Central European Media Enterprises Ltd. Reports Results for the Three Months Ended March 31, 2019

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    – Net revenues decreased 7% at actual rates but increased 2% at
    constant rates to US$ 146.6 million –

    – Operating income increased 12% at actual rates and 23% at constant
    rates to US$ 27.6 million –

    – OIBDA increased 8% at actual rates and 18% at constant rates to US$
    38.1 million –

    HAMILTON, Bermuda–(BUSINESS WIRE)–Central European Media Enterprises Ltd. (“CME” or the “Company”)
    (NASDAQ/Prague Stock Exchange – CETV) today announced financial results
    for the three months ended March 31, 2019.

    Operational and financial highlights:

    • TV advertising revenues decreased 10% at actual rates and 2% at
      constant rates in the quarter. In the first four months of 2019, which
      normalizes the phasing of spending around Easter, TV ad revenues are
      estimated to have increased 3% at constant rates compared to the same
      period in 2018.
    • Carriage fees and subscription revenues increased 4% at actual rates
      and 12% at constant rates in the first quarter.
    • Costs charged in arriving at OIBDA decreased 11% at actual rates and
      3% at constant rates.
    • OIBDA margin increased by 360 basis points to 26%.
    • Cash generated from continuing operating activities increased 34% at
      actual rates to US$ 96.0 million.
    • Unlevered free cash flow increased 33% at actual rates to US$ 94.7
      million.
    • CME repaid EUR 60 million of debt from cash generated by the business,
      which together with the improvement in our operations reduced our net
      leverage ratio to 3.0x at the end of March from 3.5x at the start of
      the year.

    Michael Del Nin, Co-Chief Executive Officer, commented: “The year has
    gotten off to an outstanding start, exceeding our previous expectations
    to such an extent that we are raising our guidance for 2019. With the
    highest Q1 margin in more than a decade, an 18% improvement in
    like-for-like OIBDA, and a more than 30% surge in unlevered free cash
    flow, these are among the best Q1 results in the history of the company.
    Furthermore, they are bolstered by around 20% growth in TV ad revenues
    in our two largest markets in April, pushing year-to-date sales well
    into positive territory after the first quarter was impacted by both
    sector taxes in Romania and the phasing of spending related to the
    timing of Easter this year.”

    Christoph Mainusch, Co-Chief Executive Officer, added: “With the
    successful launch of the spring season during the first quarter, our
    main channel in four countries increased year-to-date audience share in
    both prime time and all day. Carriage fees have transformed the
    predictability and profitability of several of our businesses, with four
    segments now seeing margins of more than 25% in Q1. Facing various
    headwinds in the quarter, we grew our TV ad revenues in three segments,
    and we increased market share in four of five countries.”

    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 March 31, 2019 and 2018
    were:

    (US$ 000’s, except per share data)     For the Three Months Ended March 31,

    (unaudited)

     

    2019

           

    2018

         

    % Actual

       

    % Lfl (1)

    Net revenues $ 146,559 $ 156,709 (6.5)% 1.6%
    Operating income 27,637 24,581 12.4% 23.2%
    Operating margin 18.9 % 15.7 % 3.2 p.p. 3.3 p.p.
    OIBDA 38,057 35,324 7.7% 17.7%
    OIBDA margin 26.0 % 22.5 % 3.5 p.p. 3.6 p.p.
    Income from continuing operations 11,751 6,756 73.9% 96.6%
    Income from continuing operations per share – basic 0.03 0.02 86.9% 127.0%
    Income from continuing operations per share – diluted $ 0.03 $ 0.01 144.8% 197.3%
    (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 first
    quarter results on Tuesday, April 30, 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 2273725. 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 March 31, 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 and the timing of public holidays on
    advertising spending; 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 March 31, 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 March 31, 2019, which was filed
    with the Securities and Exchange Commission on April 30, 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 March 31,
     

    2019

         

    2018

     
    Net revenues $ 146,559 $ 156,709
    Operating expenses:
    Content costs 70,360 78,460
    Other operating costs 13,248 14,467
    Depreciation of property, plant and equipment 8,226 8,387
    Amortization of broadcast licenses and other intangibles 2,194   2,356  
    Cost of revenues 94,028 103,670
    Selling, general and administrative expenses 24,894   28,458  
    Operating income 27,637 24,581
    Interest expense (8,242 ) (17,818 )
    Other non-operating (expense) / income, net (3,097 ) 4,208  
    Income before tax 16,298 10,971
    Provision for income taxes (4,547 ) (4,215 )
    Income from continuing operations 11,751 6,756
    Income from discontinued operations, net of tax   316  
    Net income 11,751 7,072
    Net loss attributable to noncontrolling interests 7   178  
    Net income attributable to CME Ltd. $ 11,758   $ 7,250  
     
    PER SHARE DATA:
    Net income per share:
    Continuing operations — basic $ 0.03 $ 0.02
    Continuing operations — diluted 0.03 0.01
    Discontinued operations — basic 0.00
    Discontinued operations — diluted 0.00
    Attributable to CME Ltd. — basic 0.03 0.02
    Attributable to CME Ltd. — diluted $ 0.03 $ 0.01
     
    Weighted average common shares used in computing per share
    amounts (000’s):
    Basic 264,199 158,039
    Diluted 265,211 241,905
     
     

    CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (US$ 000’s)

    (unaudited)

       
    March 31, 2019 December 31, 2018
    ASSETS
    Cash and cash equivalents $ 80,032 $ 62,031
    Other current assets 263,098   312,062  
    Total current assets 343,130 374,093
    Property, plant and equipment, net 110,347 117,604
    Goodwill and other intangible assets, net 968,225 984,256
    Other non-current assets 23,967   12,408  
    Total assets $ 1,445,669   $ 1,488,361  
     
    LIABILITIES AND EQUITY
    Accounts payable and accrued liabilities $ 127,222 $ 120,468
    Current portion of long-term debt and other financing arrangements 5,802 5,545
    Other current liabilities 38,453   13,679  
    Total current liabilities 171,477 139,692
    Long-term debt and other financing arrangements 700,694 782,685
    Other non-current liabilities 81,526   67,293  
    Total liabilities $ 953,697   $ 989,670  
     
    Series B Convertible Redeemable Preferred Stock $ 269,370 $ 269,370
     
    EQUITY
    Common Stock $ 20,262 $ 20,228
    Additional paid-in capital 2,004,188 2,003,518
    Accumulated deficit (1,566,318 ) (1,578,076 )
    Accumulated other comprehensive loss (235,961 ) (216,650 )
    Total CME Ltd. shareholders’ equity 222,171 229,020
    Noncontrolling interests 431   301  
    Total equity 222,602   229,321  
    Total liabilities and equity $ 1,445,669   $ 1,488,361  
     
     

    CENTRAL EUROPEAN MEDIA ENTERPRISES LTD.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (US$ 000’s)

    (unaudited)

         
    For the Three Months
    Ended March 31,
     

    2019

         

    2018

     
    Net cash generated from continuing operating activities $ 96,009 $ 71,495
    Net cash used in continuing investing activities (4,359 ) (5,353 )
    Net cash used in continuing financing activities (71,736 ) (60,526 )
    Net cash provided by discontinued operations 9,554
    Impact of exchange rate fluctuations on cash and cash equivalents (1,913 ) 2,515  
    Net increase in cash and cash equivalents $ 18,001   $ 17,685  
     
    Supplemental disclosure of cash flow information:
    Cash paid for interest (including guarantee fees) $ 3,093 $ 4,883
    Cash paid for income taxes, net of refunds $ 6,318 $ 4,120
     
    Supplemental disclosure of non-cash financing activities:
    Accretion on Series B Convertible Redeemable Preferred Stock $ $ 2,447
     

    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 months ended March 31, 2019 and 2018:

    (US$ 000’s)       For the Three Months Ended March 31,

    (unaudited)

     

    2019

         

    2018

       

    % Actual

     

    % Lfl (1)

    Net revenues

    Bulgaria $ 19,293 $ 19,433 (0.7 )% 6.9 %
    Czech Republic 50,316 51,534 (2.4 )% 6.4 %
    Romania 38,810 45,961 (15.6 )% (7.5 )%
    Slovak Republic 21,332 22,953 (7.1 )% 0.1 %
    Slovenia 17,850 17,530 1.8 % 9.6 %
    Intersegment revenues (1,042 ) (702 ) NM (2) NM (2)
    Total net revenues $ 146,559   $ 156,709   (6.5 )% 1.6 %
     
    (US$ 000’s) For the Three Months Ended March 31,

    (unaudited)

     

    2019

       

    2018

     

    % Act

    % Lfl (1)

    OIBDA

    Bulgaria $ 6,121 $ 2,981 105.3 % 121.2 %
    Czech Republic 14,947 15,370 (2.8 )% 6.1 %
    Romania 17,533 18,893 (7.2 )% 1.7 %
    Slovak Republic 1,729 1,103 56.8 % 71.5 %
    Slovenia 4,931 4,653 6.0 % 14.1 %
    Elimination 48   16   NM (2) NM (2)
    Total Operating Segments 45,309 43,016 5.3 % 14.9 %
    Corporate (7,252 ) (7,692 ) 5.7 % (2.2 )%
    Total OIBDA $ 38,057   $ 35,324   7.7 % 17.7 %
     
    (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 March 31,
    (unaudited) 2019     2018  
    Operating income $ 27,637 $ 24,581
    Depreciation of property, plant and equipment 8,226 8,387
    Amortization of intangible assets 2,194   2,356  
    Total OIBDA $ 38,057   $ 35,324  
     
    (US$ 000’s) For the Three Months Ended March 31,
    (unaudited) 2019   2018  
    Net cash generated from continuing operating activities $ 96,009 $ 71,495
    Capital expenditures, net of proceeds from disposals (4,359 ) (5,353 )
    Free cash flow 91,650 66,142
    Cash paid for interest (including mandatory cash-pay guarantee fees) 3,093   4,883  
    Unlevered free cash flow from continuing operating activities $ 94,743   $ 71,025  

    Contacts

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