Hemisphere Media Group Announces Third Quarter 2015 Financial Results

– Q3 Year-over-Year Net Revenues Increased 9.3%

– Q3 Year-over-Year Adjusted EBITDA Increased 7.2%

– Continued Solid Subscriber Growth

– Tightening Guidance to Mid-Teens Growth Rate for Full-Year Adjusted
EBITDA

MIAMI–(BUSINESS WIRE)–Hemisphere Media Group, Inc. (NASDAQ:HMTV) (“Hemisphere” or the
“Company”), the only publicly traded pure-play U.S. media company
targeting the high growth Spanish-language television and cable networks
business in the U.S. and Latin America, today announced financial
results for the third quarter ended September 30, 2015.

Alan Sokol, CEO of Hemisphere, stated, “Our business performed very well
in the third quarter, as we posted a 9.3% percent increase in net
revenue and a 7.2% percent increase in Adjusted EBITDA. It’s clear that
our strategy to broadly deliver world-class video content to the growing
U.S. Hispanic and Latin American markets is working. This is leading to
strong growth in advertising revenues, as well as in retransmission and
subscriber fees across our networks. In particular, the subscriber
growth that we achieved both in the quarter and over the course of the
year demonstratively proves that our demographic and subscriber trends
are far more favorable than those of the overall U.S. pay-TV
environment. In addition, during the quarter, we launched advertising on
Cinelatino and are optimistic about the revenue opportunity that
strategy presents over time. Due to our strong results year-to-date, we
are tightening our guidance range for the year to mid-teens growth rate
for Adjusted EBITDA.”

On April 1, 2014, Hemisphere closed on the acquisition of three
Spanish-language television networks—Pasiones, Centroamerica TV and
Television Dominicana (the “Acquired Cable Networks”). Results of the
Acquired Cable Networks are included in the Company’s condensed
consolidated statements of operations from the acquisition date. The
Company’s results for the three months ended September 30, 2015 are
comparable with the prior year period, however, the comparability of the
Company’s results are affected for the nine months ended September 30,
2015.

Net revenues increased $2.7 million, or 9.3%, for the three months ended
September 30, 2015, and increased $14.8 million, or 18.7%, for the nine
months ended September 30, 2015. These increases, for both the three and
nine month periods, were driven by growth in advertising revenues, and
higher subscriber and retransmission fees, resulting from overall growth
in subscribers and rate increases. The increase for the nine months
ended September 30, 2015 was also due to the inclusion of the Acquired
Cable Networks, which were not included in the prior year’s first
quarter.

Operating expenses were $23.5 million for the three months ended
September 30, 2015, a slight increase as compared to operating expenses
of $23.2 million for the comparable period in 2014. Operating expenses
were $69.8 million for the nine months ended September 30, 2015, an
increase of 10.8% from operating expenses of $63.0 million in the
comparable period. These increases, for both the three and nine months
ended September 30, 2015, were driven primarily by increased investment
in programming and higher sales and marketing costs, consistent with the
Company’s previously stated strategy. The increase for the nine months
ended September 30, 2015 was also due to the inclusion of the Acquired
Cable Networks, which were not included in the prior year’s first
quarter.

Net income was $2.9 million for the three months ended September 30,
2015, an increase of $2.2 million, as compared to net income of $0.7
million for the same period in 2014. Net income was $8.8 million for the
nine months ended September 30, 2015, an increase of $2.6 million, as
compared to $6.2 million for the same period in 2014.

Adjusted EBITDA was $13.7 million for the three months ended September
30, 2015, an increase of 7.2%, as compared to Adjusted EBITDA of $12.8
million for the same period in 2014. Adjusted EBITDA was $41.3 million
for the nine months ended September 30, 2015, an increase of 21.2%, as
compared to Adjusted EBITDA of $34.0 million for the same period in
2014. These increases, in both the three and nine month periods, were
due to growth in advertising revenues and subscriber and retransmission
fees. The increase for the nine month period was also due to the
inclusion of the Acquired Cable Networks, which were not included in the
prior year’s first quarter.

The following tables set forth the Company’s financial performance for
the three and nine months ended September, 2015 and 2014 (in thousands):

    Three Months Ended September 30,   Nine Months Ended September 30,
  2015       2014     2015       2014  
           
Net revenues $ 31,465   $ 28,781   $ 93,554   $ 78,787  
 
Operating Expenses:
Cost of revenues 10,249 9,174 29,609 26,067
Selling, general and administrative 8,907 8,353 26,816 23,473
Depreciation and amortization 4,283 4,668 12,929 12,077
Other expenses 75 972 381 1,282
Loss on disposition of assets       55     31     70  
Total operating expenses   23,514     23,222     69,766     62,969  
 
Operating income 7,951 5,559 23,788 15,818
 
Other Expenses:
Interest expense, net (3,080 ) (3,029 ) (9,071 ) (8,871 )
Loss on extinguishment of debt       (1,116 )       (1,116 )
  (3,080 )   (4,145 )   (9,071 )   (9,987 )
 
Income before income taxes 4,871 1,414 14,717 5,831
Income tax (expense) benefit   (1,961 )   (751 )   (5,912 )   399  
Net income $ 2,910   $ 663   $ 8,805   $ 6,230  
 
Reconciliation of net income to Adjusted EBITDA:
Net income $ 2,910 $ 663 $ 8,805 $ 6,230
Add (deduct):
Income tax expense (benefit) 1,961 751 5,912 (399 )
Interest expense, net 3,080 3,029 9,071 8,871
Loss on extinguishment of debt 1,116 1,116
Loss on disposition of assets 55 31 70
Depreciation and amortization 4,283 4,668 12,929 12,077
Stock-based compensation 1,436 1,390 4,123 4,606
Transaction expenses 75 972 381 1,282
Non-recurring items       173         173  
Adjusted EBITDA $ 13,745   $ 12,817   $ 41,252   $ 34,026  

Selected Balance Sheet Data:

    As of As of
September 30, 2015 December 31, 2014
(Unaudited) (Audited)
 
Cash $ 170,399 $ 142,010
Debt $ 222,188 $ 221,791
 
Leverage ratio (a): 3.9 x
Net leverage ratio (b): 0.9 x
 
(a)     Represents the sum of gross debt and the unamortized balance of
original issue discount of $1.8 million as of September 30, 2015,
divided by Adjusted EBITDA for the last twelve months. This ratio
differs from the calculation contained in the Company’s amended term
loan.
(b) Represents the sum of net debt and the unamortized balance of
original issue discount of $1.8 million as of September 30, 2015,
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:

   

Subscribers (a)

(amounts in thousands)

September 30,
2015

   

December 31,
2014

U.S. Cable Networks:

WAPA America (b) 5,166 5,115
Cinelatino 4,442 4,297
Pasiones 4,367 4,004
Centroamerica TV 3,978 3,571
Television Dominicana 2,976 2,437
Total 20,929 19,424
 

Latin America Cable Networks:

Cinelatino 11,461 10,544
Pasiones 9,712 8,702
Total 21,173 19,246

 

(a)     Amounts presented are based on most recent remittances received from
the Company’s distributors as of the respective dates shown above.
(b) Excluding digital basic subscribers, subscribers to WAPA America on
Hispanic programming tiers increased 3.3% from December 31, 2014 to
September 30, 2015.
 

Non-GAAP Reconciliations

Within Hemisphere’s third quarter 2015 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.
The specific reasons why Hemisphere’s management believes that the
presentation of this non-GAAP financial measures provides useful
information to investors regarding Hemisphere’s financial condition,
results of operations and cash flows has been provided in the Form 8-K
filed in connection with this press release.

Conference Call

Hemisphere will conduct a conference call to discuss its first quarter
financial results at 9:00AM ET on Monday, November 9, 2015. 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 (855) 715-1007, or from outside the United States at (440)
996-5685, at least five minutes prior to the start time. The conference
ID for the call is 73247122.

A replay of the call will be available beginning at approximately
12:00PM ET on Monday, November 9, 2015 by dialing (855) 859-2056, or
from outside the United States by dialing (404) 537-3406. The conference
ID for the replay is 73247122.

Forward-Looking Statements

This press release may contain certain statements about Hemisphere 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, 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 heading “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 (NASDAQ:HMTV) is the only publicly-traded
pure-play U.S. media company targeting the high growth Spanish-language
television and cable networks business in the U.S. and Latin America.
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.
Hemisphere’s networks consist of:

  • Cinelatino, the leading Spanish-language movie channel with over 15
    million subscribers across the U.S., Latin America and Canada,
    including 4.4 million subscribers in the U.S. and 11.5 million
    subscribers in Latin America, featuring the largest selection of
    contemporary Spanish-language blockbusters and critically-acclaimed
    titles from Mexico, Latin America, Spain and the Caribbean.
  • WAPA, Puerto Rico’s leading broadcast television network with the
    highest primetime and full day ratings in Puerto Rico. Founded in
    1954, WAPA produces more than 70 hours per week of top-rated news and
    entertainment programming.
  • WAPA America, the leading cable network targeting Puerto Ricans and
    other Caribbean Hispanics living in the U.S., featuring the
    highly-rated news and entertainment programming produced by WAPA. WAPA
    America is distributed in the U.S. to 5.2 million subscribers.
  • Pasiones, dedicated to showcasing the most popular telenovelas and
    drama series, distributed in the U.S. and Latin America. Pasiones has
    4.4 million subscribers in the U.S. and 9.7 million subscribers in
    Latin America.
  • Centroamerica TV, the leading network targeting Central Americans
    living in the U.S., the third-largest U.S. Hispanic group, featuring
    the most popular news, entertainment and soccer programming from
    Central America. Centroamerica TV is distributed in the U.S. to 4.0
    million subscribers.
  • Television Dominicana, the leading network targeting Dominicans living
    in the U.S., featuring the most popular news, entertainment and
    baseball programming from the Dominican Republic. Television
    Dominicana is distributed in the U.S. to 3.0 million subscribers.

Contacts

Sloane & Company
Erica Bartsch, 212-446-1875
ebartsch@sloanepr.com

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