Operating Expenses
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CTC Media, Inc. Investor Presentation Fourth Quarter 2011 and Full Year 2011 Results A Leading Independent Broadcaster in Russia Doctor Zaytseva’s Diary – new sitcom, CTC Network (Doctor’s Dairy format) 2 We Fully Capture the Value Chain by Being a Vertically Integrated TV Broadcaster CTC – target audience All 6-54 Domashny – target audience Females 25-59 FREE-TO-AIR (RUSSIA) Peretz* – target audience All 25-59 Kazakhstan Channel 31 FREE-TO-AIR (CIS) Moldova СTС/TV Dixi channel CONTENT PRODUCTION Story First Production AD-SALES Internal advertising sales house Everest CTC-INTERNATIONAL (PAY-TV) International version of CTC channel Various digital projects NEW MEDIA Social TV Network Videomore.ru Women’s portal Note: (*) DTV Network operates under Peretz brand name & logo starting from October 2011 3 Group Highlights for the FY 2011 GROUP FINANCIAL HIGHLIGHTS . Consolidated revenues up 13% to $766.4 million . Adjusted OIBDA* of $246.7 million with margin of 32.2% . Adjusted net income* of $152.6 million, adjusted fully diluted EPS of $0.97 . Payment of $130 million of cash dividends in 2011 . Board of Directors intends to pay an aggregate cash dividend of $80 million in 2012 . Net cash position of $112.6 million at Dec 31, 2011 GROUP OPERATIONAL HIGHLIGHTS . Successful relauch of DTV Network under the “Peretz” brand name and logo in October . Significant increases in technical penetration of all Russian networks, acquisition of 14 regional TV stations in 12 Russian cities . Establishment of new unified content production company Story First Production (merge Costafilm and Soho Media platforms) . Launch of CTC-international in Germany, Baltics and North America . Channel 31 in Kazakhstan recorded an all-time high average annual audience share in 2011 . Launch of new digital broadcasting complex in Moscow . Rapid development of New Media business, launch of Domashniy.ru women’s portal Note: (*) OIBDA , OIBDA margin and net income are adjusted to exclude a $106.4 million charge arising from the impairment of several regional broadcasting licenses and the Peretz Network goodwill 4 We Operate in Attractive Markets Germany Russia Russian-speaking population = 5 million Population = 142 million Baltic States 2011; TV Ad Market = US$ 4.4 billion* Russian-speaking population = 2 million Kazakhstan Population = 16.3 million 2011 TV Ad Market = US$ 120 million* Russian-speaking population= 16.5 million Moldova Population = 3.6 million 2011 TV Ad Market = US$ 16.6 million* Israel Russian-speaking population = 1 million USA Russian-speaking population = 4.5 million Since February 2012 CTC-International is available on the HOT BIRDTM 8 satellite (W/E Europe, North Africa, Middle East and Central Asia coverage) 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 5 We Are the Largest Independent Broadcaster in Russia Combined audience shares, % (all 6-54 demographic) FY 2010 FY 2011 23.6 23.0 16.0 16.1 16.1 15.4 15.1 14.8 7.2 6.2 5.2 4.6 3.3 2.4 Gazprom-Media VGTRK Channel One CTC Media National Media Prof-Media UTV Russia (Rossiya) Group Holding Source: TNS Gallup Media, demographic “all 6-54 year old”, CTC Media’s Research Department 6 Continued Growth in Revenue and Profit Baby (Detka) – original musical comedy series, CTC Network 7 We Continue to Deliver Strong Top and Bottom-line Growth… TV Ad Market CAGR – 17% CTC Media Revenue CAGR – 23% OIBDA* CAGR – 20% 900 50% 800 41.4% 766.4 39.0% 40.7% 729.6 38.1% 700 680.4 40% 32.5% 532.1 38.4% 574.1 32.2% 600 36.8% 30% 500 427.1 400 273.4 280.2 20% 300 246.7 180.6 220.4 211.3 220.9 174.0 200 104.1 10% 70.5 100 US$mln 0 0% ** ** 2004 2005 2006 2007 2008 ** 2009 2010 2011 Comparable-basis total operating revenues*** OIBDA* OIBDA margin*, % 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 45) (**) 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; (see reconciliations on page 43-44) (***) 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 45) 8 …Though Diverse Streams of Business DTV FY 2010 CIS Group FY 2011 DTV CIS Group Channel 2% Channel 2% 8% 9% Domashny Channel Domashny 13% Channel 14% Total Operating Total Operating Revenues¹ Revenues¹ $680.4 mln CTC $766.4 mln CTC Channel Channel 77% 75% DTV DTV Channel CIS Group CIS Group Channel 2% 2% 1% 2% Eliminations Domashny Domashny and other Channel 1% 9% Channel 9% OIBDA** Adjusted $220.9 mln OIBDA** $246.7 mln CTC CTC Channel Channel 87% 87% (**) FY2011 OIBDA is adjusted for non-recurring asset impairment charge of $106.4 mln related to the impairment of Notes: (1) Operating revenues by segment are shown from external customers only DTV goodwill, trade name and impairment of certain broadcasting licenses (*) Channel results = Network results + Television Station Group results Breakdown by segment is shown as % in operating segment OIBDA, which is a total OIBDA excluding corporate office OIBDA and including eliminations; operating segment OIBDA was $267.9 mln in FY 2010 and $277.9 mln in FY 2011 9 Operating in a Dynamic Market The Eighties – a nostalgic original sitcom, CTC Network 10 Russian Ad Market Has Significant Potential for Further Development… Russian TV ad market was #9 in the world Free-to-air TV ad market growth and #5 in Europe in 2011… 58.8 19.2 10.2 8.9 11.4 7.0 10.2 5.8 5.8 4.7 5.4 4.5 4.4 4.4 bln bln 3.6 3.3 3.0 US $ US US $ US 1.4 USA Japan China Brazil Italy Germany France Russia 2004 2008 2009 2010 2011 TV Ad Market Total Ad Market …and is expected to become # 1 in Europe by 2013 Note: All TV Ad Markets figures are net of VAT Sources: ZenithOptimedia, Company’s estimates 11 …Due to Relatively Low Ad Spend as % of GDP and Underleveraged Consumer Ad spend as % of GDP¹ Retail and mortgage loans as % of GDP2 1.8 1.7 1.4 1.4 76% 1.2 1.1 1.0 1.0 0.9 0.9 55% 0.9 0.8 0.8 0.8 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.5 0.5 0.5 31% 34% 63% 30% 30% 48% 26% 20% 14% 9% % 17% 16% 15% 13% 11% 5% 4% 3% UK UK USA Russia Poland Austria Russia Poland Ukraine Ukraine Belgium Bulgaria Bulgaria Moldova Slovenia Hungary Romania Germany Germany CzechRep Kazakhstan CEE Average CEE 2008 2011 Retail loans, % of GDP Mortgage loans, % of GDP Sources: (1) ZenithOptimedia, Company’s estimates (2) Eurostat, National Central Banks, 2010 12 TV Is the Most Attractive Advertising Medium in Russia 2010 Cost per Thousand in Russia (US$)² TV is the only medium with truly national reach Important social and cultural platform TV 2.0 More free-to-air networks than in other countries Radio 2.1 High quality free-to-air content offering 3.5 hours of TV watching per day Internet 3.9 Newspapers 5.5 Ad spend in Russia by media segment1 (%) Magazines 6.7 50% 43% 2010 TV Cost per Thousand (US$)² Russia 2.0 31% Asia 6.9 18% 16% 15% 13% Western Europe 8.4 6% 4% Eastern Europe 10.4 1% 0.4% 2% TV Internet Press Outdoor Radio Other North America 15.9 2004 2011 Sources: (1) Russian Association of Communication Agencies (2) Initiative Media 13 The Most Attractive Audience for Advertisers Voroniny – sitcom, CTC Network (Everybody loves Raymond format) 14 Positive Audience Share Momentum in 2012 CTC Network Domashny Network Peretz Network* 12.2 12.2 12.2 11.5 3.8 2.9 11.2 11.0 10.9 3.5 3.6 10.2 10.6 10.3 3.3 9.9 9.9 3.1 3.3 3.1 3.2 2.5 2.8 2.1 2.0 2.1 2.0 2.0 2.0 2.0 Q3 Oct Nov Dec Jan Feb Q1 Q2 Q3 Q4 Oct Nov Dec Jan Feb Q1 Q2 Q3 Q4 Oct Nov Dec Jan Feb 2011 All 14-44 All 6-54 2012 2011 All 25-59 2012 2011 All 25-59 2012 Boarding School S.U.P. 1 1st episode share 14.6% (16.8% in All 14-44) 1st episode share – 3.8%3 Average share 14.7% (16.0% in All 14-44) Average share – 3.2% Maximum share 19.8% (21.6% in All 14-44) Maximum share – 5.2% Doctor Zaytseva’s Diary Gentlemen on the Countryside 1st episode share 13.4% (16.2% in All 14-44) 1st episode share – 3.6% Average share 15.3% (18.6% in All 14-44) Average share – 2.2% Maximum share 17.4% (21.2% in All 14-44) KVN.