2019 Q3 Earnings call presentation...Q3 2019 Earnings Call Presentation This presentation contains...
Transcript of 2019 Q3 Earnings call presentation...Q3 2019 Earnings Call Presentation This presentation contains...
Q3 2019 Earnings Call Presentation
This presentation contains forward-looking statements, including those relating to our capital needs, business strategy, expectations and intentions. Statements that use the terms“believe”, “anticipate”, “trend”, “expect”, “plan”, “estimate”, “forecast”, “intend” and similar expressions of a future or forward-looking nature identify forward-looking statements forpurposes of the U.S. federal securities laws or otherwise. For these statements and all other forward-looking statements, we claim the protection of the safe harbor for forward-lookingstatements contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy or are otherwise beyond our control and some of whichmight not even be anticipated. Forward-looking statements reflect our current views with respect to future events and because our business is subject to such risks and uncertainties,actual results, our strategic plan, our financial position, results of operations and cash flows could differ materially from those described in or contemplated by the forward-lookingstatements contained in this report.
Important factors that contribute to such risks include, but are not limited to, those factors set forth under "Risk Factors” in our most recent Quarterly Report on Form 10-Q as well asthe following: the effect of changes in global and regional economic conditions; the effect of ending the quantitative easing program implemented by the European Central Bank; theeconomic, political and monetary impacts of Brexit in our markets; the outcome of our strategic review and its impact on our business; the impact of changes in local tax legislation;levels of television advertising spending and the rate of development of the advertising markets in the countries in which we operate; our ability to refinance our existing indebtedness;the extent to which our debt service obligations and covenants may restrict our business; our exposure to additional tax liabilities as well as liabilities resulting from regulatory or legalproceedings initiated against us; our success in continuing our initiatives to diversify and enhance our revenue streams; our ability to make cost-effective investments in our televisionbusinesses, including investments in programming; our ability to develop and acquire necessary programming and attract audiences; and changes in the political and regulatoryenvironments where we operate and in the application of relevant laws and regulations.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in our filings. Fora more detailed description of these uncertainties and other features, please see the “Risk Factors” section in our most recent Quarterly Report on Form 10-Q filed with the U.S. Securitiesand Exchange Commission. Forward-looking statements speak only as of the date on when they were made and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.
Non-GAAP Financial MeasuresWhile CME reports its results in accordance with generally accepted accounting principles in the United States (“GAAP”), this presentation also refers to several non-GAAP financialmeasures, including OIBDA, OIBDA margin, free cash flow and unlevered free cash flow. These non-GAAP financial measures are used in managing the business, and as suchmanagement believes they may provide meaningful information to investors about underlying trends in our business. While our reporting currency is the dollar, our consolidated revenuesand costs are divided across a range of European currencies and CME Ltd.’s function currency is the Euro. Given the significant movement of the currencies in the markets in whichwe operate against the dollar, we believe that it is useful to provide percentage movements based on actual (“% Act”) percentage movements, which includes the effect of foreignexchange, as well as like-for-like percentage movements (“% Lfl”). The like-for-like percentage movement references reflect the impact of applying the current period average exchangerates to the prior period revenues and costs.
Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, CME’s reported results prepared in accordance with GAAP. Please see the attachedAppendix for a description of non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures.
Cautionary Language
2
Michael Del Nin – Co-Chief Executive Officer
Christoph Mainusch – Co-Chief Executive Officer
David Sturgeon – Chief Financial Officer
Daniel Penn – General Counsel
Mark Kobal – Head of Investor Relations
Management Attending the Call
3
Consolidated Results of Continuing Operations
26%
500400300200100
0Q3 2018 FX Q3 2018@2019 rates Q3 2019
137.0
(7.6)
129.4 138.9
150125100
755025
0Q3 2018 FX Q3 2018@2019 rates Q3 2019
22.2
(1.5)
20.7 30.8
200
150
100
50
0Q3 2018 FX Q3 2018@2019 rates Q3 2019
35.8
(2.2)
33.6 41.4
US$ m
OIBDA Margin 26% 30%
For a reconciliation of OIBDA to Operating Income, see Non-GAAP Financial Measures beginning on slide 24.
US$ m
4
Net Revenues
OIBDA
Operating Income
7%
23%
49%
US$ m
Third Quarter 2019
28%
500400300200100
0YTD 2018 FX YTD 2018@2019 rates YTD 2019
475.7
(31.9)
443.8 469.0
150125100
755025
0YTD 2018 FX YTD 2018@2019 rates YTD 2019
96.8
(6.8)
90.0118.9
200
150
100
50
0YTD 2018 FX YTD 2018@2019 rates YTD 2019
131.9
(8.9)
123.0152.8
US$ m
28% 33%
US$ m 6%
24%
32%
US$ m
First Nine Months of 2019
Net Revenues for Continuing Operations by Quarter
5
¹ Reflects the impact of applying the most recent quarterly period average exchange rates to the prior period revenues.
Q4
220
200
180
160
140
120
100
80
60
40
20
0 Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q2 2013
Q2 2014
Q2 2015
Q2 2016
Q2 2017
Q2 2018
Q2 2019
Q3 2013
Q3 2014
Q3 2015
Q3 2016
Q3 2017
Q3 2018
Q3 2019
Q4 2013
Q4 2014
Q4 2015
Q4 2016
Q4 2017
Q4 2018
95106
116122
133144147
126
142154
159168170
184
92101
107116
124129
139
165
183187
201213
228
+3% +8%
+13%+8%
+9%
+10%+5%
+7%
+6%
+1%
+11%
+5%
+6%
Q1
+9%
+2%
Actual Exchange RatesConstant Exchange Rates1
Q2 Q3 Q4
+9%
US$ m
220
200
180
160
140
120
100
80
60
40
20
0 Q1 2013
Q1 2014
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q2 2013
Q2 2014
Q2 2015
Q2 2016
Q2 2017
Q2 2018
Q2 2019
Q3 2013
Q3 2014
Q3 2015
Q3 2016
Q3 2017
Q3 2018
Q3 2019
Q4 2013
Q4 2014
Q4 2015
Q4 2016
Q4 2017
Q4 2018
112
127
114117124
157147149
173
151159
165
182184
112120
108117
132137139
198198
178190
221228
US$ m Q1 Q2 Q3
+8%
+12%
+4%
+7%
+2%
+8%
+7%
For a reconciliation of OIBDA to Operating Income, see Non-GAAP Financial Measures beginning on slide 24. 6
OIBDA Margin for Continuing Operations by Quarter
FY
21%
24%
28%
32%
2015 2016 2017 2018 2019
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%Q1 Q2 Q3 Q4
8% 9%
13%16%
31%
17%
34%
20%
35%
23%
33%
26%
40%
26%
40%
30%
28%
31%31%
7
300
250
200
150
100
50
0
-50
-100Q1
2014Q2
2014Q3
2014Q4
2014Q1
2015Q2
2015Q3
2015Q4
2015Q1
2016Q2
2016Q3
2016Q4
2016Q1
2017Q2
2017Q3
2017Q4
2017Q1
2018Q2
2018Q3
2018Q4
2018Q1
2019Q2
2019Q3
2019
(41)
(8)
29
87101 107 113 115 121 129 138 142 147 154 161
180194 199 208
223 225238 244
$m @ actual rates
For a reconciliation of OIBDA to Operating Income, see Non-GAAP Financial Measures beginning on slide 24.
Last Twelve Months (LTM) OIBDA Trend by Quarter
8
Declining Net Leverage Ratio and Debt Service Obligations
Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
$113 $110$114 $115
$129
$104$100 $100
$92
$77$83
$68 $69
$56
$39
$29 $29 $26 $23 $21
10.08.8 8.7
8.0 8.27.5 7.5
6.8 6.96.3 6.1 5.8 5.4
4.8 4.43.8 3.5
3.0 2.6 2.5
Net leverage ratio3Annualized run-rate debt service obligations2
Wtd. averagecosts of
borrowing110.5% 10.6% 10.7% 10.7% 11.7% 9.5% 9.2% 9.2% 8.8% 7.3% 7.3% 6.0% 6.0% 5.0% 4.1% 3.5% 3.5% 3.6% 3.4% 3.4%
Gross debt1 $1,072 $1,042 $1,067 $1,073 $1,102 $1,104 $1,090 $1,088 $1,051 $1,065 $1,150 $1,128 $1,155 $1,123 $943 $821 $812 $730 $694 $611
1 Based on published quarterly data and end of period exchange rates. Gross debt includes related payables and excludes lease obligations.2 Calculated as gross debt multiplied by weighted average cost of borrowing.3 As defined in the Reimbursement Agreement with Warner Media. 4 Weighted average cost of borrowing and debt service run rate based on interest rates effective from July 25, 2019.
4
Audience Performance Overview
9
50
45
40
35
30
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
4045 45 43 41
3841 41 40
37
Bulgaria50
40
30
20
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
36 37 38 36 37
35 35 36 35 34
Czech Republic
50
40
30
20
10
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
28 29 32 30 28
26 27 28 27 25
Romania45
35
25
15
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
28 30 30 29 29
27 30 29 28 28
Slovakia
All Day Audience SharePrime Time Audience Share
50
40
30
20
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
4753 49 52 49
38 41 37 41 40
Slovenia
Sources: GARB (Bulgaria), ATO – Nielsen Admosphere; Mediaresearch (Czech Republic), Kantar Media (Romania), PMT/ TNS SK (Slovakia), AGB Nielsen Media Research (Slovenia) all shares in main TV salestarget group.
Revenues by Segment
10
US$ m
Net Revenues
Q3 2018 Q3 2019
Variance
YTD 2018 YTD 2019
Variance
Actual % Lfl %1 Actual % Lfl %1
Bulgaria 16.3 16.1 (1.7)% 3.2% 59.2 58.0 (2.1)% 4.1 %
Czech Republic 45.5 46.9 3.0 % 8.9% 158.1 161.6 2.2 % 9.4 %
Romania 41.1 39.7 (3.5)% 3.3% 136.7 126.9 (7.2)% 0.6%
Slovak Republic 20.9 22.1 6.1 % 11.7% 70.6 70.8 0.3 % 6.8 %
Slovenia 13.6 14.4 5.8 % 11.2% 53.5 54.5 1.9 % 8.5 %
Intersegment revenues (0.4) (0.3) NM 2 NM 2 (2.4) (2.6) NM 2 NM 2
Total net revenues 137.0 138.9 1.3 % 7.3% 475.7 469.0 (1.4)% 5.7 %
¹ Like-for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues.² Number is not meaningful.
The percentage growth figures have been derived from data included in our Form 10-Q for the period ended September 30, 2019.
OIBDA by Segment
11
US$ mOIBDA
Q3 2018 Q3 2019
Variance
YTD 2018 YTD 2019
Variance
Actual % Lfl %1 Actual % Lfl %1
Bulgaria 4.5 2.4 (45.8)% (43.1)% 13.1 16.4 25.6% 32.6 %
Czech Republic 15.4 17.5 13.8 % 21.0 % 59.0 64.7 9.7% 17.2 %
Romania 15.6 16.9 8.5 % 16.0 % 58.7 59.7 1.7% 10.2 %
Slovak Republic 5.0 7.1 40.5 % 48.2 % 10.0 17.4 72.8% 83.0 %
Slovenia 2.2 3.8 76.8 % 86.2 % 12.0 15.0 24.6% 32.8 %
Eliminations 0.0 0.0 NM2 NM2 0.0 0.0 NM2 NM2
Operations sub-total 42.7 47.8 12.0 % 18.9 % 152.9 173.2 13.3% 21.5 %
Corporate (6.9) (6.3) 7.8 % 3.0 % (20.9) (20.4) 2.4% (4.3)%
Total 35.8 41.4 15.8 % 23.2 % 131.9 152.8 15.8% 24.2 %
¹ Like-for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.² Number is not meaningful.
The percentage growth figures have been derived from data included in our Form 10-Q for the period ended September 30, 2019.
See also Non-GAAP Financial Measures beginning on slide 24.
12
Segment Review
Czech Republic: Segment Results
¹ Like for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
Sources: Audience share, ATO - Nielsen Admosphere; Mediaresearch (all audience share data is for the 15-54 target group). TV ad market andTV ad market share represents CME’s internal estimates at constant currency exchange rates.
US$ m Q32018
Q32019 % Act % Lfl¹ YTD
2018YTD2019 % Act % Lfl¹
TV advertising revenues 39.5 40.1 1.4 % 7.2% 138.9 139.8 0.6 % 7.7%
Carriage fees &subscription revenue 4.0 4.4 10.0 % 15.9% 11.8 13.0 9.8 % 17.2%
Other revenues 2.0 2.4 22.0 % 29.0% 7.3 8.7 19.9 % 28.0%
Net revenues 45.5 46.9 3.0 % 8.9% 158.1 161.6 2.2 % 9.4%
Costs charged inarriving at OIBDA 30.1 29.4 (2.5)% 2.8% 99.0 96.8 (2.3)% 4.7%
OIBDA 15.4 17.5 13.8 % 21.0% 59.0 64.7 9.7 % 17.2%
OIBDA Margin 33.8% 37.4% 3.6p.p. 3.8p.p. 37.3% 40.1% 2.8p.p. 2.7p.p.
Total TV Ad Market Year-on-Year Change
TV ad market & Audience Performance
TV Ad Market Share
Prime Time Audience Share
All Day Audience Share
80%
60%
40%
20%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
61 63 61 59 62
36 37 38 36 37
35 35 36 35 34
13
8%
6%
4%
2%
0%
YTD 2018 YTD 2019
3%
6%
Romania: Segment Results
14
¹ Like for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
Sources: Audience share, Kantar Media (all audience share and leadership data is for the 18-49 Urban target group).TV ad market sharerepresents CME’s internal estimates at constant currency exchange rates.
US$ m Q32018
Q32019 % Act % Lfl¹ YTD
2018YTD2019 % Act % Lfl¹
TV advertising revenues 28.5 27.3 (4.1)% 2.7% 98.7 90.4 (8.4)% (0.6)%
Carriage fees &subscription revenue 11.5 11.2 (2.4)% 4.5% 34.8 33.4 (4.2)% 3.7%
Other revenues 1.2 1.2 (0.3)% 6.0% 3.1 3.1 (2.0)% 5.5%
Net revenues 41.1 39.7 (3.5)% 3.3% 136.7 126.9 (7.2)% 0.6%
Costs charged inarriving at OIBDA 25.5 22.7 (10.9)% (4.5)% 78.0 67.1 (13.9)% (6.6)%
OIBDA 15.6 16.9 8.5% 16.0% 58.7 59.7 1.7 % 10.2%
OIBDA Margin 37.9% 42.7% 4.8p.p. 4.7p.p. 42.9% 47.1% 4.2p.p. 4.1p.p.
Total TV Ad Market Year-on-Year Change
TV ad market & Audience Performance
TV Ad Market Share
Prime Time Audience Share
All Day Audience Share
70%
50%
30%
10%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
59 58 58 57 58
28 29 32 30 28
26 27 28 27 25
7%
5%
3%
1%
-1%
-3%
YTD 2018 YTD 2019
4%
(1)%
Slovak Republic: Segment Results
15
¹ Like for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
Sources: Audience share, PMT / TNS SK (all audience share and leadership data is for the 12-54 target group). TV ad market share representsCME’s internal estimates at constant currency exchange rates.
US$ m Q32018
Q32019 % Act % Lfl¹ YTD
2018YTD2019 % Act % Lfl¹
TV advertising revenues 17.9 19.1 6.7% 12.4% 61.1 60.6 (0.8)% 5.6%
Carriage fees &subscription revenue 2.1 2.2 5.1% 10.4% 6.5 6.7 3.6% 10.1%
Other revenues 0.9 0.8 (2.8)% 1.7% 3.0 3.5 15.3% 22.5%
Net revenues 20.9 22.1 6.1% 11.7% 70.6 70.8 0.3% 6.8%
Costs charged inarriving at OIBDA 15.8 15.1 (4.8)% 0.2% 60.5 53.4 (11.7)% (6.0)%
OIBDA 5.0 7.1 40.5% 48.2% 10.0 17.4 72.8% 83.0%
OIBDA Margin 24.1% 31.9% 7.8p.p. 7.8p.p. 14.2% 24.5% 10.3p.p. 10.2p.p.
Total TV Ad Market Year-on-Year Change
TV ad market & Audience Performance
TV AD Market Share
Prime Time Audience Share
All Day Audience Share
75%
55%
35%
15%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
60 62 60 5862
28 30 30 29 29
27 30 29 28 28
8%
6%
4%
2%
0%
YTD 2018 YTD 2019
3%
6%
Bulgaria: Segment Results
16
¹ Like for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
Sources: Audience share, GARB (all audience share and leadership data is for the 18-49 target group). TV ad market share represents CME’sinternal estimates at constant currency exchange rates.
US$ m Q32018
Q32019 % Act % Lfl¹ YTD
2018YTD2019 % Act % Lfl¹
TV advertising revenues 10.1 9.5 (5.7)% (0.9)% 40.1 38.0 (5.0)% 1.1%
Carriage fees &subscription revenue 5.3 5.5 4.0% 9.3% 15.8 16.1 2.0% 8.3%
Other revenues 1.0 1.1 7.4% 13.0% 3.4 3.8 13.5% 20.6%
Net revenues 16.3 16.1 (1.7)% 3.2% 59.2 58.0 (2.1)% 4.1%
Costs charged inarriving at OIBDA 11.9 13.6 14.9% 20.8% 46.1 41.5 (10.0)% (4.0)%
OIBDA 4.5 2.4 (45.8)% (43.1)% 13.1 16.4 25.6% 32.6%
OIBDA Margin 27.4% 15.1% (12.3)p.p. (12.4)p.p. 22.1% 28.4% 6.3p.p. 6.1p.p.
Total TV Ad Market Year-on-Year Change
TV ad market & Audience Performance
TV AD Market Share
Prime Time Audience Share
All Day Audience Share
60%
50%
40%
30%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
50 5153
5052
40
45 4543
41
3841 41 40
37
9%
7%
5%
3%
1%
-1%
-3%
YTD 2018 YTD 2019
7%
(1)%
¹ Like for-Like currency variance reflects the impact of applying the current period average exchange rates to the prior period revenues and costs.
Sources: Audience share, AGB Nielsen Media Research (all audience share and leadership data is for the 18-54 target group). TV ad marketshare represents CME’s internal estimates at constant currency exchange rates.
US$ m Q32018
Q32019 % Act % Lfl¹ YTD
2018YTD2019 % Act % Lfl¹
TV advertising revenues 7.6 7.4 (1.8)% 3.4% 34.8 32.8 (5.7)% 0.5%
Carriage fees &subscription revenue 5.4 6.3 17.8% 23.7% 16.1 19.1 19.2% 26.7%
Other revenues 0.7 0.6 (5.2)% (0.3)% 2.6 2.5 (3.6)% 2.5%
Net revenues 13.6 14.4 5.8% 11.2% 53.5 54.5 1.9% 8.5%
Costs charged inarriving at OIBDA 11.4 10.6 (7.7)% (2.9)% 41.5 39.5 (4.7)% 1.4%
OIBDA 2.2 3.8 76.8% 86.2% 12.0 15.0 24.6% 32.8%
OIBDA Margin 15.9% 26.6% 10.7p.p. 10.7p.p. 22.5% 27.5% 5.0p.p. 5.1p.p.
TV ad market & Audience Performance
Total TV Ad Market Year-on-Year Change
TV AD Market Share
Prime Time Audience Share
All Day Audience Share
85%
65%
45%
25%
Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019
71
79
70
8073
4753
49 52 49
38 4137
41 40
Slovenia: Segment Results
17
4%
2%
0%
YTD 2018 YTD 2019
1%
0%
US$ m Nine months ended September 30, Variance2018 2019
OIBDA 131.9 152.8 20.9Change in working capital 41.0 64.1 23.1Interest, taxes, and other (77.1) (45.3) 31.8Net investment in programming (2.0) (3.6) (1.6)Net cash generated from continuing operating activities 93.8 168.0 74.2Capex (15.0) (15.6) (0.6)Other items1 — 1.2 1.2Free cash flow 78.7 153.6 74.9Cash paid for interest (including guarantee fees) 29.8 17.0 (12.8)Cash paid for guarantee fees previously paid in kind 27.3 — (27.3)Cash paid for guarantee fees that previously could be paid in kind 0.8 — (0.8)Unlevered free cash flow 136.7 170.6 33.91 Other items reflects costs related to the previously announced plan to review strategic alternatives. See Non-GAAP Financial Measures beginning on slide 24.Amounts in table derived from data included in our Form 10-Q for the period ended September 30, 2019.
Debt Maturity Profile and Cash Flow
18
Maturity profile as at September 30, 20191
(US$ m)800
600
400
200
02019 2020 2021 2022 2023
$66
$511
$34
1 Translated at FX rates as at September 30, 2019.
2021 Euro Loan Accrued Guarantee Fees2023 Euro Loan
Business Outlook
19
Based on our view today, in 2019 we expect:
• OIBDA growth of 15% - 17% at constant exchange rates.
• Unlevered free cash flow growth of 14% - 16% at actual rates.
Impact of foreign exchange rates on guidance:
• A 1% change in the average EUR/USD rate for the full year would result in a change in OIBDA
of more than US$ 2 million.
Supplemental cash flow information:
• Cash paid for interest and guarantee fees in 2019 expected to be around US$ 26 million.
• Cash paid for income taxes in 2019 expected to be around US$ 35 million.
• Capital expenditures expected to be around US$ 25 million.
The outlook above does not include the impact of any unanticipated legal proceedings or other actions that may occur from time-to-time due to managementdecisions and changing business circumstances.
Earnings call Appendix
Please refer to our Form 10-Q for the period ended September 30, 2019 for the full financial statements and related notes and disclosures.Amounts in table derived from data included in our Form 10-Q for the period ended September 30, 2019
Summary Consolidated Statements of Operations
21
US$ m (except per share data)Three months ended
September 30,Nine months ended
September 30,
2018 2019 2018 2019Net revenues 137.0 138.9 475.7 469.0Content costs 60.9 59.0 219.3 199.7Other operating costs 13.3 13.3 41.9 40.3Depreciation and amortization 10.4 10.3 32.0 31.0Selling, general and administrative costs 30.3 25.6 85.6 79.2Operating income 22.2 30.8 96.8 118.9Interest expense (10.0) (8.0) (40.2) (24.0)Non-operating income / (expense), net 1.6 (4.0) (1.1) (4.8)Provision for income taxes (3.2) (5.3) (14.4) (20.7)Income from continuing operations 10.6 13.5 41.0 69.4Income from discontinued operations, net of tax 57.9 — 60.5 —Net income 68.5 13.5 101.6 69.4Net loss attributable to noncontrolling interests 0.1 0.2 0.3 0.1Net income attributable to CME Ltd. 68.6 13.7 101.9 69.5
Continuing operations per share — basic 0.03 0.04 0.11 0.18Continuing operations per share — diluted 0.03 0.04 0.10 0.18Discontinued operations per share — basic 0.15 — 0.18 —Discontinued operations per share — diluted 0.15 — 0.17 —Attributable to CME Ltd. per share — basic 0.18 0.04 0.29 0.18Attributable to CME Ltd. per share — diluted 0.18 0.04 0.27 0.18
US$ m December 31, 2018 September 30, 2019Current assets 374.1 279.7
Non-current assets 1,114.3 1,059.5
Total assets 1,488.4 1,339.2
Current liabilities 139.7 145.3
Non-current liabilities 850.0 659.3
Total liabilities 989.7 804.6
Series B Convertible Redeemable Preferred Stock 269.4 269.4
CME Ltd. shareholders' equity 229.0 264.7
Noncontrolling interests 0.3 0.5
Total liabilities and equity 1,488.4 1,339.2
Cash & cash equivalents 62.0 34.2
Gross debt 1 (827.0) (624.5)
Net debt (765.0) (590.3)
22
Summary Consolidated Balance Sheet
¹ Gross debt is the full face value of all outstanding debt and related payables.Please refer to our Form 10-Q for the period ended September 30, 2019 for the full financial statements and related notes and disclosures.Amounts in table derived from data included in our Form 10-Q for the period ended September 30, 2019
Summary Cash Flow
23
Please refer to our Form 10-Q for the period ended September 30, 2019 for the full financial statements and related notes and disclosures.
US$ mNine months ended September 30,
2018 2019
Net cash generated from continuing operating activities 93.8 168.0
Net cash used in continuing investing activities (15.0) (15.6)
Net cash used in continuing financing activities (180.8) (176.1)
Net cash provided by discontinued operations 105.1 —
Impact of exchange rate fluctuations (2.4) (4.1)
Net increase / (decrease) in cash and cash equivalents 0.7 (27.9)
Supplemental disclosure of cash flow information and non-cash items from continuing operations:
Cash paid for interest (including guarantee fees) 29.8 17.0
Cash paid for guarantee fees previously paid in kind 27.3 —
Cash paid for guarantee fees that could previously be paid in kind 0.8 —
Cash paid for income taxes, net of refunds 23.5 29.1
Accretion on Series B Convertible Redeemable Preferred Stock 4.8 —
In this presentation we refer to several non-GAAP financial measures, including OIBDA, OIBDA margin, free cash flow and unleveredfree cash flow. We believe that each of these metrics is useful to investors for the reasons outlined below. Non-GAAP financial measuresmay not be comparable to similar measures reported by other companies. Non-GAAP financial measures should be evaluated inconjunction with, and are not a substitute for, US GAAP financial measures.
We evaluate our consolidated results and the performance of our segments based on net revenues and OIBDA. We believe OIBDA isuseful to investors because it provides a meaningful representation of our performance, as it excludes certain items that do not impacteither our cash flows or the operating results of our operations. OIBDA and unlevered free cash flow are also used as components indetermining management bonuses.
OIBDA includes amortization and impairment of program rights and is calculated as operating income before depreciation, amortizationof intangible assets and impairments of assets and certain unusual or infrequent items that are not considered by our co-CEOs whenevaluating our performance. Our key performance measure of the efficiency of our consolidated operations and our segments is OIBDAmargin. We define OIBDA margin as the ratio of OIBDA to net revenues.
Following a repricing of our Guarantee Fees in March 2017 and April 2018, we pay interest and related Guarantee Fees on our outstandingindebtedness in cash. In addition to this obligation to pay Guarantee Fees in cash, we expect to use cash generated by the businessto pay certain Guarantee Fees that were previously paid in kind. These cash payments are all reflected in free cash flow; accordinglywe believe unlevered free cash flow, defined as free cash flow before cash payments for interest and Guarantee Fees, best illustratesthe cash generated by our operations when comparing periods. We define free cash flow as net cash generated from continuing operatingactivities less purchases of property, plant and equipment, net of disposals of property, plant and equipment and excluding the cashimpact of certain unusual or infrequent items that are not included in costs charged in arriving at OIBDA because they are not consideredby our co-CEOs when evaluating performance.
For additional information regarding our business segments, see Part I, Item 1, Note 19, "Segment Data" in our Form 10-Q.
Non-GAAP Financial Measures
24
Non-GAAP Financial Measures - Reconciliation
US$ mNine months ended September 30,
2018 2019Net cash generated from continuing operating activities 93.8 168.0Capex additions, net of disposals (15.0) (15.6)Other items 1 — 1.2Free cash flow 78.7 153.6Cash paid for interest (including guarantee fees) 29.8 17.0Cash paid for guarantee fees previously paid in kind 27.3 —Cash paid for guarantee fees that could previously be paid in kind 0.8 —Unlevered free cash flow 136.7 170.6
25
US$ mThree months ended
September 30,Nine months ended
September 30,
2018 2019 2018 2019Operating income 22.2 30.8 96.8 118.9
Depreciation of property, plant and equipment 8.2 8.2 25.2 24.6
Amortization of intangible assets 2.2 2.0 6.8 6.3
Other items 1 3.2 0.4 3.2 3.0
OIBDA 35.8 41.4 131.9 152.8
Please refer to our Form 10-Q for the period ended September 30, 2019 for the full financial statements and related notes and disclosures.Amounts in table derived from data included in our Form 10-Q for the period ended September 30, 2019.
1 Other items in 2019 reflects costs related to the previously announced plan to review strategic alternatives. Other items in 2018 reflects the non-cash expense related to the accelerated vesting ofRSUs with performance conditions in accordance with the terms of the corresponding award agreement following the completion of sale of the Company's Croatian operations on such date.
Non - GAAP Financial Measures - Reconciliation
26
Last Twelve Months (LTM)
US$ m Q12014
Q22014
Q32014
Q42014
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
LTMoperating(loss) /income
(167.5) (140.6) (103.7) 33.0 29.4 43.0 80.3 89.5 114.9 122.9 102.0 105.7 110.6 116.9 123.4 139.9 152.6 156.2 162.3 177.6 180.6 191.1 199.7
Depreciationof property,plant andequipment
32.9 32.8 32.9 30.0 29.0 28.0 27.2 25.4 25.7 26.4 26.9 27.5 27.9 28.5 29.7 31.3 32.6 33.6 33.8 32.9 32.8 32.4 32.4
Amortizationof intangibleassets
14.1 13.7 13.0 12.3 12.6 12.9 12.5 12.3 10.8 9.5 8.9 8.3 8.3 8.3 8.4 8.6 8.8 9.1 9.1 9.0 8.8 8.7 8.5
Other items¹ — 6.9 6.9 8.6 26.8 19.9 (10.1) (11.9) (30.1) (30.1) — — — — — — — — 3.2 3.2 3.2 5.8 3.0
Impairmentcharge 79.7 79.7 79.7 3.3 3.3 3.3 3.3 — — — — — — — — — — — — — — — —
LTM OIBDA (40.9) (7.6) 28.8 87.3 101.2 107.1 113.2 115.3 121.4 128.7 137.8 141.5 146.9 153.7 161.4 179.8 194.0 198.9 208.4 222.7 225.4 237.9 243.5
Please refer to our Form 10-Q for the period ended September 30, 2019 for the full financial statements and related notes and disclosures.
1Other items from Q2 2014 to Q2 2016 reflect accruals that were subsequently reversed related to tax audits in Romania, and a fine that was later overturned in Slovenia. Since the charges were not included inOIBDA, our subsequent reversal of those charges was similarly excluded from OIBDA. Other items in Q3 2018 consists solely of expense related to the accelerated vesting of RSUs with performance conditionsin accordance with the terms of the corresponding award agreement following the completion of sale of the Company's Croatian operations on such date. Other items in Q2 and Q3 2019 consists of corporatecharges related to the previously announced plan to review strategic alternatives.