CETV

Central European Media Enterprises Ltd. (CETV)

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Exchange: NASDAQ
Industry: Consumer Services
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Central European Media Enterprises (CETV)

Q1 2011 Earnings Call

April 27, 2011 9:00 am ET

Executives

Adrian Sarbu - Chief Executive Officer, President and Director

Daniel Penn - Executive Vice President, Secretary and General Counsel

David Sach - Chief Financial Officer and Executive Vice President

Romana Wyllie - Vice President of Corporate Communications

Anthony Chhoy - Senior Vice President of Strategic Planning & Operations

Analysts

Mitch Reznick - Fortis

Pavel Ryska - Atlantik Financni Trhy A.S.

Vijay Singh - Janco Partners, Inc.

Benjamin Mogil - Stifel, Nicolaus & Co., Inc.

Laurie Davison - Deutsche Bank AG

David Kestenbaum - Morgan Joseph TriArtisan LLC

Andrzej Knigawka - ING Groep N.V.

Presentation

Operator

Hello, my name is Kevin, I'll be your conference operator today. At this time, I would like to welcome everyone to the Central European Media Enterprises First Quarter 2011 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, April 27, 2011. It is now my pleasure to turn the floor over to Romana Wyllie, Vice President of Corporate Communications. Ms. Wyllie, you may begin your conference.

Romana Wyllie

Good morning, good afternoon [French] to each of you, and welcome to CME's First Quarter 2011 Investor Conference Call. We are broadcasting this call via a video webcast to enable you to see the management team in action. You can join us via the link on our Homepage, www.cetv-net.com. There you can also download the presentation slides which we will refer to during this call. You can find them on the Homepage at the bottom left corner. The participants of today’s call will be CME’s President and Chief Executive Officer, Adrian Sarbu.

Adrian Sarbu

[French] and good afternoon.

Romana Wyllie

Chief Financial Officer, David Sach.

David Sach

Good afternoon.

Romana Wyllie

Anthony Chhoy, Executive Vice President, Strategic Planning & Operations.

Anthony Chhoy

Good afternoon.

Romana Wyllie

And our General Counsel, Daniel Penn.

Daniel Penn

Hello.

Romana Wyllie

Before I turn to Adrian, let me read the usual Safe Harbor Statement. Our presentation today will contain forward-looking statements. For these statements, we claim the protection of the Safe Harbor contained in the U.S. Private Securities Litigation Reform Act of 1995, and refer you to the Forward-looking Statements section in our Form 10-Q filed with the Securities and Exchange Commission earlier today for a list of such statements and the factors which could cause future results to differ from those presented in this call.

During this call, we will refer to certain financial information that is not in U.S. GAAP. Please see the appendix of the presentation for a reconciliation to U.S. GAAP financial measures. In addition, our segment financial information that is presented in local currency is not in U.S. GAAP. We do not provide a reconciliation to these numbers as the U.S. GAAP amounts are expressed in U.S. dollars in our financial statements. Additional information on our segment data is provided in Note 17 of our financial statements on Page 30 of our 10-Q. And now over to Adrian.

Adrian Sarbu

Good afternoon, and good morning. A few months ago, on our fourth quarter 2010 earnings call, I pointed out that our priority in 2011 will be to deliver growth in revenues, OIBDA and positive free cash flow.

Today, I am pleased to announce that we are back onto growth. Our revenues increased by 20% and our OIBDA grew by 17x from $0.8 million to $14 million.

We also delivered positive free cash flow and are on track to meet our target for the full year. Our strong results are built on our continued audience and market leadership, rigorous cost control, the positive contribution from bTV in Bulgaria and growth in both Media Pro Entertainment and the New Media Division.

We also delivered against our task to reduce leverage. We bought back $24 million of debt and smooth out and extended maturities by refinancing $206 million of convertible notes due 2013.

Our liquidity today is a strong, exceeding $300 million. Back to growth, we agreed to acquire the Bontonfilm distribution platform in the Czech and Slovak Republic, which will add new streams of revenue in these two countries, and will have a positive impact on our bottom line.

And now over to David, who will review the macroeconomic situation in our region and first quarter consolidated performance.

David Sach

Thank you, Adrian. Please turn to Slide 5. Our summary of the current macroeconomic situation in the region is as follows: The GDP of all countries has returned to growth, but this growth is still primarily export driven. Private consumption has lagged GDP growth, but is now stabilized in all countries. The TV ad market in following the trend of private consumption. The TV advertising market in Czech, Slovakia and Slovenia have returned to growth. But advertisers are waiting to see the impact of government austerity measures on private consumption before resuming their increased spending.

The TV advertising markets in Romania, Bulgaria and Croatia have not yet returned to growth, but the trending similar to consumer spending and should stabilize shortly. Overall, market growth was flat in the first quarter compared to the same period last year. Nonetheless, we are confident that consumer spending is on a growth trajectory.

Moving to Slide 6. Consolidated revenues for the first quarter increased by 20% at actual exchange rates or 80% on a constant currency basis to $173 million. Both three segments increased revenues.

The Broadcast division benefited from the bTV acquisition in April last year. Media Pro Entertainment generated higher third-party revenues in distribution and production. And the New Media Division grew from significantly higher traffic on the websites, which we were able to monetize.

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