First Quarter Financial Results Impacted by Continued Disruption
Caused by Hurricane Maria
First Quarter Results Show Improving Metrics on a Sequential Basis as
Puerto Rico Recovery Advances
Enters into Agreement to Acquire a 75% Interest in Snap TV;
Opportunity to Monetize Hemisphere Productions and Drive Content
Licensing Revenue
MIAMI--(BUSINESS WIRE)--May 4, 2018--
Hemisphere Media Group, Inc. (NASDAQ: HMTV) (“Hemisphere” or the
“Company”), the only publicly traded pure-play U.S. media company
targeting the high growth U.S. Hispanic and Latin American markets with
leading broadcast and cable television and digital content platforms,
today announced financial results for the first quarter ended March 31,
2018.
President and Chief Executive Officer of Hemisphere, Alan Sokol, said,
“Our first quarter results reflect continued progress in Puerto Rico’s
recovery. We have begun to see signs of normalization across the island
that give us confidence for the future, as vital services are now
available to virtually the entire island and electricity has been
restored to 98% of homes. While we expect that there will be some
volatility to the recovery efforts, we anticipate continued progress
through the remainder of the year.
In the first quarter of 2018, on a year-over-year basis, Hemisphere’s
Adjusted EBITDA decreased 27%, due to the continued disruption caused by
Hurricane Maria. Nonetheless, as compared to the fourth quarter, both
advertising revenue and retransmission fees grew significantly and
Adjusted EBITDA increased by 54%, despite the first quarter typically
being our seasonally weakest. This reflects the improvement in
conditions in Puerto Rico, as well as our continued effective execution,
notwithstanding the challenging environment.
Our business outside of Puerto Rico continues to perform well, with
continued organic subscriber growth, once again highlighting the unique
growth paradigm of our U.S. networks. In addition, we drove significant
U.S. advertising revenue increases in the first quarter, led by robust
growth at Cinelatino and WAPA America.
Our strategic investments are also off to a solid start in 2018.
Pantaya, our OTT platform remains one of the top downloaded
entertainment apps on iOS and Android, while Canal 1, the #3 rated
national broadcast network in Colombia, continues to grow ratings and
audience share with its differentiated news and content offering.”
As of midnight, May 4, 2018, the Company has reached an impasse in
negotiations with DIRECTV in Puerto Rico regarding its retransmission
consent agreement. As a result, WAPA is currently not being broadcast in
Puerto Rico to DIRECTV customers. The Company has engaged in extended
negotiations with DIRECTV, but does not believe that DIRECTV is properly
valuing WAPA and WAPA Deportes’ extraordinary lineup of news, sports and
entertainment programming. Recently, the Company successfully signed a
new retransmission consent agreement with another large pay television
distributor in Puerto Rico, which is now paying fair market value for
WAPA’s programming. The Company is hopeful that DIRECTV will follow suit
and that the blackout will be short-lived.
Hemisphere Enters Into Definitive Agreement to Acquire 75% Interest
in Snap TV
Hemisphere today announced that it reached a definitive agreement to
acquire a 75% interest in Snap Global, LLC (“Snap TV”), a leading
independent distributor of content to broadcast, pay TV and OTT
platforms in Latin America. As part of the investment, the Company has
also signed a co-production joint venture with Mar Vista Entertainment,
an established independent film and TV production company and minority
owner of Snap TV, to co-produce new original movies and series.
Financial terms of the transaction were not disclosed.
Snap TV distributes third party content to major free and pay TV
broadcasters and OTT platforms serving Latin America and other Spanish
speaking markets. Snap TV has also co-produced successful series for
NatGeo and History Channel in Latin America, and together with Mar
Vista, has produced movies in Latin America. Snap TV will be based in
Hemisphere’s Miami headquarters.
“We are thrilled to be acquiring a majority interest in Snap TV,”
continued Sokol. “Snap TV is one of the fastest growing and most
innovative content distribution companies in Latin America. Content
distribution is an important strategic asset, and we are confident that
our resources and combined expertise will accelerate Snap’s growth and
position it as the leading independent distributor of Hispanic content.
Our partnership with Mar Vista will facilitate expansion of our original
production strategy, and provide us with world-class content that we can
exploit on our networks and platforms and syndicate to existing and
emerging platforms.”
Financial Results for the Three Months Ended March 31, 2018
Net revenues were $29.0 million for the three months ended March 31,
2018, as compared to net revenues of $34.2 million for the comparable
period in 2017. The decrease in the three months ended March 31, 2018
was due to a $4.7 million decline in advertising revenue, driven by the
continued impact of Hurricane Maria, particularly the widespread loss of
power, the restoration of which continued during the period.
Additionally, in 2017, the Company benefited from advertising sales for
the World Baseball Classic televised on WAPA, which did not occur in
2018. The decrease in net revenues in the period was also due to a $1.0
million, or 5%, decline in subscriber and retransmission fees as a
result of the interruption caused by Hurricane Maria on subscriptions of
pay television distributors in Puerto Rico, as well as the termination
of carriage of Television Dominicana by AT&T in September 2017. This
decline was partially offset by rate increases and organic growth in
U.S. cable network subscribers. Other revenues increased $0.5 million in
the three months ended March 31, 2018, due to the timing and
availability of content licensed to third parties.
Operating expenses were $24.2 million for the three months ended March
31, 2018, as compared to operating expenses of $27.1 million for the
comparable period in 2017. The decrease in the three months ended March
31, 2018 was primarily due to lower programming and production costs, as
WAPA implemented cost savings measures following Hurricane Maria, offset
in part by incremental Hurricane Maria related expenses of $0.5 million.
Additionally, transaction expenses were lower, primarily due to fees
incurred in the prior year period in connection with the refinancing of
the Company’s Term Loan.
Net loss was $7.6 million for the three months ended March 31, 2018, as
compared to net income of $2.7 million in the comparable period in 2017.
The decline in net income was due to lower revenues as a result of the
impact of Hurricane Maria and loss on equity investments.
Adjusted EBITDA was $10.6 million for the three months ended March 31,
2018, as compared to Adjusted EBITDA of $14.5 million for the comparable
period in 2017.
As of March 31, 2018, the Company had $209.1 million in debt and $107.4
million of cash. The Company’s leverage ratio was approximately 4.4
times, and net leverage ratio was approximately 2.2 times.
As previously announced, the Company implemented a share repurchase plan
during the third quarter of 2017. During the three months ended March
31, 2018, the Company repurchased 3,225 shares of common stock at a
weighted average price of $10.50, for an aggregate purchase price of
approximately $34,000.
During the three months ended March 31, 2018, the Company funded $14.8
million in investments towards its strategic ventures, primarily related
to Canal 1.
The following tables set forth the Company’s financial performance for
the three months ended March 31, 2018 and 2017, as well as select
financial data as of March 31, 2018 and December 31, 2017:
HEMISPHERE MEDIA GROUP, INC.
Comparison of Consolidated
Operating Results
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
|
|
|
|
|
$ |
29,035 |
|
|
|
|
$ |
34,191 |
|
Operating Expenses: |
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
|
|
|
|
|
9,427
|
|
|
|
|
|
10,541
|
|
Selling, general and administrative
|
|
|
|
|
|
|
|
10,584
|
|
|
|
|
|
10,228
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
4,115
|
|
Other expenses
|
|
|
|
|
|
|
|
233
|
|
|
|
|
|
2,250
|
|
Gain on disposition of assets
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
-
|
|
Total operating expenses
|
|
|
|
|
|
|
|
24,238
|
|
|
|
|
|
27,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
|
4,797
|
|
|
|
|
|
7,057
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
|
|
(2,884
|
)
|
|
|
|
|
(2,628
|
)
|
Loss on equity investments
|
|
|
|
|
|
|
|
(9,795
|
)
|
|
|
|
|
-
|
|
Total other expense
|
|
|
|
|
|
|
|
(12,679
|
)
|
|
|
|
|
(2,628
|
)
|
(Loss) income before income taxes
|
|
|
|
|
|
|
|
(7,882
|
)
|
|
|
|
|
4,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
|
|
|
|
323
|
|
|
|
|
|
(1,684
|
)
|
Net (loss) income |
|
|
|
|
|
|
$ |
(7,559 |
) |
|
|
|
$ |
2,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net (loss) income to Adjusted EBITDA: |
|
|
|
|
Net (loss) income
|
|
|
|
|
|
|
$ |
(7,559 |
) |
|
|
|
$ |
2,745 |
|
Add (Deduct):
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense
|
|
|
|
|
|
|
|
(323
|
)
|
|
|
|
|
1,684
|
|
Other expense
|
|
|
|
|
|
|
|
12,679
|
|
|
|
|
|
2,628
|
|
Gain on disposition of assets
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
-
|
|
Transaction and non-recurring expenses
|
|
|
|
|
|
|
|
239
|
|
|
|
|
|
2,278
|
|
Hurricane related expenses
|
|
|
|
|
|
|
|
536
|
|
|
|
|
|
-
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
3,997
|
|
|
|
|
|
4,115
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
996
|
|
|
|
|
|
1,070
|
|
Adjusted EBITDA |
|
|
|
|
|
|
$ |
10,562 |
|
|
|
|
$ |
14,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Financial Data:
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of |
|
|
|
As of |
|
|
|
|
|
|
|
March 31, 2018 |
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
$107,377
|
|
|
|
$124,299
|
Debt (a)
|
|
|
|
|
|
|
$209,081
|
|
|
|
$211,214
|
|
|
|
|
|
|
|
|
|
|
|
|
Leverage ratio (b):
|
|
|
|
|
|
|
4.4x
|
|
|
|
4.1x
|
Net leverage ratio (c):
|
|
|
|
|
|
|
2.2x
|
|
|
|
1.7x
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents the aggregate principal amount of the debt.
(b)
Represents gross debt divided by Adjusted EBITDA for the last twelve
months. This ratio differs from the calculation contained in the
Company's amended term loan.
(c) Represents gross debt
less cash divided by Adjusted EBITDA for the last twelve months. This
ratio differs from the calculation contained in the Company's amended
term loan.
The following table presents estimated subscriber information
(unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscribers (a) (amounts in thousands) |
|
|
|
|
|
|
|
March 31, 2018 |
|
|
|
December 31, 2017 |
U.S. Cable Networks:
|
|
|
|
|
|
|
|
|
|
|
|
WAPA America (b)
|
|
|
|
|
|
|
4,383
|
|
|
|
4,362
|
Cinelatino
|
|
|
|
|
|
|
4,543
|
|
|
|
4,424
|
Pasiones
|
|
|
|
|
|
|
4,448
|
|
|
|
4,450
|
Centroamerica TV
|
|
|
|
|
|
|
4,203
|
|
|
|
4,127
|
Television Dominicana
|
|
|
|
|
|
|
1,942
|
|
|
|
1,876
|
Total |
|
|
|
|
|
|
19,519 |
|
|
|
19,239 |
|
|
|
|
|
|
|
|
|
|
|
|
Latin America Cable Networks:
|
|
|
|
|
|
|
|
|
|
|
|
Cinelatino
|
|
|
|
|
|
|
16,123
|
|
|
|
16,087
|
Pasiones
|
|
|
|
|
|
|
15,230
|
|
|
|
14,776
|
Total |
|
|
|
|
|
|
31,353 |
|
|
|
30,863 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Amounts presented are based on most recent remittances received
from our Distributors as of the respective dates shown above, which are
typically two months prior to the dates shown above.
(b)
Excludes digital basic subscribers.
Non-GAAP Reconciliations
Within Hemisphere’s first quarter 2018 press release, Hemisphere makes
reference to the non-GAAP financial measure, “Adjusted EBITDA.” Whenever
such information is presented, Hemisphere has complied with the
provisions of the rules under Regulation G and Item 2.02 of Form 8-K.
When presenting Adjusted EBITDA, Hemisphere’s management adds back
(deducts) from net income or net loss, if any, depreciation expense,
amortization of intangibles, gain on disposition of assets, transaction
and non-recurring expenses including hurricane related expenses, income
tax (benefit) expense, interest expense, stock-based compensation, and
other expense items. The specific reasons why Hemisphere’s management
believes that the presentation of this non-GAAP financial measure
provides useful information to investors regarding Hemisphere’s
financial condition, results of its operations and cash flows has been
provided in the Form 8-K filed in connection with this press release. A
reconciliation of net income to Adjusted EBITDA can be found above in
the table that sets forth Hemisphere’s financial performance for the
three months ended March 31, 2018 and 2017.
Conference Call
Hemisphere will conduct a conference call to discuss its first quarter
2018 results at 10:00 AM ET on Friday, May 4, 2018. A live broadcast of
the conference call will be available online via the company's Investor
Relations website located at http://ir.hemispheretv.com/.
Alternatively, interested parties can access the conference call by
dialing (877) 497-1436, or from outside the United States at (262)
558-6292, at least five minutes prior to the start time. The conference
ID for the call is 8877848.
A replay of the call will be available beginning at approximately 1:00
PM ET on Friday, May 4, 2018 by dialing (855) 859-2056, or from outside
the United States by dialing (404) 537-3406. The conference ID for the
replay is 8877848.
Forward-Looking Statements
Statements in this press release and oral statements made from time to
time by representatives of Hemisphere may contain certain statements
about Hemisphere and its consolidated subsidiaries that are
“forward-looking statements” within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These include, but are not
limited to, the effects of Hurricane Maria in the short and long-term on
Hemisphere’s business and the advertising market in Puerto Rico as well
as Hemisphere’s customers, employees, third-party vendors and suppliers,
the effect on retransmission and subscriber fees that Hemisphere
receives, the timing under which power is fully restored to all of
Puerto Rico, short and long-term migration shifts in Puerto Rico,
Hemisphere’s ability to timely and fully recover proceeds under our
insurance policies, Hemisphere’s ability to close the acquisition of
Snap TV, Hemisphere’s ability to successfully integrate the acquired
assets and achieve anticipated synergies, statements relating to
Hemisphere’s future financial and operating results (including growth
and earnings), plans, objectives, expectations and intentions and other
statements that are not historical facts. These statements are based on
the current expectations of the management of Hemisphere and are subject
to uncertainty and changes in circumstance, which may cause actual
results to differ materially from those expressed or implied in such
forward-looking statements. Without limitation, any statements preceded
or followed by or that include the words “targets,” “plans,” “believes,”
“expects,” “intends,” “will,” “likely,” “may,” “anticipates,”
“estimates,” “projects,” “should,” “would,” “expect,” “positioned,”
“strategy,” “future,” or words, phrases or terms of similar substance or
the negative thereof, are forward-looking statements. In addition, these
statements are based on a number of assumptions that are subject to
change. Factors that could cause actual results to differ materially
from those expressed or implied by the forward-looking statements are
discussed under the headings “Risk Factors” and “Forward-Looking
Statements” in Hemisphere’s most recent Annual Report on Form 10-K,
filed with the Securities and Exchange Commission (“SEC”), as they may
be updated in any future reports filed with the SEC. If one or more of
these factors materialize, or if any underlying assumptions prove
incorrect, Hemisphere’s actual results, performance, or achievements may
vary materially from any future results, performance or achievements
expressed or implied by these forward-looking statements.
Forward-looking statements included herein are made as of the date
hereof, and Hemisphere undertakes no obligation to update publicly such
statements to reflect subsequent events or circumstances.
About Hemisphere Media Group, Inc.
Hemisphere Media Group, Inc. (NASDAQ: HMTV) is the only publicly traded
pure-play U.S. media company targeting the high growth U.S. Hispanic and
Latin American markets with leading broadcast and cable television and
digital content platforms. Headquartered in Miami, Florida, Hemisphere
owns and operates five leading U.S. Hispanic cable networks, two Latin
American cable networks, and the leading broadcast television network in
Puerto Rico, and has ownership interests in a new broadcast television
network in Colombia and a Spanish-language OTT service in the U.S and
other digital assets.

View source version on businesswire.com: https://www.businesswire.com/news/home/20180504005391/en/
Source: Hemisphere Media Group, Inc.
Sloane & Company
Erica Bartsch, 212-446-1875
ebartsch@sloanepr.com