MIAMI--(BUSINESS WIRE)--Nov. 7, 2017--
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 third quarter ended September
30, 2017.
President and Chief Executive Officer of Hemisphere, Alan Sokol, said,
“The situation in Puerto Rico following two devastating hurricanes in
September – Irma and Maria – had a significant impact on our business.
Immediately following Hurricane Maria, our first priority was to ensure
the safety and well-being of our employees. Thankfully, no one was
injured, but some families lost their homes and unfortunately their
lives continue to be in disarray. We are continuing to work closely with
them to provide support and assistance.
We previously announced that Hurricane Maria inflicted only limited
damage to our studios and offices, and that one of our three
transmission towers was significantly damaged. Upon further inspection,
the damage to this transmission tower was beyond repair, while our other
two towers incurred only minimal damage. We are still estimating the
replacement cost of the damaged tower, but we do expect insurance will
cover most of the cost, subject to deductibles and other costs. We also
anticipate that a portion of our lost income will be mitigated through
business interruption insurance, although it will not offset the full
extent of the income loss. There can be no assurances of the timing and
amount of the proceeds we may recover under our insurance policies.
Notwithstanding the extraordinarily challenging situation, WAPA-TV has
provided uninterrupted news coverage of Hurricane Maria and its
aftermath. Our news team worked tirelessly and under near impossible
circumstances – a testament to their courage and tenacity.
While our business in Puerto Rico was performing well through August,
following the hurricanes, there was a steep decline in advertising
revenue in Puerto Rico, which continues through today. We also expect
that there will be a significant decrease in retransmission revenue in
Puerto Rico for the fourth quarter. Generally, for both advertising and
retransmission revenues in Puerto Rico, we do not expect significant
improvement until power is more widely restored. Power was restored to
WAPA’s headquarters on October 31st, prior to which we had
been using generators, and officially, electric power generation on the
island is over 40% of normal production. We are managing our expenses in
Puerto Rico as much as possible to mitigate the impact of revenue losses.
All of our WAPA news coverage has been simulcast on WAPA America,
providing Puerto Ricans and other interested viewers living in the U.S.
with the only continuous coverage of this crisis. Importantly, at the
request of several of our distributors, in response to consumer demand,
we were pleased to allow MVPDs to expand carriage of WAPA America to all
of their subscribers. From September 21st through the end of
October, WAPA America was the top-rated Hispanic cable channel in the
U.S., according to Comscore, a reflection of WAPA America’s leading role
in providing news and information to all viewers interested in Puerto
Rico.
In addition, following Hurricane Maria, two major operators expanded
their carriage of Television Dominicana to their basic packages,
underscoring the importance of the channel to the fourth largest
Hispanic community in the U.S. That said, while these operators are
recognizing Television Dominicana’s critical role in the large
Dominican-American community, the decision in September by AT&T to
remove the channel from AT&T U-verse and DIRECTV shows a disregard for
this valuable and important consumer group. We believe this decision was
ill-advised and are hopeful that we can come to an appropriate
resolution. During September, we experienced a loss of subscriber fees
in connection with this dispute, and anticipate this will be the case in
the fourth quarter as well.
While returning WAPA to full pre-storm performance is our main focus,
this has not slowed our work on future growth initiatives and M&A
activity. Regarding our newest strategic initiatives, we formally
launched the new Canal 1 in Colombia on August 14th and
implemented a full rebrand of the network. Less than three months into
the initiative, we are already seeing very strong and positive reaction,
which has translated into a 6% share of the audience in Colombia,
approximately 3 times the viewing share prior to our re-launch. In
addition in October, marketing efforts commenced for PANTAYA, our OTT
movie platform that we own in partnership with Lionsgate, with very
strong early returns. PANTAYA is already ranked among the
highest-grossing entertainment apps on iOS and Android.
Over the long-term, we remain very optimistic about our business
prospects. I believe in the resilience of Puerto Rico and more
specifically, our ability to withstand the impact from these events,
given our standing as the leading source of news, information and
entertainment to Puerto Ricans both on and off the island. And we
continue to aggressively build and grow our valuable set of assets that
are attracting an increasing number of subscribers and advertisers, and
are on the cutting edge of Hispanic content consumption.”
Financial Results for the Three and Nine Months Ended September 30,
2017
Net revenues were $32.2 million for the three months ended September 30,
2017, a decrease of 3%, as compared to net revenues of $33.1 million for
the comparable period in 2016. The decrease in the three months ended
September 30, 2017 was due to a decline in advertising revenue,
partially offset by growth in subscriber and retransmission fees and
other revenues. Advertising revenue declined $2.3 million, or 16%,
primarily due to the negative impact of Hurricanes Irma and Maria on the
television advertising market in Puerto Rico in September. Subscriber
and retransmission fees increased $0.9 million, or 5%, due to subscriber
growth, new launches and annual rate increases. Other revenues, which
are primarily related to the licensing of content, grew $0.5 million due
to the timing and availability of content licensed to third parties.
Excluding political advertising revenue in the prior year period, net
revenues decreased $0.8 million, or 3%, for the three months ended
September 30, 2017.
Net revenues were $100.5 million for the nine months ended September 30,
2017, an increase of 1%, as compared to net revenues of $99.1 million
for the comparable period in 2016. The increase in the nine months ended
September 30, 2017 was due to growth in subscriber and retransmission
fees and other revenue, which were partially offset by a decline in
advertising revenue. Subscriber and retransmission fees increased $4.1
million, or 8%, due to subscriber growth, new launches and annual rate
increases. Advertising revenue decreased $3.7 million, or 8%, due
primarily to the impact of Hurricanes Irma and Maria and political
advertising revenue in 2016 of $0.8 million. Other revenues increased
$0.9 million, due to the timing and availability of content licensed to
third parties. Excluding political advertising revenue in the prior year
period, net revenues increased $2.2 million, or 2%, for the nine months
ended September 30, 2017.
Operating expenses were $23.8 million for the three months ended
September 30, 2017, an increase of 1%, as compared to operating expenses
of $23.5 million for the comparable period in 2016. Operating expenses
in the nine months ended September 30, 2017 were $74.6 million, an
increase of 4%, as compared to $71.7 million for the comparable period
in 2016. The increases in the three and nine months ended September 30,
2017 were driven by higher stock-based compensation. The increase in the
nine months ended September 30, 2017 was also attributable to costs
incurred in connection with the amendment of the Company’s term loan
earlier in 2017, legal and advisory fees in connection with investment
activities and higher personnel expenses. The increase in operating
expenses in the nine months ended September 30, 2017 was partially
offset by reduced news and programming costs.
Net income was $0.7 million for the three months ended September 30,
2017, a decrease of 84%, as compared to $4.3 million in the comparable
period in 2016. Net income for the nine months ended September 30, 2017
was $8.6 million, a decrease of 29%, as compared to $12.1 million in the
comparable period in 2016. The decreases in net income was due primarily
to the loss on equity investments and the loss on impairment of assets
damaged by Hurricane Maria.
Adjusted EBITDA was $13.8 million for the three months ended September
30, 2017, a decrease of 9%, as compared to Adjusted EBITDA of $15.1
million for the comparable period in 2016. Adjusted EBITDA for the nine
months ended September 30, 2017 was $44.4 million, an increase of 1%, as
compared to Adjusted EBITDA of $43.9 million for the comparable period
in 2016. Adjusted EBITDA, excluding political revenue for the three
months ended September 30, 2017, decreased $1.2 million, or 8%, and for
the nine months ended September 30, 2017, increased $1.3 million, or 3%.
Following Hurricane Maria and due to the associated uncertainty around
the timing of the recovery in Puerto Rico, on September 29, 2017, the
Company withdrew its previously-provided full year 2017 Adjusted EBITDA
guidance.
As of September 30, 2017, the Company had $211.7 million in debt and
$140.3 million of cash. The Company’s leverage ratio was approximately
3.3 times, and net leverage ratio was approximately 1.1 times.
As previously announced, during the third quarter the Company
implemented a share repurchase plan. In the quarter the Company
repurchased 0.8 million shares of common stock at a weighted average
price of $12.60, for an aggregate purchase price of $10.7 million.
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HEMISPHERE MEDIA GROUP, INC. Comparison of
Consolidated Operating Results
(amounts in thousands)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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(Unaudited)
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(Unaudited)
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Net revenues |
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$ |
32,173 |
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$ |
33,116 |
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$ |
100,512 |
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$ |
99,118 |
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Operating Expenses: |
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Cost of revenues
|
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9,883
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9,826
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30,426
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|
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30,647
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Selling, general and administrative
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9,510
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8,999
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28,845
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27,775
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Depreciation and amortization
|
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4,041
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4,083
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12,223
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12,500
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Other expenses
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332
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638
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3,056
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|
770
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Loss on disposition of assets
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-
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(9
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)
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2
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6
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Total operating expenses
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23,766
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23,537
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|
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74,552
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71,698
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Operating income
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8,407
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9,579
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25,960
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27,420
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Other Expenses:
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Interest expense, net
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(2,863
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)
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(2,954
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)
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(8,089
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)
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(8,779
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)
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Loss on impairment of fixed assets
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(533
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)
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-
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(533
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)
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-
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Loss on equity method
investments, net
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(2,571
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)
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-
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(2,450
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)
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-
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Total operating expenses
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(5,967
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)
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(2,954
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)
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(11,072
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)
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(8,779
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)
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Income before income taxes
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2,440
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6,625
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14,888
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18,641
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Income tax expense
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(1,758
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)
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(2,276
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)
|
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(6,280
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)
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(6,563
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)
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Net income |
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$ |
682 |
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$ |
4,349 |
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$ |
8,608 |
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$ |
12,078 |
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Reconciliation of net income to Adjusted EBITDA: |
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Net income
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$ |
682 |
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$ |
4,349 |
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$ |
8,608 |
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$ |
12,078 |
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Add (deduct):
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Income tax expense
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1,758
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2,276
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|
|
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6,280
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6,563
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Loss on equity method
investments, net
|
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2,571
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-
|
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2,450
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-
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Interest expense, net
|
|
|
|
2,863
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|
|
|
2,954
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|
|
|
|
8,089
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8,779
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Loss on disposition of assets
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-
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(9
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)
|
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|
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2
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6
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Depreciation and amortization
|
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4,041
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|
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4,083
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|
|
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12,223
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12,500
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Stock-based compensation
|
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981
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|
533
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|
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3,104
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|
2,522
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Transaction & non-recurring expenses
|
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|
867
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|
913
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3,647
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|
|
1,435
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Adjusted EBITDA |
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$ |
13,763 |
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$ |
15,099 |
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$ |
44,403 |
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$ |
43,883 |
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Selected Financial Data:
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(amounts in thousands)
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As of |
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As of |
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September 30, 2017 |
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December 31, 2016 |
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(Unaudited)
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(Audited)
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Cash
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$140,321
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$163,090
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Debt (a)
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$211,747
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$213,347
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Leverage ratio (b):
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3.3x
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3.3x
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Net leverage ratio (c):
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1.1x
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0.8x
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(a)
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Represents the aggregate principal amount of the debt.
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(b)
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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.
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(c)
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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.
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The following table presents estimated subscriber information
(unaudited):
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Subscribers (a) (amounts in thousands) |
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September 30, 2017 |
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December 31, 2016 |
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September 30, 2016 |
U.S. Cable Networks:
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WAPA America (b)
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4,330
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4,189
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4,096
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Cinelatino
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4,563
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4,588
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4,581
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Pasiones
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4,602
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4,620
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4,530
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Centroamerica TV
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4,125
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4,063
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|
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4,055
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Television Dominicana
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3,468
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|
|
3,249
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|
|
3,159
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Total |
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21,088 |
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20,709 |
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|
20,421 |
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Latin America Cable Networks:
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Cinelatino
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16,139
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15,430
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13,003
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Pasiones
|
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13,504
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13,235
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11,126
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Total |
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29,643 |
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28,665 |
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24,129 |
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(a)
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Amounts presented are based on most recent remittances received
from the Company's distributors as of the respective dates shown
above, which are typically two months prior to the dates shown
above.
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(b)
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Excludes digital basic subscribers. Subscribers to WAPA America
including digital basic subscribers decreased 3.2% from September
30, 2016 to September 30, 2017, and decreased by 5.0% from December
31, 2016 to September 30, 2017.
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Non-GAAP Reconciliations
Within Hemisphere’s third quarter 2017 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, if any, depreciation expense, amortization of
intangibles, loss (gain) on disposition of assets, transaction and
non-recurring expenses, income tax expense, interest expense, loss
(gain) on equity method investments and stock-based compensation. 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 and nine months
ended September 30, 2017 and 2016.
Conference Call
Hemisphere will conduct a conference call to discuss its third quarter
results at 10:00 AM ET on Tuesday, November 7, 2017. 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 7677559.
A replay of the call will be available beginning at approximately 1:00
PM ET on Tuesday, November 7, 2017 by dialing (855) 859-2056, or from
outside the United States by dialing (404) 537-3406. The conference ID
for the replay is 7677559.
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, Hemisphere’s ability to timely and fully recover proceeds
under our insurance policies, 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 REMEZCLA, an influential
digital media company, Canal 1, a new broadcast television network in
Colombia and PANTAYA, a Spanish-language OTT service in the U.S.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171107005976/en/
Source: Hemisphere Media Group, Inc.
Sloane & Company
Erica Bartsch, 212-446-1875
ebartsch@sloanepr.com