage investors, the media, our customers and others interested in CME to review the information we post at www.cme.net.

CME is a media and entertainment company operating leading businesses in five Central and Eastern European markets with an aggregate population of approximately 45 million people. CME's operations broadcast 30 television channels in Bulgaria (bTV, bTV Cinema, bTV Comedy, bTV Action, bTV Lady and Ring), the Czech Republic (Nova, Nova 2, Nova Cinema, Nova Sport 1, Nova Sport 2, Nova International, Nova Action and Nova Gold), Romania (PRO TV, PRO 2, PRO X, PRO GOLD, PRO CINEMA, PRO TV International and PRO TV Chisinau), the Slovak Republic (TV Markíza, Markíza International, Doma and Dajto) and Slovenia (POP TV, Kanal A, Brio, Oto and Kino). CME is traded on the NASDAQ Global Select Market and the Prague Stock Exchange under the ticker symbol “CETV”.

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ 000's, except share and per share data)

(unaudited)

 

For the Three Months Ended June 30,

 

2019

 

2018

Net revenues

$

183,599

 

$

181,908

Operating expenses:

 

 

 

Content costs

70,356

 

79,967

Other operating costs

13,806

 

14,202

Depreciation of property, plant and equipment

8,154

 

8,561

Amortization of broadcast licenses and other intangibles

2,113

 

2,267

Cost of revenues

94,429

 

104,997

Selling, general and administrative expenses

28,708

 

26,894

Operating income

60,462

 

50,017

Interest expense

(7,735)

 

(12,411)

Other non-operating income / (expense), net

2,237

 

(6,926 )

Income before tax

54,964

 

30,680

Provision for income taxes

(10,886)

 

(7,005)

Income from continuing operations

44,078

 

23,675

Income from discontinued operations, net of tax

—

 

2,350

Net income

44,078

 

26,025

Net (income) / loss attributable to noncontrolling interests

(119)

 

16

Net income attributable to CME Ltd.

$

43,959

 

$

26,041

 

 

 

 

PER SHARE DATA:

 

 

 

Net income per share:

 

 

 

Continuing operations — basic

$

0.12

 

$

0.06

Continuing operations — diluted

0.12

 

0.06

Discontinued operations — basic

—

 

0.01

Discontinued operations — diluted

—

 

0.00

Attributable to CME Ltd. — basic

0.12

 

0.07

Attributable to CME Ltd. — diluted

$

0.12

 

$

0.06

 

 

 

 

Weighted average common shares used in computing per share amounts (000's):

 

 

 

Basic

264,570

 

235,148

Diluted

265,932

 

258,783

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(US$ 000's, except share and per share data)

(unaudited)

 

For the Six Months Ended June 30,

 

2019

 

2018

Net revenues

$

330,158

 

$

338,617

Operating expenses:

 

 

 

Content costs

140,716

 

158,427

Other operating costs

27,054

 

28,669

Depreciation of property, plant and equipment

16,380

 

16,948

Amortization of broadcast licenses and other intangibles

4,307

 

4,623

Cost of revenues

188,457

 

208,667

Selling, general and administrative expenses

53,602

 

55,352

Operating income

88,099

 

74,598

Interest expense

(15,977)

 

(30,229)

Other non-operating expense, net

(860)

 

(2,718)

Income before tax

71,262

 

41,651

Provision for income taxes

(15,433)

 

(11,220)

Income from continuing operations

55,829

 

30,431

Income from discontinued operations, net of tax

—

 

2,666

Net income

55,829

 

33,097

Net (income) / loss attributable to noncontrolling interests

(112)

 

194

Net income attributable to CME Ltd.

$

55,717

 

$

33,291

 

 

 

 

PER SHARE DATA:

 

 

 

Net income per share:

 

 

 

Continuing operations — basic

$

0.15

 

$

0.08

Continuing operations — diluted

0.15

 

0.07

Discontinued operations — basic

—

 

0.01

Discontinued operations — diluted

—

 

0.01

Attributable to CME Ltd. — basic

0.15

 

0.09

Attributable to CME Ltd. — diluted

$

0.15

 

$

0.08

 

 

 

 

Weighted average common shares used in computing per share amounts (000's):

 

 

 

Basic

264,385

 

196,807

Diluted

265,628

 

250,515

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

(US$ 000's)

(unaudited)

 

June 30, 2019

 

December 31, 2018

ASSETS

 

 

 

Cash and cash equivalents

$

74,639

 

$

62,031

Other current assets

286,324

 

312,062

Total current assets

360,963

 

374,093

Property, plant and equipment, net

110,627

 

117,604

Goodwill and other intangible assets, net

973,800

 

984,256

Other non-current assets

23,136

 

12,408

Total assets

$

1,468,526

 

$

1,488,361

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Accounts payable and accrued liabilities

$

130,671

 

$

120,468

Current portion of long-term debt and other financing arrangements

6,089

 

5,545

Other current liabilities

32,653

 

13,679

Total current liabilities

169,413

 

139,692

Long-term debt and other financing arrangements

664,110

 

782,685

Other non-current liabilities

82,121

 

67,293

Total liabilities

$

915,644

 

$

989,670

 

 

 

 

Series B Convertible Redeemable Preferred Stock

$

269,370

 

$

269,370

 

 

 

 

EQUITY

 

 

 

Common Stock

$

20,285

 

$

20,228

Additional paid-in capital

2,005,215

 

2,003,518

Accumulated deficit

(1,522,359)

 

(1,578,076)

Accumulated other comprehensive loss

(220,088)

 

(216,650)

Total CME Ltd. shareholders' equity

283,053

 

229,020

Noncontrolling interests

459

 

301

Total equity

283,512

 

229,321

Total liabilities and equity

$

1,468,526

 

$

1,488,361

CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(US$ 000's)

(unaudited)

 

For the Six Months Ended June 30,

 

2019

 

2018

Net cash generated from continuing operating activities

$

140,280

 

$

79,671

Net cash used in continuing investing activities

(8,266)

 

(10,164)

Net cash used in continuing financing activities

(118,929)

 

(92,003)

Net cash provided by discontinued operations

—

 

8,839

Impact of exchange rate fluctuations on cash and cash equivalents

(477)

 

(681)

Net increase / (decrease) in cash and cash equivalents

$

12,608

 

$

(14,338)

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

Cash paid for interest (including guarantee fees)

$

14,017

 

$

26,630

Cash paid for income taxes, net of refunds

$

11,348

 

$

18,203

 

 

 

 

Supplemental disclosure of non-cash financing activities:

 

 

 

Accretion on Series B Convertible Redeemable Preferred Stock

$

—

 

$

4,777

Segment Data

We manage our business on a geographical basis, with five reporting segments: Bulgaria, the Czech Republic, Romania, the Slovak Republic and Slovenia. These segments reflect how CME Ltd.’s operating performance is evaluated by our chief operating decision makers, who we have identified as our co-Chief Executive Officers, how operations are managed by segment managers, and the structure of our internal financial reporting.

We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. Intersegment revenues and profits have been eliminated in consolidation.

Below are tables showing our net revenues and OIBDA by segment for the three and six months ended June 30, 2019 and 2018:

(US$ 000's)

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

(unaudited)

2019

 

2018

 

% Actual

 

% Lfl (1)

 

2019

 

2018

 

% Actual

 

% Lfl (1)

Net revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulgaria

$

22,607

 

$

23,427

 

(3.5)%

 

2.5%

 

$

41,900

 

$

42,860

 

(2.2)%

 

4.5%

Czech Republic

64,379

 

61,028

 

5.5%

 

12.1%

 

114,695

 

112,562

 

1.9%

 

9.5%

Romania

48,362

 

49,594

 

(2.5)%

 

5.8%

 

87,172

 

95,555

 

(8.8)%

 

(0.6)%

Slovak Republic

27,313

 

26,770

 

2.0%

 

8.5%

 

48,645

 

49,723

 

(2.2)%

 

4.6%

Slovenia

22,276

 

22,367

 

(0.4)%

 

5.9%

 

40,126

 

39,897

 

0.6%

 

7.5%

Intersegment revenues

(1,338)

 

(1,278)

 

NM (2)

 

NM (2)

 

(2,380)

 

(1,980)

 

NM (2)

 

NM (2)

Total net revenues

$

183,599

 

$

181,908

 

0.9%

 

7.9%

 

$

330,158

 

$

338,617

 

(2.5)%

 

5.0%

(US$ 000's)

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

(unaudited)

2019

 

2018

 

% Act

 

% Lfl (1)

 

2019

 

2018

 

% Act

 

% Lfl (1)

OIBDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bulgaria

$

7,888

 

$

5,622

 

40.3%

 

47.2%

 

$

14,009

 

$

8,603

 

62.8%

 

72.4%

Czech Republic

32,293

 

28,251

 

14.3%

 

21.0%

 

47,240

 

43,621

 

8.3%

 

15.9%

Romania

25,243

 

24,196

 

4.3%

 

13.0%

 

42,776

 

43,089

 

(0.7)%

 

8.1%

Slovak Republic

8,555

 

3,906

 

119.0%

 

131.0%

 

10,284

 

5,009

 

105.3%

 

118.3%

Slovenia

6,213

 

5,199

 

19.5%

 

27.0%

 

11,144

 

9,852

 

13.1%

 

21.0%

Elimination

(24)

 

17

 

NM (2)

 

NM (2)

 

24

 

33

 

NM (2)

 

NM (2)

Total Operating Segments

80,168

 

67,191

 

19.3%

 

27.3%

 

125,477

 

110,207

 

13.9%

 

22.5%

Corporate

(6,826)

 

(6,346)

 

(7.6)%

 

(14.7)%

 

(14,078)

 

(14,038)

 

(0.3)%

 

(7.9 )%

Total OIBDA

$

73,342

 

$

60,845

 

20.5%

 

28.6%

 

$

111,399

 

$

96,169

 

15.8%

 

24.6%

(1) % Lfl (like-for-like) variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.

(2) Number is not meaningful.

Non-GAAP Financial Measures

In this release we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. We believe that each of these metrics is useful to investors for the reasons outlined below. Non-GAAP financial measures may not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated in conjunction with, and are not a substitute for, US GAAP financial measures.

We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA is useful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impact either our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components in determining management bonuses.

OIBDA includes amortization and impairment of program rights and is calculated as operating income / loss before depreciation, amortization of intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-Chief Executive Officers when evaluating our performance. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDA margin. We define OIBDA margin as the ratio of OIBDA to net revenues.

Following a repricing of our Guarantee Fees in March 2017 and April 2018, we pay interest and related Guarantee Fees on our outstanding indebtedness in cash. In addition to this obligation to pay Guarantee Fees in cash, we expect to use cash generated by the business to pay certain Guarantee Fees that were previously paid in kind. These cash payments are all reflected in free cash flow; accordingly we believe unlevered free cash flow, defined as free cash flow before cash payments for interest and Guarantee Fees, best illustrates the cash generated by our operations when comparing periods. We define free cash flow as net cash generated from continuing operating activities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cash impact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not considered by our co-Chief Executive Officers when evaluating performance. For additional information regarding our business segments, see Item 1, Note 19, "Segment Data" in our Form 10-Q.

While our reporting currency is the dollar, our consolidated revenues and costs are divided across a range of European currencies and CME Ltd.’s function currency is the Euro. Given the significant movement of the currencies in the markets in which we operate against the dollar, we believe that it is useful to provide percentage movements based on actual percentage movements (“% Act”), which includes the effect of foreign exchange, as well as like-for-like percentage movements (“% Lfl”). The like-for-like percentage movement references reflect the impact of applying the current period average exchange rates to the prior period revenues and costs. Since the difference between like-for-like and actual percentage movements is solely the impact of movements in foreign exchange rates, our discussion in this release includes constant currency percentage movements in order to highlight those factors influencing operational performance. The incremental impact of foreign exchange rates is presented in the tables accompanying such analysis.

(US$ 000's)

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

(unaudited)

2019

 

2018

 

 

 

 

Operating income

$

60,462

 

$

50,017

 

$

88,099

 

$

74,598

Depreciation of property, plant and equipment

8,154

 

8,561

 

16,380

 

16,948

Amortization of intangible assets

2,113

 

2,267

 

4,307

 

4,623

Other (1)

2,613

 

—

 

2,613

 

—

Total OIBDA

$

73,342

 

$

60,845

 

$

111,399

 

$

96,169

(1) Other items consists of corporate charges related to the previously announced plan to review strategic alternatives, which were not considered when evaluating performance.

(US$ 000's)

For the Six Months Ended June 30,

(unaudited)

2019

 

2018

Net cash generated from continuing operating activities

$

140,280

 

$

79,671

Capital expenditures, net of proceeds from disposals

(8,266)

 

(10,164)

Free cash flow

132,014

 

69,507

Cash paid for interest (including mandatory cash-pay guarantee fees)

14,017

 

26,630

Unlevered free cash flow from continuing operating activities

$

146,031

 

$

96,137

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20190722005812/en/

For additional information, please visit www.cme.net or contact: Mark Kobal Head of Investor Relations Central European Media Enterprises +420 242 465 576 mark.kobal@cme.net