CTC Media, Inc. (CTCM)

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CTC Media, Inc. (CTCM)

Q3 2007 Earnings Call

October 29, 2007 9:00 a.m. ET


Alexander Rodnyansky - CEO

Nilesh Lakhani - CFO

Vladimir Khanumyan - COO


Sohail Ahmer - Lusight Research

Alexei Yakovitsky - Deutsche Bank

Edward Hill - Wood - Morgan Stanley

Elena Rogovina - UBS

David Ferguson - Renaissance Capital

Alexander Wisch - S&P Equity Research

Michael Sonenshine - Thaler

Evgeny Golossony - Troika

Stefan Nilsson - SEB Enskilda



Hello ladies and gentlemen, and welcome to CTC Media's Third Quarter 2007 Conference Call. At this time all participants are in a listen-only mode. We will be conducting a question-and-answer session toward the end of this conference. During the Q&A session we ask that you please limit your questions to no more than one and one follow-up.

This conference call is being webcast and an audio version of the call will be available on the company's website for two weeks.

As a reminder, this conference is being recorded for replay purposes.

You should all have received CTC Media's third quarter earnings release that was issued today. If you have not received a release, please visit the company's website at www.ctcmedia.ru. Please refer to the earnings release for reconciliation of non-GAAP measures to the most comparable GAAP measures.

Before we begin today's call, CTC Media would like to remind everyone that this conference call may contain certain forward-looking statements relating to future events, future financial performance, strategies, expectations, competitive environments, regulations and availability of resources.  Such forward-looking statements are based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statements, based on a number of factors and other risks which are more specifically identified in CTC Media's filings with the SEC.  And now I will like to turn the call over to Mr. Alexander Rodnyansky, Chief Executive Officer of CTC Media. Please go ahead, sir. 

Alexander Rodnyansky

Thank you, operator. Good day everyone, and let me first of all apologize for our delay with the beginning of the conference call. We have got Vladimir, our Chief Operating Officer, stuck in an unbelievable Moscow traffic jam, sorry.

So anyway, welcome to CTC Media's third quarter 2007 earnings conference call. And I am joined today by Nilesh Lakhani, our Chief Financial Officer, as well as Vladimir Khanumyan, our Chief Operating Officer.

The Russian television market continues to grow at an impressive pace. Consumer purchasing power is expanding and in-term advertisers are increasingly, drawn to television as a preferred medium to reach their target audience. We are executing on our operating and strategic plan and continue to deliver the premium audiences to advertisers to strengthen our CTC and Domashny brands.  As a result, we remain well-positioned to continue to capitalize on the numerous growth opportunities in our markets.

In the third quarter, we delivered revenue of approximately $94 million, an increase of 33% versus the third quarter of 2006. Our revenue performance was driven by the strengths of our overall Russian markets, our ability to deliver targeted audience to our advertisers and helped by the appreciation of the ruble against the US dollar.  Our OIBDA was $32 million in the quarter, an improvement of 68% over third quarter last year. We also delivered a strong OIBDA margin of 34%, which is an increase of seven percentage points from the same period one year ago. This performance reflects the significant operating leverage of our business model as well as the commitment of our management team to control costs.

Turning to our CTC Network: in the third quarter, audience share was 8.7% compared to 10.1% during the same period a year ago. While this performance was lower than our internal goal, it factors in July and August, which are seasonally low for us.

We launched a record number of [premieres] this fall and, overall, delivered a solid performance across our schedule and we maintained our position as the fourth most-watched television channel in Russia in a highly competitive market.

We are pleased with the performance of such titles as Cadets, Daddy’s Girls, and School #1. At the same time, some of our prime-time products like, Thirtysomething, [CTC Life of a Superstar], and some other shows, clearly failed to meet our performance expectations. Overall, we did not benefit from any break-out successes.

We have several new premieres planned for later in the fourth quarter, including (inaudible) a drama series from the authors of our greatest hit, Born Not Pretty starring: Nelly Uvarova, who played the main character as the “not pretty girl” in that series. (Inaudible) will follow Cadets at the 8:00 pm time slot, in the second week of December.

Domashny, our second network, delivered another strong performance as a combined network and station group, and has now generated positive OIBDA for four consecutive quarters. We are very pleased with Domashny's development, growth and position in the market. Audience share in the quarter was 1.9%, a strong improvement from the 1.5% achieved in the third quarter of 2006 and this is in line with the second quarter of 2007.

This fall we will make modest adjustments to Domashny's programming schedule, essentially fine-tuning the existing lineup. The programming shown on Domashny remains highly focused on delivering to the core female audience-base. Further, the network remains on track from both an operating and strategic standpoint.

We continue to look for opportunities to expand Domashny's presence in the important regional market, and found just such an opportunity in the third quarter by acquiring the new stations, Stavropol, bringing our owned and operated stations total at Domashny to 11.

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