ctc media investor presentation...ctc – target audience all 10- 45 domashny – target audience...
TRANSCRIPT
CTC Media, Inc. Investor Presentation Q2 & H1 2014
Transformation from TV Broadcaster to Content Company
TRANSMEDIA
CTC-INTERNATIONAL (PAY-TV)
AD SALES
FREE-TO-AIR (CIS)
We Fully Capture the Value Chain by Being Integrated Content Company
BROADCASTING ( RUSSIA)
Free-to-air TV ad maket growth1
International version of CTC channel
Mobile, smart TV, second screen, transmedia projects
Ctc.ru, Domashniy.ru, Peretz.ru
Online video portal Videomore.ru
CTC – target audience All 10-45
Domashny – target audience Females 25-59
Peretz – target audience All 25-49
International version of PERETZ channel
Kazakhstan Channel 31
Moldova СTС Dixi
Internal advertising sales house Everest
CTC Love – target audience All 11-34
2
Transformation from TV Broadcaster to Content Company
Digital media revenue up 50% in RUB in H1 2014 and continues to grow
Launch of Russian TV series in the US on the HULU subscription service
Launch of the first e-commerce project by a TV company in Russia
Channels' websites became full scale platforms
New approach of monetization throw partnerships
Game and second screen are to be launched by the ned of the year
Launched in-house creative production center
Centralized content purchases to secure synergies, longer content life span and sharing among platforms
Centralized programming to avoid cannibalization
Further steps towards more local content
Prioritize content and synergies
Grow combined audience share
Expand digital offerings
Diversify revenue streams
1 2 3 4
Launch of CTC Love to cover a further, complementary audience segment
New Head of Domashny upgrades Channel’s content and programming
3
STRATEGIC GOAL: To become a leader in creation, management and distribution of content on all potentially monetizable platforms
Pillar 1: Prioritize content and synergies
4
► High TV penetration and reach can jumpstart digital and adjacent space development
► The more powerful the brand is, the greater are opportunities to monetize it on various platforms and markets
Adjacent space Digital
media space
Traditional media space
Brand and content creation
Marketing
Production
Communications Programming
Content acquisitions Centralization
of functions
► Centralization of functions ensures higher efficiency and provides potential for additional synergies
► Creation, production, integration and promotion of content for all platforms simultaneously
► Secure content safety - Sustainable supply of high quality content* - In-house creative producing center - Diversified network of content providers
► Full rights or an optimal set of rights required by CTC Media - Content library accumulation - Centralized content purchases to secure maximum
synergies, longer content life span and content sharing among all CTC Media platforms (TV channels and digital)
- Multi-platforms and trans-media - distribution across platforms and media
- Most effective monetization by CTCM in all markets and media
► Predictable pricing / controlled content inflation
* High quality content – content that can be effectively monetized across all platforms (TV, digital), territories and other media to get high OIBDA margin
Pillar 1: Strategic Goals with Respect to Content Production and Acquisition
5
Pillar 1: Approach to Deals with Major Studios and Locals
– Minimize off-prime movies in package deals – Prevent appreciation of costs – Obtain TV sublicensing rights for all CTC Media channels (content sharing) – Obtain IPTV/SVOD/AVOD rights and any other rights to monetize across media
(mobile streaming, Internet broadcasting, applications, etc.), if economically feasible/ positive OIBDA margin
6 6
First step: When acquiring content from majors we plan to
The next step: gradual movement towards local content
– Local series and movies are planned to partially replace Hollywood feature films
– Production of series/ TV movies for movie prime time slots – Via strategic partnerships with local movie producers (Art Pictures,
Bazelevs, EnjoyMovies, individual deals with producers) – Studio deals to be limited to small packages
Pillar 2: Grow Combined Audience Share
7
• Family-oriented channel with special appeal to women
• Retain audience share through:
• Focusing on prime time
• Developing long-term content brands
• Increasing the number of premium weekend show formats
• Transmedia projects trend setter
Brings the family together Bright, emotional and entertaining channel for women
• Growing audience share by becoming a more dynamic and modern channel
• Positioning the channel brand as ‘lifestyle’ to use for cross-media projects and merchandizing
• Strengthening of horizontal programming grid
• Increase of audience share in prime time with the most effective monetization
• Continuing rejuvenation of the channel: proportion W25-45 increased by 5pp in target demographic
Modern, dynamic, reality and action male-oriented channel
• Growing audience share by bringing programming offering in line with the well-regarded Peretz brand and marketing
• Launching 20 new shows in 2014
Brand-new CTC Media channel aimed at girls and young women
• New channel complementary to the Group’s brands family: Target audience “All 11-34”; core audience: “Women 18-25”
• Building extensively on the existing high-quality local and foreign content library
• Technical penetration increased up to 25% in Russia, >30% in Moscow and almost 40% in Saint Petersburg
• Started sales of CTC Love to TV advertisers and commit ~$1mln NEW
Pillar 3: Loyal Audience Growth through Cross-Platform Engagement
8
► TV Holding becomes Content company: Transmedia and multi-platform content
► Build core loyal audience
► Distribution and monetization on brand-
appropriate platforms
► Inventory growth driven by monetization opportunities
► Monetization diversification from premium sales to ad technology
► Unified authorization: personalized content,
recommendation service
Create, distribute and monetize content on all platforms to reach maximum audience
Pillar 3: Driving Value Growth through Broader Content Distribution and Monetization
9
We will get our audience used to watching our content across CTC Media platforms Organic audience growth => profit growth, not only inventory Inventory management
► Content distribution by revenue share model
► Monetization of our audience by
advertising model with all possible means
► New activities support (Second Screen, mobile, Smart TV)
► User payments and various partnership projects
Pillar 3: We are Wherever Our viewers Are
10
Special Projects
Successfully implemented a special project based on movies of MARVEL: project reach – over 5М individuals, 75,000 active participants of transmedia competition
The sketchcom #Students was premiered online – the current view count is over 1.3m and the project is still in progress. Mechanisms for large-scale online premiere have been developed in collaboration with partners (Odnoklassniki, Vkontakte 2, Caramba)
A test version of application SecondScreen- Molodezhka Apps - has been completed. A presentation for advertisers has been conducted. The launch of the application is planned simultaneously with the second season premier.
Partnerships
Odnoklassniki – our video is already available on the website in July 2014 Yandex – the partnership starts in Fall 2014, conditions have already been agreed upon Vkontakte – distribution of our video through the aggregator Pladform in August/September’14 Rambler&Co – a number of special projects are in development, launch – fall of 2014 Game Insight – all commercial terms are agreed upon, game development is in progress, launch–
September 2014
11
Pillar 3: Partnerships and Special Projects in Digital
Sublicensing 0.2%
Pillar 4: Diversify Revenue Streams
2004
Russian FTA Broadcasting
100%
H1 2014
Russian FTA Broadcasting
96%
71% 15%
10%
Digital Media 1.0%
Channel 31 2.3%
CTC-International 0.5%
12
Aim to increase
Combination of Growth, Profitability and Dividend Yield
GROWTH EFFICIENCY / PROFITABILITY
RETURN CASH TO SHAREHOLDERS
Operating in Europe’s third largest1
Forecast for Russian TV advertising market to grow up to 5% in 2014, CTC Media strive to outperform the market with its Russian advertising revenue
OIBDA margin of 32.5% in 2013, well above European TV broadcasters average High Group power ratio above 1.5x compared to rivals due to attractive audience profiles2
Strong cash flow generation and net cash position
Over 50% cash dividend payout More than 5% dividend yield in 2011, 2012 and 2013 Current dividend yield approximately 7%, the highest among European media companies
+ +
Source: (1) Zenith Optimedia, April 2014 estimates (2) Kommersant newspaper, 16 April 2013 (FY 2012 results). Power ratio = national TV ad revenue share / audience share in “all 4+” age group. Power ratio demonstrates relative effectiveness of audience monetization.
13
Macro and Market Update
Macroeconomic Update in Russia
15
CP Inflation, Retail Sales Dynamics and Real Disposable Income (RUB) 1
Ruble Depreciation 1
-8%
-4%
0%
4%
8%
12%
Jan
2013
Feb
2013
Mar
201
3
Apr 2
013
May
201
3
Jun
2013
Jul 2
013
Aug
2013
Sep
2013
Oct
201
3
Nov
201
3
Dec
2013
Jan
2014
Feb
2014
Mar
201
4
Apr 2
014
May
201
4
Jun
2014
CPI Inflation, % YoY Retail Sales growth, % YoY Real Disposable Income growth, % YoY
Real GDP Growth, % YoY 1
0%
1%
1%
2%
2%
3%
Q1 Q2 Q3 Q4
2013 2014E
25
30
35
40
Q1 Q2 Q3 Q4
2013 2014E
Sources: (1) Bloomberg
Macroeconomic environment is deteriorating
USA Japan China Brazil UK Germany Russia
US
$ bl
n Russian TV Ad Market Overview
Russian TV ad market was #7 in the world and #3 in Europe in 20131 and is expected to maintain its position by 2016
Free-to-air TV ad market growth1
RU
B b
ln
Sources: (1) Zenith Optimedia, as of April 2014, Company’s estimates Note: All TV Ad Markets figures are net of VAT
64.3
22.5
16.4 11.8
5.4 5.4 5.0
42
11795 109
129 140 152
96
257
186219
263298
328
2004 2008 2009 2010 2011 2012 2013TV Ad Market Total Ad Market
16
Ad spend as % of GDP¹ 1.4
1.7
0.9
1.2
0.90.9
0.8 0.70.6 0.6 0.6
1.6 1.6
1.0 1.01.0
0.80.7
0.5 0.5 0.50.4
Slo
veni
a
Bulg
aria
Aus
tria
US
A
Belg
ium UK
Ger
man
y
CE
E A
vera
ge
Rus
sia
Ukr
aine
Pola
nd
2008 2013
Russian TV ad market has potential for further development
TV is the only medium with truly national reach
Important social and cultural platform
More free-to-air networks than in other countries
High quality free-to-air content offering
TV Is the Most Attractive Advertising Medium in Russia
Ad spend in Russia by media segment1 (%)
FY 2012 cost per thousand in Russia (US$)²
FY 2012 TV cost per thousand (US$)²
Sources: (1) Russian Association of Communication Agencies, Video International (2) Initiative Media
2.0
4.1
16.4
19.8
29.1
Russia
Central & Eastern Europe
Asia Pacific
Western Europe
North America
2.0
3.9
5.8
5.6
6.3
TV
Radio
Internet
Newspapers
Magazines
43%
1%
31%
18%
6%
0.4%
48%
22%
11%12%
5%2%
48%
30%
6%10%
5%2%
TV Internet Press Outdoor Radio Other2004 2013 2018F
17
Stable Consumer Goods Client Base with Large Multi-National and Local Advertisers
Ad spending on CTC Media’s Russian channels by category
■ Vast majority of CTC Media’s Russian advertisers are basic consumer goods focused
■ CTC Media’s advertisers’ budgets split:
80% multinationals, 20% local companies
■ New clients in portfolio: 141 in H1 2014, compared to 121
for the same period last year
Notes: (*) National advertising sales for CTC, Domashny and Peretz Networks
(**) Total Russian advertising sales for CTC, Domashny and Peretz Channels
*
18
FY 2013 2Q 2013 2Q 20141 Food and beverages 26% 33% 31%2 Cosmetics and personal care products 19% 18% 17%3 Other goods 14% 11% 16%4 Pharmaceuticals and vitamins 16% 12% 11%5 Telecoms 7% 9% 8%6 Retail 4% 4% 6%7 Auto 4% 4% 4%8 Appliances 4% 4% 3%9 Detergents 4% 4% 2%10 Finance 2% 2% 1%
232226
246 243 243
222
249251
133142
134
188210
170 169
166
5 6 1323
39 47
5866
4537
46 51 44 40
42 41
2006 2007 2008 2009 2010 2011 2012 2013
TV
Radio
Internet
Other
Internet Is Growing Not at the Expense of TV Usage
Source: TNS Gallup Media, Russia
* Change in TNS Measurement panel in 2012 increase proportion of 2+ Tv-sets per household
TV Usage (Minutes per day, All 16+)
Min
utes
per
day
*
But in “All 10-45” demographic TV viewership was down 4%
19
Fragmentation is Inevitable Trend on Developing Market
Audience shares, all 10-45 demographic
Top 3 state-controlled channels
1st tier channels
2nd tier channels
Notes: top 3 state-controlled channels: Channel One, Rossiya 1, NTV; 1st tier channels: CTC, TNT, Ren-TV;
2nd tier channels: TV-3, Domashny, Peretz, Rossiya K, Channel 5, Rossiya 2, Euronews, Zvezda, Pyatniza, Rossiya 24, Ю, 2x2, TV Center, Disney, RU TV
Non-FTA and regional channels
20
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 H1 2014
TV viewers’ attention in H1 was captured by massive Ukrainian news flow, domestic Olympic Games and World Cup
Operating Update
We Are the Largest Independent FTA-Broadcaster in Russia with Premium Audiences
Combined audience shares, % (all 10-45 demographic)
22
27.4
15.5
12.8 12.09.5
4.3
Gazprom-Media СTС Media VGTRK (Rossiya) Channel One National Media Group UTV Russia Holding
H1 2013
26.7
14.5 14.512.5
8.3
3.6
Gazprom-Media СTС Media VGTRK (Rossiya) Channel One National Media Group UTV Russia Holding
H1 2014
12.012.5
11.4
8.8 8.9
5.24.3
2.9
0.9
2.31.4
2.2 2.61.9 1.8 1.6 1.4 1.5
0.8
18.6
12.512.1
10.5
8.98.1
4.43.9
3.1 2.6 2.4 2.0 2.0 2.0 2.0 1.8 1.6 1.5 1.40.6
19.7
ChannelOne
TNT CTC Russia 1 NTV Ren TV Channel 5 TV-3 Russia24
Russia 2Pyatniza *** Peretz Disney * Domashny TV Centr U ** Zvezda 2X2 RussiaK
Other
H1 2013
H1 2014
We Currently Deal with External Pressure on Entertainment Channels
Audience shares1, %
(all 10-45 demographic)
(1) Source: TNS Russia, CTC Media’s Research Department (2) Includes audience shares of regional and non-FTA channels (*) Operated under Semerka brand before 31 December, 2011 (**) Operated under Muz-TV brand before 1 September, 2012
2
(***) Operated under MTV brand before 1 June, 20123
23
News/sport events TV broadcasters demonstrated audience share growth vs. decline of entertainment channel shares
Audience Share Performance in H1 2014
Despite of the fact that:
TV viewers’ attention in H1 was captured by massive Ukrainian news flow, domestic Olympic Games and World Cup
We have tough comparison with H1 2013
Inventory was almost fully compensated by viewership increase which is monetized
24
Strengthening of horizontal programming grid
Increase of audience share in prime time with the most effective monetization
Continuing rejuvenation of the channel: proportion W25-45 increased by 5pp in target demographic
In July audience share reached 3.9% showing upward trend
Peretz was affected by extensive news flow about Ukraine with its reality and action positioning and male skewed audience
Launch of new programming in progress. The results will be seen in Fall
Recovery on its way: audience share in June – 2.1%; in July – 2.2%
11.6
10.211.4
10.5
Q2'13 Q2'14 1H'13 1H'14
3.53.3 3.3 3.2
Q2'13 Q2'14 1H'13 1H'14
2.3
1.9
2.4
2.1
Q2'13 Q2'14 1H'13 1H'14
Financial Update
We Continue to Deliver Strong Top and Bottom-line Growth
Notes: (*) OIBDA is defined as operating income before depreciation and amortization (exclusive of amortization of programming and sublicensing rights. OIBDA margin is defined as OIBDA divided by total operating revenues. Both OIBDA and OIBDA margin are non-GAAP financial measures (see reconciliations on page 48)
(**) 2008 OIBDA and OIBDA margin are adjusted to exclude a $232.7 million charge arising from the impairment of the intangible assets of DTV Group in Russia, Channel 31 in Kazakhstan and a broadcasting group in Moldova; 2009 OIBDA and OIBDA margin are adjusted to exclude an $18.7 million charge arising from the impairment of the broadcasting licenses in Russia and a $28.6 million stock-based compensation expense recognized in conjunction with the previously announced settlement by CTC Media of litigation brought by it against its former CEO; 2011 OIBDA and OIBDA margin are adjusted to exclude a $106.4 million charge arising from the impairment of several regional broadcasting licenses and the Peretz Network goodwill; 2011 OIBDA and OIBDA margin are adjusted to $82.5 million non-recurring charge arising from the impairment of analog broadcasting licenses; 2013 OIBDA and OIBDA margin are adjusted to $29 million charge arising from the impairment of the Company’s production unit in the fourth quarter 2013 (see reconciliations on page 46-47)
(***) Comparable-basis operating revenues are non-GAAP financial measures provided in order to facilitate period-to-period comparisons of CTC Media’s results following the implementation of the new model of advertising sales starting from 2011 (see reconciliations on page 48)
(****) Following companies are included in European peers average OIBDA margin calculations: CME, TVN, S.A. Modern Times Group, Antena3, ITV plc, Metropole Television, Mediaset, ProSiebenSat, Mediaset Espana, TF1
US
$ m
ln
US
$ m
ln
181
273
427
532
730
574
680
766805 832
2004 2005 2006 2007 2008** 2009** 2010 2011** 2012** 2013**
(Comparable-basis) total operating revenues***
71
104
174
220
280
211221
247256
271
39% 38%
41%
41% 38%37%
32% 32% 32% 33%
22%
26% 26% 27%
21%16% 21% 20% 16% 21%
2004 2005 2006 2007 2008** 2009** 2010 2011** 2012** 2013**
OIBDA* OIBDA margin*, % Peers average OIBDA margin****,%
26
Digitalization in Russia Is on Its Way
First multiplex Second multiplex
27
Multiplex Expenses*, RUBm
P&L, RUBm (net of VAT) 2014 2014-2019
Current ~185
Savings ~700
Cash, RUBm (net of VAT) 2014 2014-2019
Current ~575
Savings ~300
OPEX savings
>5000
CASH savings
>4000
* per CTC + Domashny in Multiplex, annualy Part of cash payments are capitalized as prepaid expenses; to be written off to PnL in 2019 and subsequent years
Significant cost optimization have been achieved as a result of active positioning of CTC Media. We consider this to be a huge achievement that will have a significant impact on current and future CTC Media Group financial performance in the long-term period
The rollout of second digital multiplex has been modified as follows: Instead of 100% infrastructure roll-out in 2015, beginning 2H 2014 RTRS launches broadcasting in cities with
population more than 50 thousand people in the second multiplex Over the period 2015-2018, RTRS constructs broadcasting infrastructure in cities with population less than 50
thousand people, but does not put this infrastructure into operation Starting from 2019 RTRS put into operations broadcasting units in cities with population less that 50 thousand
people.
H1 2014 Financial Highlights
28
401.3 370.6
108.4 101.4
27.0 % 27.4 %
H1 2013 H1 2014
Revenue OIBDA OIBDA Margin
Group Revenue* and OIBDA
284.5 265.1
H1 2013 H1 2014
H1 2014 Divisional Revenues ($m)
$m
59.5 56.0
H1 2013 H1 2014
41.9 35.9
H1 2013 H1 2014
10.9 8.5
H1 2013 H1 2014
CTC channel Domashny channel Peretz channel Channel 31
Group Net Income ($m)**
60.2 57.9
H1 2013 H1 2014
Group Expenses
309.7 283.8 Total operating expenses
*Negative exchange effect rate effect on revenue 11% in H1 2014 **Effective tax rate 31% in Q2 2014 (Q2 2013:36%)
$m
182.6 164.2
84.7 80.6
22.9 24.6
16.8 14.7
2.6 0.3
H1 2013 H1 2014
Stock-basedcompensarion
Depreciation &amortization
Direct operatingexpenses
Comparable-basisSG&A expenses
Programmingexpenses
H1 2014 Financial Highlights (cont’d)
29
Dividends
99 mln 109 mln
$0.63 per share
$0.70 per share
2013 2014
Free Cash Flow and Cash Position at YE($m)
47.0 47.8
142.4
190.3
6M 2013 6M 2014
Free Cash Flow * Net Cash at the End of Period **
Notes: (*) Free cash flow = cash flow from operating activities - acquisitions of property and equipment and intangible assets (**) Net cash position = cash and cash equivalents + short-term investments - total debt
September 2014 – quarterly payment of $0.175/share (~$27 mln total)
Russian total TV ad market Up to 5% growth in RUB terms
Russian TV ad revenues Aim to outperform the market
Total revenues Expect comparatively less growth in total revenue due to decrease in sublicensing revenue to Ukraine
Digital media revenues Up to 30% growth
Programming expenses Growing at lower rate than total revenues and at lower pace than in 2013
Multiplex expenses Up to 185 mln rubles
OIBDA margin Upgrade to approximately 30% including multiplex costs
Dividends $0.70 per share (~$109 million) in 2014, $0.175 per share (~ $27 million) to be paid in September
Capital expenditure Up to $10 million
Effective tax rate 30-35%
2014 Guidance
Commitment to creating long-term sustainable shareholder value
30
Appendix
From Private TV Network to Public Media Holding
1989 1994 2002 2005 2006 2008 2009 2010 2011 2012 2013 2014
CTC Media was founded as Story First Communications
Launch of CTC Network
Modern Times Group became a shareholder of CTC Media
Launch of Domashny Network
Initial Public Offering on NASDAQ
Acquisition of DTV (rebranded to Peretz in 2011) Acquisition of Channel 31 in Kazakhstan and a TV company in Moldova
Launch of CTC-international in Kazakhstan, Kyrgyzstan, Armenia, Georgia, Azerbaijan, Thailand and uplink to HOT BIRD CTC and Domashny received digital licenses
Launch of CTC-international in Germany, North America and the Baltics Telcrest Investments Limited acquired a 25% stake in СTС Media from Alfa Group Launch of Domashniy.ru women’s portal
Launch of CTC-international in USA
Launch of CTC-international in Israel Establishment of CTC Media’s internal advertising sales house ‘Everest Sales’ Launch of Videomore.ru online content portal
Development of in-house creative production center Launch of Peretz International in Belarus
Launch of CTC Love Channel on cable and satellite Launch of Peretz International in Kyrgystan Launch of Sweet me brand together with KupiVip Launch of Russian TV series in the US on the HULU subscription service
32
We Operate in Attractive Markets
Sources: Video International, Russian Association of Communications Agencies, ZenithOptimedia, CIA World Factbook, Rosstat, Russkiy Mir Foundation Note: (*) All TV Ad Markets figures are net of VAT
Kazakhstan Population = 17.1 million 2012 TV Ad Market = US$ 128.6 million* Russian-speaking population = 12.3 million
Kyrgyzstan Russian-speaking population = 3.6 million North America
Russian-speaking population = 3.5 million
Germany Russian-speaking population = 6 million
Russia Population = 143.7 million 2013 TV Ad Market = US$ 4.9 billion*
Israel Russian-speaking population = 1.5 million
Moldova Population = 3.6 million 2012 TV Ad Market = US$ 17.1 million*
Baltic states Russian-speaking population = 4 million
Since February 2012 CTC-International an is available on the HOT BIRDTM 8 satellite (W/E Europe, North Africa, Middle East and Central Asia coverage)
Thailand Russian-speaking tourists = 1.3 million (2012)
Armenia, Georgia, Azerbaijan Russian-speaking population=10.4 mln
Belarus Russian-speaking population = 7 million
33
Strong Management Team
Yuliana Slashcheva Chief Executive Officer • Joined CTC Media in 2013 • 20 years in high growth media
related businesses • Vast executive experience • Experience in creating and
managing digital development projects
Nikolay Surikov Chief Financial Officer • Joined CTC Media in 2012 • Almost 20 years experience in
finance • Previously with Ernst & Young,
VTB and MTS
Julia Moskvitina Chief Commercial Officer • Joined CTC Media in 1999 • 15 years experience in advertising
sales
Sergey Petrov Chief Broadcasting Officer • Joined CTC Media in 1995 • 20 years experience in TV industry
Viacheslav Murugov Chief Content Officer • Joined CTC Media in 2005 • Over 15 years in media industry • Acclaimed producer of numerous
award winning TV shows
Lilia Omasheva Chief of Operational Efficiency and Organizational Development • Joined CTC Media in 2013 • 10 years experience in advertising
industry
34
CTC Media Shareholder Structure
CTC Media, Inc.
Shareholder of CTC Media since 2002
Modern Times Group MTG AB
39%
Number of common shares outstanding (as of July 31, 2014)
Shareholder of CTC Media since 2011
Telcrest Investments Limited
25%
IPO on NASDAQ in June 2006
Free float
36%
155,762,166
Lorenzo Grabau Co-Chairman
Irina Gofman Director
Jørgen Madsen Lindemann Director
Board of Directors
Independent Directors
Angelo Codignoni Co-Chairman Alexander Pentya Director Timur Weinstein Director
Tamjid Basunia Director Werner Klatten Director Jean-Pierre Morel Director 35
12.611.9 11.6
8.4 8.6
5.34.3
0.9
2.9 2.5 2.11.6
2.61.8 2.1
1.7 1.81.5
0.7
18.6
12.812.0
10.2
8.57.7
4.1 4.13.4 3.1
2.1 2.1 2.0 1.9 1.8 1.8 1.6 1.6 1.5
0.6
20.2
TNT ChannelOne
CTC Russia 1 NTV Ren TV Channel 5 Russia24
TV-3 Russia 2 Domashny Pyatniza *** Disney * TV Centr Peretz 2X2 U ** Zvezda RussiaK
Other
Q2 2013
Q2 2014
Growing Audience Shares In “All 10-45” Most Commercially Attractive Demographic
Audience shares1, %
(1) Source: TNS Russia, CTC Media’s Research Department (2) Includes audience shares of regional and non-FTA channels (*) Operated under Semerka brand before 31 December, 2011 (**) Operated under Muz-TV brand before 1 September, 2012
2
(***) Operated under MTV brand before 1 June, 20123
36
14.2
12.6 12.5
6.9 6.9
5.85.4
1.1
2.9 2.6 2.62.2 2.4
1.9 1.9 1.61.0 1.0 0.9
17.2
14.5
13.4
11.3
6.75.9 5.7
4.0 3.83.1
2.5 2.4 2.4 2.11.5 1.5 1.4
1.2 0.8 0.8
18.7
ChannelOne
Russia 1 NTV TNT CTC Channel 5 Ren TV Russia 24 TV Centr TV-3 Domashny Zvezda Russia 2 Disney * Peretz Russia K Pyatniza *** U ** 2X2 Other
Q2 2013
Q2 2014
Audience Shares In “All 4+” Demographic
(1) Source: TNS Russia, CTC Media’s Research Department (2) Includes audience shares of regional and non-FTA channels
Audience shares1, %
(*) Operated under Semerka brand before 31 December, 2011 (**) Operated under Muz-TV brand before 1 September, 2012
2
(***) Operated under MTV brand before 1 June, 20123
37
CTC Improves Its Target Audience Profile in Commercially Attractive Demographic
Sources: TNS Russia 38
Domashny Improves Affinity in Its Target Demographic
Sources: TNS Russia 39
Peretz Improves Audience Profile In Commercially Attractive Young Adults Demographics
Sources: TNS Russia 40
CTC Has a Strong Viewership Position
13.013.7 13.4
12.111.0 11.3
2008 2009 2010 2011 2012 2013
Audience share in all 10-45 demographic, % 41
1.5 1.7
2.42.8 2.8
3.2 3.23.6 3.5
2005 2006 2007 2008 2009 2010 2011 2012 2013
2.02.1 2.1
2.7
2.4
2009 2010 2011 2012 2013
24.7
12.6
15.9
10.1
5.6
8.4 7.9
3.51.8
17.6
13.7 13.3
10.88.9 8.3 7.8
5.54.7
3.1
Channel 1 Channel 31 KTK NTK Astana Channel 7 Kazakhstan RTRPlaneta (KZ) **
Habar Mir
Q2 2013Q2 2014
10.011.9
16.9
23.6
25.8
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Revenue OIBDA margin
Strong Market Positions in Kazakhstan
Channel 31, Kazakhstan (all 6-54 demographics)* Significant growth in Kazakhstan revenue and OIBDA margin
US$
mln
Source: (*) TNS Central Asia
** Measured since March 1, 2014
17.4% 21.8%
30.4%
16.2%
Power ratio up to 1.2x from 1.0x
31.0% 11.6% 11.2%
15.2% 14.7%13.2%
11%12%
14%
17%
18%
FY 2009 FY 2010 FY 2011 FY 2012 FY 2013
Target audience share Market share
#2 among Top-10 Kazakh channels
42
Q2 and 6M 2014 Financial Highlights
43
2013 2014 in USD in RUB 2013 2014 in USD in RUBTotal operating revenues 206 015 184 312 -11% -1% 401 302 370 559 -8% 4%Total operating expenses (156,620) (145,692) -7% 3% (309,723) (283,800) -8% 3%OIBDA 57 753 45 440 -21% -12% 108 402 101 411 -6% 6%OIBDA margin 28.0% 24.7% 27.0% 27.4%Net income/(loss) attributable to CTC Media, Inc. stockholders 31 593 26 661 -16% -6% 60 181 57 877 -4% 10%
Diluted earnings per share $0.20 $0.17 -15% $0.38 $0.37 -3%
Six MonthsEnded June 30, Change
(US$ 000’s except per share data)
Three MonthsEnded June 31, Change
Consolidated Balance Sheet Highlights Consolidated Cash Flow Highlights
(US$ mln)As of December 31,
2013As of June 30,
2014
Cash and cash equivalents 30.6 43.3
Short-term investments 180.3 150.0
Total assets 971.0 941.6
including goodwill 135.3 131.7
including broadcasting licenses 59.7 50.7
including programming rights 294.0 288.1
Working capital1 311.9 290.0
Stockholders’ equity 734.1 715.1
Net cash position2 207.5 190.3
(US$ mln)Six months ended
June 30, 2013Six months ended
June 30, 2014
Cash at beginning of period 55.2 30.6
Net cash provided by operating activities 48.9 50.0
including acquisition of progr. and sublic. rights (196.2) (184.0)
Net cash used in investing activities (17.4) 20.7
including CapEx (1.9) (2.2)
including receipts from/(investments in) deposits (15.4) 22.9
Net cash used in financing activities (59.7) (58.5)
Cash at end of period 24.6 43.3
CapEx (1.9) (2.2)
CapEx as % of total revenue 0.5% 0.6%
Free cash flow3 47.0 47.8
Notes: (1) Working capital = current assets - current liabilities (2) Net cash position = cash and cash equivalents + short-term investments - total debt (3) Free cash flow = cash flow from operating activities - acquisitions of property and equipment and intangible assets
H1 2014 Operating Expenses Breakdown
as % of total operating expenses
as % of total operating revenues
$309.7 mln $283.8 mln $370.6 mln $401.3 mln
44
59% 58%46% 44%
27% 28%
21% 22%
7% 9%
6% 7%
1%
0%
1%
0%
5% 5%
4% 4%
H1 2013 H1 2014 H1 2013 H1 2014
Depreciation & amortization
Stock-based compensation
Direct operating expenses
SG&A expenses
Programming expenses
87%
65%
54%
88%
71%
61%
91%
76%
68%
94%
82%
73%
95%
85%80%
95%89%
84%
95%90%
85%
Consistent Growth in Technical Penetration
Note: (1) Technical penetration means the percentage of the population that has the technical ability to receive a particular broadcast signal. Measured annually by TNS Gallup Media in cities with populations of more than 100,000
Technical Penetration1, %
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
45
FY 2013 Income Statement Highlights
2012 2013 in USD in RUBTotal operating revenues 804,946 832,103 3% 7%Total operating expenses (655,059) (624,404) -5% -2%Total operating expenses before non-recurring items (572,556) (594,535) 4% 7%
OIBDA 173,905 240,815 nm nmOIBDA margin 21.6% 28.9%Adjusted OIBDA 256,408 270,684 6% 10%Adjusted OIBDA margin 31.9% 32.5% 0.6ppNet income/(loss) attributable to CTC Media, Inc. stockholders 93,063 152,340 nm nm
Diluted earnings per share $0.59 $0.97 nmAdjusted Net income/(loss) attributable to CTC Media, Inc. stockholders
157,794 182,209 15% 19%
Adjusted Diluted earnings per share $1.00 $1.16 16%
Twelve MonthsEnded December 31, Change(US$ 000’s except per share data)
46
(US$ mln)As of December 31,
2012As of December 31,
2013
Cash and cash equivalents 55.2 30.6
Short-term investments 131.4 180.3
Total assets 985.6 971.0
including goodwill 178.0 135.3
including broadcasting licenses 82.3 59.7
including programming rights 255.3 294.0
Working capital1 298.3 311.9
Total debt (bank overdraft and loans) 13.2 3.4
Stockholders’ equity 762.9 734.1
Net cash position2173.4 207.5
(US$ mln)Twelve months
ended December 31, 2012
Twelve months ended December 31,
2013
Cash at beginning of period 12.3 55.2
Net cash provided by operating activities 157.7 186.6
including acquisition of progr. and sublic. rights (364.2) (378.0)
Net cash used in investing activities (26.5) (63.4)
including acquisition of businesses (4.0) (0.5)
including CapEx (15.6) (6.3)
including receipts from/(investments in) deposits (6.8) (56.6)
Net cash used in financing activities (88.9) (143.9)
Cash at end of period 55.2 30.6
CapEx (15.6) (6.3)
CapEx as % of total revenue 1.9% 0.8%
Free cash flow3 142.1 180.3
FY 2013 Balance Sheet and Cash Flow Highlights
Consolidated Balance Sheet Highlights Consolidated Cash Flow Highlights
Notes: (1) Working capital = current assets - current liabilities (2) Net cash position = cash and cash equivalents + short-term investments - total debt (3) Free cash flow = cash flow from operating activities - acquisitions of property and equipment and intangible assets 47
36%33%
27% 27% 27%29%
32%
2007 2008 2009 2010 2011 2012 2013
High Levels of Cash Conversion and Return on Capital Employed
2007-2013 average ROCE: 30%
% of OIBDA Converted to Operating Cash Flow Return on Capital Employed*
Note: (*) ROCE excludes one-off non-cash asset impairment charges recognized in 2008, 2009, 2011, 2012 and 2013
US$
mln
158
186
133
186
116
158
187
72%66% 63%
84%
47%
62%69%
0 20 40 60 80
100 120 140 160 180 200
2007 2008 2009 2010 2011 2012 2013
Operating Cash Flow % of OIBDA converted
48
Reconciliation of Non-GAAP Measures
Reconciliation of consolidated adjusted OIBDA and other adjusted financial measures to consolidated OIBDA and other corresponding GAAP financial measures
49
(US$ 000’s except per share data) OIBDA Total operating expenses
Operating income
Income before income tax and noncontrolling
interest
Income tax expense Net income
Fully diluted earnings per
share
Twelve Months Ended December 31, 2013Adjusted non-US GAAP results $270 684 ($594 535) $237 568 $251 365 ($61 335) $182 209 $1.16 Impact of impairment loss (29 869) (29 869) (29 869) (29 869) - (29 869) 0.19 Results as reported(under US GAAP, except for OIBDA which is a non-US GAAP financial measure) 152 340 $0.97 $240 815 (624 404) 207 699 221 496 (61 335)
(US$ 000’s except per share data) OIBDA Total operating expenses
Operating income
Income before income tax and noncontrolling
interest
Income tax expense Net income
Fully diluted earnings per
share
Twelve Months Ended December 31, 2012
Adjusted non-US GAAP results $256 408 ($572 556) $232 390 $247 192 ($82 645) $157 794 $1.00
Impact of impairment loss (82 503) (82 503) (82 503) (82 503) 17 772 (64 731) (0.41)
Results as reported(under US GAAP, except for OIBDA which is a non-US GAAP financial measure) $173 905 ($655 059) $149 887 $164 689 ($64 873) $93 063 $0.59
Reconciliation of Non-GAAP Measures (continued)
Reconciliation of consolidated OIBDA margin to consolidated operating income margin
USD mln 2004 2005 2006 2007 2008 2009 2010Comparable-basis total operating revenues 180,639 273,352 427,091 532,143 729,629 574,107 680,418
Agency commission fees payable to Video International in connection with Russian advertising sales (excluding commissions for regional advertising sales to local clients)
(25,072) (35,875) (56,257) (60,087) (89,458) (67,994) (79,133)
Total operating revenues 155,567 237,477 370,834 472,056 640,171 506,113 601,285
Reconciliation of consolidated OIBDA to consolidated operating income
Reconciliation of comparable-basis, non-GAAP total operating revenues to total operating revenues
50
USD mln H1 2014 H1 2013 Q2 2014 Q2 2013 FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 FY 2004Operating income (loss) 86 759 91 579 38 620 49 395 207 699 149 887 122 685 207 118 152 475 34 181 193 061 154 313 90 187 62 559
Add: depreciation and amortization 14 652 16 823 6 820 8 358 33 116 24 018 17 649 13 736 11 454 13 379 27 361 19 651 13 920 7 962
OIBDA 101 411 108 402 45 440 57 753 240 815 173 905 140 334 220 854 163 929 47 560 220 422 173 964 104 107 70 521
USD mln H1 2014 H1 2013 Q2 2014 Q2 2013 FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 FY 2004Operating margin 23.4% 22.8% 21.0% 23.9% 25.0% 18.6% 16.0% 34.4% 30.1% 5.3% 40.9% 41.6% 38.0% 40.2%Add: depreciation and amortization as percentage of revenue
4.0% 4.2% 3.7% 4.1% 4.0% 3.0% 2.3% 2.3% 2.3% 2.1% 5.8% 5.3% 5.8% 5.1%
OIBDA margin 27.4% 27.0% 24.7% 28.0% 28.9% 21.6% 18.3% 36.7% 32.4% 7.4% 46.7% 46.9% 43.8% 45.3%
Reconciliation of Non-GAAP Measures
Reconciliation of consolidated adjusted OIBDA and other adjusted financial measures to consolidated OIBDA and other corresponding GAAP financial measures
(US$ 000’s except per share data) OIBDATotal
operating expenses
Operating income (loss)
Income (loss) before income tax and noncontrolling
interest
Income tax expense Net income (loss)
Fully diluted earnings per
share
Twelve months ended December 31, 2011Adjusted non-US GAAP results $246,716 ($537,293) $ 229,067 $ 243,301 ($83,342) $ 152,561 $ 0.97 Impact of impairment loss (106,382) (106,382) (106,382) (106,382) 6,939 (99,443) (0.63) Results as reported(under US GAAP, except for OIBDA which is a non-US GAAP financial measure) $ 0.34 $140,334 ($643,675) $ 122,685 $ 136,919 ($76,403) $ 53,118
Twelve months ended December 31, 2009Adjusted non-US GAAP results $87,382 ($96,460) $84,047 $87,585 ($20,759) $64,466 $0.41
Impact of non-cash intangible asset impairment charge (18,739) (18,739) (18,739) (18,739) 3,748 (14,991) (0.10)
Impact of Stock-based compensation expense related to settlement of litigation against former executive (28,588) (28,588) (28,588) (28,588) - (28,588) (0.18)
Results as reported (under US GAAP, except for OIBDA, which is a non-GAAP financial measure) $163,929 ($353,638) $152,475 $148,645 ($45,626) $100,389 $0.64
Twelve months ended December 31, 2008
Adjusted non-US GAAP results $280,241 ($94,636) $92,712 $74,266 ($1,653) $64,635 $1.11
Impact of non-cash impairment of intangible assets of DTV, Kz and Moldova (232,683) (232,683) (232,683) (232,683) 30,331 (153,679) (0.97) Results as reported
(under US GAAP, except for OIBDA) $28,678 ($89,044) $0.14 $47,558 ($327,319) ($139,971) ($158,417)
51
Contact Information and Disclaimer
For further information please visit www.ctcmedia.ru or contact:
Irina Faritova Head of Investor Relations E-mail: [email protected] Tel: +7 (495) 981 0740
DISCLAIMER • The information contained in this presentation, including market data that are attributed to specific sources and have not been independently verified. No
representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation.
• The presentation is not an offer of securities for sale in the United States. Neither the presentation nor any copy of it may be taken or transmitted into or distributed in the United States of America or to any U.S. person within the meaning of Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”).
• This presentation is not a public offer or advertisement of securities in the Russian Federation, and is not an offer, or an invitation to make offers, to purchase any securities in the Russian Federation.
• Certain statements in this presentation that are not based on historical information are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, among others, Russian advertising market growth, roll-out of digital broadcasting in 2014 – 2019 and ability of RTRS to put into operation equipment for digital broadcasting, OPEX and cash 2015-2018 growth of Russian TV ad market by 2020 and etc. These statements reflect the Company's current expectations concerning future results and events. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of CTC Media to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The potential risks and uncertainties that could cause actual future results to differ from those expressed by forward-looking statements include, among others, changes in the size of the Russian television advertising market; the roll-out of digital broadcasting in Russia; depreciation of the value of the Russian ruble compared to the US dollar; geopolitical events involving Russia and the other countries in which the Company operates, including any potential negative economic impact of such events; the Company’s ability to deliver audience share, particularly in primetime, to its advertisers; free-to-air television remaining a significant advertising forum in Russia; and restrictions on foreign involvement in the Russian television business. These and other risks are described in the "Risk Factors" section of CTC Media's annual report on Form 10-K filed with the SEC on March 6, 2014. Other unknown or unpredictable factors could have material adverse effects on CTC Media's future results, performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed herein may not occur. You are cautioned not to place undue reliance on these forward-looking statements. CTC Media does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.
52