MIAMI, Aug 12, 2014 (BUSINESS WIRE) — Hemisphere Media Group, Inc. HMTV -1.90% (“Hemisphere”), the only publicly traded pure-play U.S. media company targeting the high growth Hispanic TV/cable networks business, today announced financial results for the second quarter ended June 30, 2014.
Alan Sokol, CEO of Hemisphere, stated, “Our second quarter performance reflected the sound execution of our strategic plan to drive growth in our networks. We continued to leverage our world-class portfolio, uniquely positioned in the rapidly expanding U.S. Hispanic market. We are very encouraged by the initial performance of our recently acquired networks and are confident that we will grow their distribution and reach. Furthermore, our recently amended term loan facility will provide additional funding resources for strategic acquisitions of complementary assets. We are confident that we can continue to identify assets in our space that we are uniquely-suited to grow and that will create significant shareholder value. We remain on track to achieve our full-year earnings guidance.”
On April 4, 2013, Hemisphere completed a series of mergers pursuant to which InterMedia Español Holdings, LLC, (“WAPA”), and Cine Latino, Inc. (“Cinelatino”) became indirect, wholly owned subsidiaries of Hemisphere (the “Transaction”). Results for Cinelatino are included in our consolidated income statement from the acquisition date, April 4, 2013, which affects the comparability of our results.
On April 1, 2014, Hemisphere closed on the acquisition of the assets of the Spanish-language television network business of Media World, LLC (the “Cable Networks Acquisition”), which is comprised of Pasiones, Centroamerica TV and TV Dominicana (the “Acquired Cable Networks”). Results for the Acquired Cable Networks are included in our consolidated income statement from the acquisition date, April 1, 2014, which affects the comparability of our results.
Net revenues for the three months ended June 30, 2014 were $29.1 million, an increase of 27%, compared to net revenues of $22.9 million for the same period in 2013. Net revenues for the six months ended June 30, 2014 were $50.0 million, an increase of 37%, compared to net revenues of $36.4 million for the same period in 2013. These increases are primarily a result of the inclusion of the Acquired Cable Networks in the current quarter, and Cinelatino for a full six months, as well as growth in retransmission and subscriber fees.
Operating expenses were $22.4 million for the three months ended June 30, 2014, a decrease of 7% from operating expenses of $24.2 million for the same period in 2013. Operating expenses were $39.7 million for the six months ended June 30, 2014, an increase of 5% from operating expenses of $37.8 million in the year ago period. The decrease in the three months ended June 30, 2014 was primarily due to a one-time $3.8 million charge in connection with the termination of a related party agreement in the prior year’s quarter and declines in stock compensation expense and transaction related fees and expenses. This was offset in part by the inclusion of the Acquired Cable Networks and amortization expense as a result of intangibles identified in the Cable Networks Acquisition. The increase in operating expenses for the six months ended June 30, 2014 was primarily due to the inclusion of the Acquired Cable Networks, and the inclusion of Cinelatino, corporate overhead and public company charges, which were not included in the prior year’s first calendar quarter, as well as an increase in amortization expense as a result of intangibles identified in connection with our acquisitions. This was offset in part by a one-time $3.8 million charge in prior year’s period, and declines in stock compensation expense and transaction related fees and expenses.
Net income was $5.3 million for the three months ended June 30, 2014, an increase of $7.7 million compared to a net loss of $2.4 million for the same period in 2013, and net income was $5.6 million for the six months ended June 30, 2014, an increase of $8.5 million compared to a net loss of $3.0 million for the same period in 2013.
Adjusted EBITDA increased $2.7 million, or 26%, to $13.2 million for the three months ended June 30, 2014, and increased $6.5 million, or 44%, to $21.2 million for the six months ended June 30, 2014. These increases were due to the inclusion of the operating results of the Acquired Cable Networks and Cinelatino and growth at our combined networks, offset in part by a full six months of corporate overhead, which has grown as we expand our infrastructure to support the expansion in our business.
The following tables set forth Hemisphere’s financial performance for the three and six months ended June 30, 2014 and 2013 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||
| Net revenues | $ | 29,055 | $ | 22,929 | $ | 50,006 | $ | 36,424 | ||||||||||
| Operating Expenses: | ||||||||||||||||||
| Cost of revenues | 9,292 | 7,672 | 16,890 | 13,528 | ||||||||||||||
| Selling, general and administrative | 8,241 | 12,544 | 15,122 | 15,973 | ||||||||||||||
| Depreciation and amortization | 4,832 | 2,582 | 7,410 | 3,592 | ||||||||||||||
| Other expenses | 62 | 1,380 | 311 | 4,672 | ||||||||||||||
| Loss on disposition of assets | 16 | 43 | 14 | 68 | ||||||||||||||
| Total operating expenses | 22,443 | 24,221 | 39,747 | 37,833 | ||||||||||||||
| Operating income (loss) | 6,612 | (1,292 | ) | 10,259 | (1,409 | ) | ||||||||||||
| Other Expenses: | ||||||||||||||||||
| Interest expense, net | (2,936 | ) | (1,155 | ) | (5,843 | ) | (1,914 | ) | ||||||||||
| Other expense, net | – | (13 | ) | – | (25 | ) | ||||||||||||
| (2,936 | ) | (1,168 | ) | (5,843 | ) | (1,939 | ) | |||||||||||
| Income (loss) before income taxes | 3,676 | (2,460 | ) | 4,416 | (3,348 | ) | ||||||||||||
| Income tax benefit | 1,642 | 34 | 1,150 | 397 | ||||||||||||||
| Net income (loss) | $ | 5,318 | $ | (2,426 | ) | $ | 5,566 | $ | (2,951 | ) | ||||||||
| Reconciliation of net income (loss) to EBITDA: | ||||||||||||||||||
| Net income (loss) | $ | 5,318 | $ | (2,426 | ) | $ | 5,566 | $ | (2,951 | ) | ||||||||
| Add (deduct): | ||||||||||||||||||
| Income tax benefit | (1,642 | ) | (34 | ) | (1,150 | ) | (397 | ) | ||||||||||
| Other expenses, net | 2,936 | 1,168 | 5,843 | 1,939 | ||||||||||||||
| Loss on disposition of assets | 16 | 43 | 14 | 68 | ||||||||||||||
| Depreciation and amortization | 4,832 | 2,582 | 7,410 | 3,592 | ||||||||||||||
| Stock-based compensation | 1,702 | 4,007 | 3,216 | 4,007 | ||||||||||||||
| EBITDA | 13,162 | 5,340 | 20,899 | 6,258 | ||||||||||||||
| Transaction expenses | 62 | 1,380 | 311 | 4,672 | ||||||||||||||
| Non-recurring expenses | – | 3,800 | – | 3,800 | ||||||||||||||
| Adjusted EBITDA | $ | 13,224 | $ | 10,520 | $ | 21,210 | $ | 14,730 | ||||||||||
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