CTC Media, Inc. Investor Presentation. First Quarter 2010 Results

Transcription

1 CTC Media, Inc. Investor Presentation First Quarter 2010 Results

2 The Leading Independent Media Company in Russia and the CIS 4 th most watched broadcaster in Russia with a national audience of c.100 million for CTC, the flagship channel One of the leading broadcasters in Kazakhstan (Channel 31) Entertainment focus appeals to dynamic, youthful & affluent audience 6 channels in 4 countries and 2 in-house production companies CTC MEDIA GROUP TV is the most cost-effective advertising medium in Russia Well positioned portfolio of assets with in-house production capabilities Strong cash flow generation & balance sheet FREE-TO-AIR PRODUCTION RUSSIA CIS SOHO MEDIA COSTAFILM CTC - pure entertainment channel targeting viewers aged KAZAKHSTAN Channel 31 - entertainment channel targeting viewers aged 6-54 Domashny - only channel in Russia targeting females aged UZBEKISTAN SofTS - start-up channel DTV - action / investigative themed channel targeting viewers aged MOLDOVA CTC TV Dixi - entertainment channel targeting viewers aged

3 Operational & Financial Highlights 2

4 Group Highlights for the First Quarter 2010 GROUP FINANCIAL HIGHLIGHTS Total revenues up 18% to $123.2 million OIBDA up 1% to $39.7 million OIBDA margin of 32.2% Net income up 8% to $25.2 million, fully diluted EPS of $0.16 (Q1 2009: $0.15) Net cash position of $76.2 million at end of the period Board of Directors approved a $0.065 per share cash dividend to be paid on June 30, 2010 to stockholders of record as of June 1, 2010 GROUP OPERATIONAL HIGHLIGHTS Average combined 4+ audience share in Russia up year-on-year from 12.3% to 13.0% Target audience shares up year-on-year for CTC and Domashny networks Successful introduction of CTC-international following its North American launch in December 2009 Sale of 100% interest in Kazakh radio station for $2.0 million in cash in January

5 Market and Operational Update 4

6 Russian Advertising Market Overview Advertising Market Size 1 (US$ billion) 2009 Cost per Thousand (CPT) 2 (US$) TV Ad Market Total Ad Market * 2008* 2009 Ad Spend in Russia by Media Segment 1 (%) Other Internet Outdoor Radio Print 2009 TV Cost per Thousand (US$)² Television * 2008 * 2009 TV remains inexpensive relative to other media in Russia and continues to take advertising market share Sources: (1) Russian Association of Communication Agencies (2) Initiative Media Note: (*) Data for 2007 and 2008 was restated by Russian Association of Communication Agencies in February

7 Russian TV Advertising Sales Structure Advertisers Advertising Agencies Media Sales Houses: Video International Gazprom-Media / Alkasar Combined audience share of 62% 1 Combined audience share of 25% 2 Advertising on CTC Media channels exclusively sold by the largest media sales house in Russia Sources: (1) Video International web site, as of April Source for audience share: TNS Gallup (all above 4 years old) in Q (2) Public information, as of April Source for audience share: TNS Gallup (all above 4 years old) in Q

8 Sectors Advertised on CTC Media Channels Q Q Food 27% 2 Cosmetics 19% 3 Other goods 11% 4 Pharmaceuticals and vitamins 11% 5 Telecoms 7% 6 Appliances 5% 7 Personal care products 5% 8 Beverages 5% 9 Detergents 5% 10 Beer 3% 11 Auto and finance 2% 100% 1 Food 25% 2 Cosmetics 20% 3 Other goods and services 13% 4 Pharmaceuticals and vitamins 12% 5 Appliances 7% 6 Personal care products 5% 7 Detergents 5% 8 Telecoms 5% 9 Beverages 4% 10 Beer 2% 11 Auto and finance 2% 100 % Vast majority of advertisers are basic consumer goods focused CTC Media advertisers budgets split: 77% multinationals, 23% local companies 2 Notes: (1) CTC Media sales data for CTC, Domashny and DTV Networks (2) Q1 2010

9 Free-to-Air TV Landscape in Russia Combined Audience Shares, % (all 4+ demographic) Q Q Channel One VGTRK Gazprom-Media CTC Media National Media Group Prof-Media UTV Russia Holding CTC Media is the largest non-state owned broadcasting company in Russia Source: TNS Gallup Media, demographic all above 4 years old, CTC Media s Research Department 8

10 All 4+ Audience Share Dynamics and Power Ratio Audience Shares, % (all 4+ demographic) 1 Combined Power Ratio of CTC Media s channels in Q (FY 2009: 1.5) Q Q Channel One Rossiya 1 NTV CTC Media Combined CTC TNT Ren-TV TV Center TV-3 Domashny Rossiya K DTV Channel 5 Rossiya 2 Zvezda MTV Rossiya 24 Muz-TV 2x2 7TV Other 3 CTC Media captures market share in access of combined audience share due to its high power ratio (1) Source: TNS Gallup Media, demographic all above 4 years old, CTC Media s Research Department (2) Power ratio = National TV advertising market share/all 4+ audience share (average). Combined Power Ratios include blended power ratios for CTC, Domashny and DTV (company s estimates) (3) Includes audience shares of smaller national and regional channels 9

11 CTC Media Target Audience Share Dynamics CTC Network Domashny Network DTV Network Q1 09 FY 09 Q Q1 09 FY 09 Q Q1 09 FY 09 Q1 10 All 4+ demographic All 4+ demographic All 4+ demographic Target demographic All 6-54 Target demographic females Target demographic All CTC and Domashny networks gained target audience shares y-o-y in Q Source: TNS Gallup Media (audience shares, %) 10

12 Increasing Technical Penetration Technical Penetration 1, % Substantial year-on-year increase in technical penetration for CTC (+3.2pp) Domashny (+5.4pp) and DTV (+7.4pp) in 2009 We continue to improve the signal distribution through regional stations acquisitions and expanding our affiliate network % of technical penetration is provided by CTC Media s owned-and-operated stations and repeater transmitters Reaching more potential viewers through expanded technical penetration Note: (1) Technical penetration means the percentage of the population that has the technical ability to receive a particular broadcast signal. Measured annually by TNS Gallup Media in cities with populations of more than 100,000 11

13 Programming Strategy Content split by hours and by % in amortization of programming rights expense CTC Network 1 Domashny Network 1 Russian and Foreign Movies 42% (52%) Russian & Foreign Movies 38% (14%) Russian Sitcoms and Sketchcoms 12% (16%) Russian Shows 12% (14%) Russian Shows 19% (64%) Russian Series 4% (10%) Foreign Series and Animation 31% (83%) Russian Series & Sketchcoms 13% (19%) Foreign Series and Animation 40% (20%) Optimal mix of programming Locally produced content is the key element of our strategic programming grids and drive the audience share in target demographics In-house produced series and sitcoms are top CTC prime-time performers and are the core of our content library DTV Network 1 Russian Series & Sitcoms 14% (13%) Russian Shows 19% (64%) Russian and Foreign Movies 38% (14%) Foreign Series 30% (9%) ¼ of CTC Media s programming and ½ of CTC prime time is produced in-house 2 Programming agreements with major Hollywood studios - Sony Pictures Television International, Walt Disney, Paramount, Universal and Warner Bros. Notes: (1) Content split is given for Q (2) As a % in amortization of programming rights, Q Maximizing the audience share numbers in desirable demographics through well-balanced content acquisition and scheduling strategy 12

14 Kazakhstan: Audience Share Dynamics Channel 31 Audience Share Dynamics Q Q Audience Shares, % (all 6-54 demographic) All 6+ demographic Target demographic All Q1 09 FY 09 Q Channel One Eurasia KTK Channel 31 NTK Kazakhstan El Arna/Khabar Khabar NTV (Alma TV) Astana Rakhat Tan HIT TV Mir Channel 31 is one of the leading broadcasters in Kazakhstan Source: TNS Gallup Asia 13

15 Key Strategic Objectives Core strategy Further consolidation of our position as Russia s leading independent free-to-air TV broadcaster Further development of the DTV and Domashny channels, sustainable position of CTC channel Monetize strong CTC, DTV and Domashny brands Opportunistic approach to acquisitions and start-up projects in neighboring CIS markets Establish international presence through developing selected CTC Media programs based on existing content for selective international markets Drivers Increase technical penetration of DTV and Domashny channels Sustain CTC s target audience share, increase Domashny s and DTV s target audience shares Attract younger audiences to Domashny and DTV Integrate Russian networks to drive combined power ratio and sustain sound level of overall market share Expand and improve online presence of free-to-air channels in Russia Maintain focus on pure entertainment programming and complementary audience profiles Exert greater control over programming quality and investments through in-house content production Develop existing CIS operations Selectively expand into neighboring CIS markets to ensure growth participation Maximize cash flows Use strong balance sheet to capitalize on investment opportunities and enhance shareholder returns Clear and focused strategy 14

16 Markets of Operations and Primary Strategic Interest Counties of current operations Countries of potential interest Belarus Population = 9.6 million 2009TV Ad Market = US$ 60 million Russia Population = 142 million 2009 TV Ad Market = US$ 3.6 billion Ukraine Population = 45.7 million 2009 TV Ad Market = US$ 252 million Moldova Population = 4.3 million 2009 TV Ad Market = US$ 17.2 million Uzbekistan Population = 27.6 million 2008 TV Ad Market = US$ 15 million* Kazakhstan Population = 15.4 million 2009 TV Ad Market = US$ 95 million Potentially reaching over 180 million viewers in four countries of current operations Sources: Video International, Russian Association of Communications Agencies, Zenith Optimedia, CIA World Factbook, Rosstat, All-Ukrainian Advertising Coalition, Company s estimates * 2009 data is not available 15

17 Financial Highlights 16

18 Group Total Operating Revenues US$ mln % 18% Q Q Q Advertising Revenues Total Operating Revenues CTC Media s total operating revenues up 18% to $123.2 million The increase reflects : Recovery of Russian TV ad. Market Growing audience shares and their efficient monetization High blended power ratio Favorable currency exchange rate movements 14% positive impact of the exchange rate between the US dollar and the Russian ruble on Russian ad sales in Q Total revenues up 18% y-o-y in Q1 17

19 Group OIBDA and Net Income Group OIBDA US$ mln 1% OIBDA up 1% year on year to $39.7 million OIBDA margin: 32.2% 0 Q Q Q % 48.4% Adjusted % Group Net Income US$ mln % Fully diluted EPS up 7% to $ Q Q Q % 35.7% Adjusted % BOD approved second $0.065 per share cash dividend installment to be paid on June 30, 2010 Note: (1) Adjusted results exclude $232.7 million charge arising from the impairment of the intangible assets of DTV Group in Russia, Channel 31 in Kazakhstan and a broadcasting group in Moldova in the Q4 2008; an $18.7 million charge arising from the impairment of the broadcasting licenses in Russia in Q4 2009; and a $28.6 million stock-based compensation expense recognized in conjunction with the previously announced settlement by CTC Media of litigation brought by it against its former CEO and Board in Q See reconciliations on pages

20 Q Revenue and OIBDA Contribution by Segment Total Operating Revenue¹ Q Q DTV Netw ork 8% Domashny Netw ork 10% DTV TV Station Group 1% Domashny TV Station Group CTC TV Station Group 2% 10% CIS Group 2% Total Revenue $104.8 mln Domashny TV Station Group 1% CTC TV Station Group 10% DTV Netw ork 8% DTV TV Station Group 1% CIS Group 2% Eliminations and other -12.7% Total Revenue $123.2 mln CTC Netw ork 67% Domashny Netw ork 11% CTC Netw ork 67% Total OIBDA 1 Q Q CIS Group -3% DTV TV Station Group -1% Domashny TV Station Group 1% Production Group 1% CTC TV Station Group 15% Corporate Office -20% DTV Netw ork 11% Eliminations and other -20% Total OIBDA $39.2 mln Domashny Netw ork 9% CTC Netw ork 88% CIS Group -2% Domashny TV Station Group 1% DTV TV Station Group -1% CTC TV Station Group 20% DTV Netw ork 2% Domashny Netw ork 8% Production Group -1% Corporate Office -28% Total OIBDA $39.7 mln CTC Netw ork 100% Diversification of business and decrease of dependence on CTC Channel Note: (1) intersegment transactions are included in eliminations. 19

21 Q Operating Expenses Q Amortization of sublicensing rights and own production cost $3.1 m 4% Amortization of programming rights $36.9 m 54% Q Amortization of sublicensing rights and own production cost $1.4 m 2% Depreciation & amortization $2.6 m 4% Total OpEx $68.2 mln Depreciation & amortization $3.4 m 4% Direct operating expenses $7.3 m 11% Direct operating expenses $12.5 m 14% SG&A expenses $18.3 m 27% In Q12010 CTC Media s total operating expenses increased by 27% year-on-year in US dollar terms due to: Increased investments in programming (resulted in healthy audience share gains) and network coverage Foreign currency movements 14% positive impact of the exchange rate between the US dollar and the Russian ruble on Russian ad sales in Q (2/3 of OpEx are ruble denominated) Amortization of programming rights $49.5 m 57% Total OpEx $86.9 mln SG&A expenses $20.3 m 23% OpEx increases in line with CTC Media development strategy 20

22 CIS Group Financials CIS Group 1 (US$, million) Q Q REVENUES OIBDA (1.1) (0.7) CIS Group contributed $2.3 million or 1.9% of CTC Media s total operating revenues in Q Channel 31 Group in Kazakhstan contributed a majority of the segment revenues OIBDA margin % -55.8% -32.6% CIS Group contributed 1.9% to CTC Media s total operating revenues in Q Note: (1) CIS Group results include intercompany results that are eliminated level in consolidation at CTC Media Group level 21

23 Balance Sheet and Cash Flow Highlights Consolidated Balance Sheet Highlights Consolidated Cash Flow Highlights (US$ mln) As of December 31, 2009 As of March 31, 2010 Cash and cash equivalents Short-term investments Total assets (incl cash), Including Goodwill Broadcasting licenses Working capital Total debt Stockholders equity Net cash position The three months ended March 31, 2009 The three months ended March 31, 2010 (US$ mln) Cash at beginning of period Net cash provided by operating activities, including Acquisition of progr. and sublic. rights (34.7) (63.5) Net cash used in investing activities (13.0) (26.4) Net cash used in financing activities 0 (38.4) Effect of exchange rate changes on cash (3.6) 1.2 Cash at end of period Cash used for acqusitions (12.1) (12.8) (Acquisitions of businesses, net of cash acquired) CapEx (1) (4.4) CapEx as % of Total Revenue 0.0% 3.6% Free cash flow Strong cash position and no debt Notes: (1) Working capital = current assets - current liabilities (2) Net cash position = cash and cash equivalents + short-term investments total debt (3) Free cash flow = cash flow from operating activities - acquisitions of property and equipment - acquisitions of intangibles 22

24 To conclude A leading independent media company in Russia and the CIS Most transparent Russian company according to Standard & Poor s 1 The only direct way to get exposure to Russia s TV advertising market Well-positioned channel brands with growing audience and market shares Benefiting from dominance of TV as only national reach media Majority of client base in consumer goods sector with both large multinational and local advertisers Operating advantage due to in-house content production businesses Focus on cost control and profit maximization with strong balance sheet (1) CTC Media scored #1 in Standard & Poor s Transparency and Disclosure by Russian Companies Study in 2008 and #2 in

25 Appendix 24

26 CTC Media Shareholder Structure 35% free float IPO on NASDAQ in June 2006 In July 2007 CTC Media qualified for the premier NASDAQ Global Select Market as the result of meeting NASDAQ's most stringent listing standards Major shareholders: 39% stake in CTC Media Shareholder of CTC Media since 2002 Headquartered in Stockholm, Modern Times Group is a leading international entertainment broadcasting group with the second largest geographical broadcast footprint in Europe MTG s TV assets are broadcast in a total of 30 countries and have 125 million viewers The company s shares are listed on Nasdaq OMX Stockholm's Large Cap market 26% stake in CTC Media Shareholder of CTC Media since 2003 Founded in 1989 and headquartered in Moscow, Alfa Group Consortium is one of Russia s largest privately owned financial-industrial conglomerates Alfa Group is focused on value-oriented, longer-term opportunities, primarily in Russia and the CIS Backed by strong strategic shareholders Source: U.S. SEC filings, as of March 31,

27 Reconciliation of Non-GAAP Measures Reconciliation of consolidated adjusted OIBDA and other adjusted financial measures to consolidated OIBDA and other corresponding GAAP financial measures Three months ended March 31, 2009 Operating Intersegment Operating Capital Depreciation Amortization Amortization OIBDA revenue revenue income/ and of of from (loss) amortization programmin sublicensing external rights rights customers CTC Network $70,555 $783 $34,302 ($64) ($131) ($28,492) ($3,393) $34,433 Domashny Network 10, ,383 (6) (113) (4,891) 3,496 DTV Network 8,667 3,721 (297) (592) (2,488) 4,313 CTC Television Station Group 10, ,270 (274) (415) (822) 5,685 Domashny Television Station Group 1, (52) (311) (5) 388 DTV Television Station Group (1,193) - (720) (1) (473) CIS Group 2,044 (1,362) (161) (222) (1,533) (1,140) Production Group 178 5, (12) (4,890) 275 Corporate Office - - (7,856) (11) (65) - - (7,791) Business segment results $104,778 $7,263 $36,605 ($865) ($2,581) ($38,232) ($8,283) $39,186 Eliminations and other - ($7,263) ($22) $9 - $1,349 $5,221 ($22) Consolidated results $104,778 - $36,583 ($856) ($2,581) ($36,883) ($3,062) $39,164 Three months ended March 31, 2010 Operating Intersegment Operating Capital Depreciation Amortization Amortization revenue revenue income/ and of of OIBDA customers from external (loss) amortization programmin rights sublicensing rights CTC Network $82,639 $620 $39,483 ($574) ($285) ($36,602) ($1,065) $39,768 Domashny Network 13, ,811 (154) (207) (6,822) 3,018 DTV Network 9, (1,688) (692) (6,031) (203) 975 CTC Television Station Group 12, ,333 (1,068) (574) (77) - 7,907 Domashny Television Station Group 1, (608) (371) (1) DTV Television Station Group (1,460) (1) (971) - (489) CIS Group 2, (895) (261) (151) (1,565) - (744) Production Group 442 7,175 (264) (18) (39) - (6,326) (225) Corporate Office 427 (11,112) (33) (84) - - (11,028) Business segment results $123,097 $9,253 $36,180 ($4,404) ($3,374) ($51,098) ($7,594) $39,554 Eliminations and other $103 ($9,253) $96 ($43) ($3) $1,637 $6,239 $99 Consolidated results $123,200 - $36,276 ($4,447) ($3,377) ($49,461) ($1,355) $39,653 26

28 Reconciliation of Non-GAAP Measures (continued) Reconciliation of segment OIBDA to segment operating income Three Months Ended December 31, 2009 (US$ 000 s) OIBDA Depreciation and amortization Operating income CTC Network $ 34,433 $ (131) $ 34,302 Domashny Network 3,496 (113) 3,383 DTV Network 4,313 (592) 3,721 CTC Television Station Group 5,685 (415) 5,270 Domashny Television Station Group 388 (311) 77 DTV Television Station Group (473) (720) (1,193) CIS Group (1,140) (222) (1,362) Production Group 275 (12) 263 Corporate Office (7,791) (65) (7,856) Business segment results $ 39,186 $ (2,581) $ 36,605 Eliminations and other (22) - (22) Consolidated results $ 39,164 $ (2,581) $ 36,583 Three Months Ended March 31, 2010 (US$ 000 s) OIBDA Depreciation and amortization Operating income CTC Network $ 39,768 $ (285) $ 39,483 Domashny Network 3,018 (207) 2,811 DTV Network 975 (692) 283 CTC Television Station Group 7,907 (574) 7,333 Domashny Television Station Group 372 (371) 1 DTV Television Station Group (489) (971) (1,460) CIS Group (744) (151) (895) Production Group (225) (39) (264) Corporate Office (11,028) (84) (11,112) Business segment results $ 39,554 $ (3,374) $ 36,180 Eliminations and other 99 (3) 96 Consolidated results $ 39,653 $ (3,377) $ 36,276 Reconciliation of consolidated OIBDA to consolidated operating income Three months ended March 31, (US$ 000 s) OIBDA $39,164 $39,653 Depreciation and amortization (exclusive of amortization of programming rights and sublicensing rights) (2,581) (3,377) Operating income $36,583 $36,276 Reconciliation of consolidated OIBDA margin to consolidated operating income margin Three months ended March 31, OIBDA margin 37.4% 32.2% Depreciation and amortization (exclusive of amortization of programming rights and sublicensing rights) as a % of total operating revenues -2.5% -2.7% Operating income margin 34.9% 29.4% 27

29 Contact Information and Disclaimer For further information please visit or contact: Ekaterina Ostrova Director, Investor Relations Tel: +7 (495) DISCLAIMER The information contained in this presentation, including market data that are attributed to specific sources and have not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. The presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or transmitted into or distributed in the United States of America or to any U.S. person within the meaning of Regulation S under the United States Securities Act of 1933, as amended (the Securities Act ). This presentation is not a public offer or advertisement of securities in the Russian Federation, and is not an offer, or an invitation to make offers, to purchase any securities in the Russian Federation. Certain statements in this presentation that are not based on historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of Such forward-looking statements reflect the company's current expectations concerning future results and events. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CTC Media to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual future results to differ from those expressed by forwardlooking statements include, among others, the company s ability to deliver audience share, particularly in primetime, to its advertisers; changes in the size of the Russian television advertising market; free-to-air television remaining a significant advertising forum in Russia; the company s reliance on a single television advertising sales house for substantially all of its revenues; and restrictions on foreign involvement in the Russian television business. These and other risks are described in the "Risk Factors" section of CTC Media's latest annual and quarterly filings with the SEC. Other unknown or unpredictable factors could have material adverse effects on CTC Media's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur. You are cautioned not to place undue reliance on these forward-looking statements. CTC Media does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise. 28