TVN Group Financial Results for Q1 2011

1. TVN Group Financial Results
for the first quarter of 2011
Markus Tellenbach, CEO TVN Group, CEO ‘n’
Piotr Walter, VP Television
Łukasz Wejchert, VP Online, CEO Onet
John Driscoll, Board Member, CFO
Warsaw, May 12th, 2011
1

2. Disclaimer
• This presentation (the “Presentation”) has been prepared by TVN S.A. (the “Company”) solely for use by its shareholders, clients or analysts and should not be treated as a part
of any invitation or offer to sell any securities, invest or deal in or a solicitation of an offer to purchase any securities or recommendation to conclude any transaction, in particular
with respect to securities of TVN S.A.
• The information contained in this Presentation is derived from publicly available sources which Company believes are reliable, but TVN S.A. does not make any representation as
to its accuracy or completeness. TVN S.A. shall not be liable for the consequences of any decision made based on information included in this Presentation.
• The information contained in this Presentation has not been independently verified and is, in any case, subject to changes and modifications. TVN S.A.’s disclosure of the data
included in this Presentation is not a breach of law for listed companies, in particular for companies listed on the Warsaw Stock Exchange. The information provided herein was
included in current or periodic reports published by TVN S.A. or is additional information that is not required to be reported by Company as a public company.
• In no event may the content of this Presentation be construed as any type of explicit or implicit representation or warranty made by TVN S.A. or, its representatives. Likewise,
neither TVN S.A. nor any of its representatives shall be liable in any respect whatsoever (whether in negligence or otherwise) for any loss or damage that may arise from the use
of this Presentation or of any information contained herein or otherwise arising in connection with this Presentation.
• TVN S.A. does not undertake to publish any updates, modifications or revisions of the information, data or statements contained herein should there be any change in the
strategy or intentions of TVN S.A., or should facts or events occur that affect TVN S.A.’s strategy or intentions, unless such reporting obligations arises under the applicable laws
and regulations.
• This Presentation contains certain market information relating to the television broadcasting sector in Poland, including information on the market share of TVN S.A. and certain
of its competitors. Unless attributed exclusively to another source, such market information has been calculated based on data provided by third party sources identified herein
and includes estimates, assessments, adjustments and judgments that are based on TVN S.A.’s experience and familiarity with the sector in which TVN S.A. operates. Because
such market information has been prepared in part based upon estimates, assessments, adjustments and judgments and not verified by an independent third party, such market
information is, unless otherwise attributed to a third party source, to a certain degree subjective. While it is believed that such estimates, assessments, adjustments and
judgments are reasonable and that the market information prepared is appropriately reflective of the sector and the markets in which TVN S.A. operates, there is no assurance
that such estimates, assessments and judgments are the most appropriate for making determinations relating to market information or that market information prepared by other
sources will not differ materially from the market information included herein.
• TVN S.A. hereby informs persons viewing this Presentation that the only source of reliable data describing TVN S.A.’s financial results, forecasts, events or indexes are current or
periodic reports issued by TVN S.A. in satisfaction of its disclosure obligations under Polish law.
2

3. Agenda
1. Introduction 5. Financial review
2. TV segment 6. Conclusions
3. ‘n’ platform 7. Q&A session
4. Online segment
3

4. TVN Group Highlights
• Strong first quarter driven by revenue diversification initiatives
– ‘n’ platform improves all financial metrics: increases customer base and ARPU with
continued cost management
– Onet maintains high pace: double-digit revenue growth and high operating leverage
– TV segment stable: non-advertising revenue growth offsets muted roll out of
advertising campaigns; profitability performance reflects investments in
programming schedules
• Key strategic initiatives yield expected results
– Non-advertising revenue sources reached 43% of total compared to 40% year ago
– Launch of first retail bundled offerings with TP Group in 2Q are well on track
– Strong balance sheet with high liquidity and a distant maturity of debt maintained
4

5. Revenue growth driven by Pay TV
Revenue
TV broadcasting top line stable with
growth in content sales, call TV, carriage
+ 7%
600,0 fees and other revenue offsetting shortfall
in advertising and sponsoring
550,0
Pay TV revenue up 27% reflecting growth
500,0
582 in subscriber base and ARPU
547
450,0
Online revenue growth of 12% driven by
400,0 continued migration of advertising budgets
1Q 2010 1Q 2011
from traditional to online media
in PLN million
5

6. EBITDA growth reflects operating leverage
in Pay TV and online segments
EBITDA
Strong operating leverage in Pay TV and
200 Online segments provided PLN 29 million
+ 19%
of EBITDA growth
150
117
98 Making prudent investments to further
100
strengthening TV programming schedule
50 20%
18%
Solid margins with the Group
0 transforming more than half of revenue
1Q 2010 EBITDA 1Q 2011 EBITDA
growth into profitability improvement
in PLN million
EBITDA margin
6

7. TV segment
7

8. TV segment highlights: investing now, ROI will follow
• Revenue diversification results in stable year-on-year
performance
– Advertising and sponsoring decrease by 3% vs. TV ad market growth of 2%
• Impacted by slow start of advertising market and increased distribution of main competitor
– Content sales, carriage fees, call TV and other revenue compensated for the shortfall
with 16% growth rate
• Profitability reflects programming investment and market
environment
– TV segment EBITDA margin at 32%
• TVN again leads the market in the opening of spring season
– TVN main channel outperformed key competitors by differences ranging
from 3 to 5 pp of peak-time audience share in the basic commercial target group
8

9. TVN spot sales reflect shift in audience shares
TVN audience was impacted by distribution of the main competitor widened
at the end of last year, reflected in the relative shift of ad spend in a muted market
TVN on TV advertising market 1 TV advertising market shares 2
1 000
792 + 1.5% 804 1Q 2010 1Q 2011
800
TVP TVP
600
30,2% 29,4%
528 + 3.3% 546
Polsat Polsat
400 TVN
26,6% TVN 27,2%
33,6% 32,4%
200 9,7%
11,0%
264 - 2.5% 258
0
1Q 2010 1Q 2011
TVN TV advertis ing revenue Other TV advertis ing revenue
1 Source: Starlink for total market and TVN for own data, airtime only, in PLN million
2 Source: Starlink, airtime and sponsoring
9

10. Stable top line with profitability impacted by investments
Stable top line reflects growth of non-advertising revenue and slow start of
advertising market
EBITDA and margin driven by early investments in programming
Revenue EBITDA and margin
175
400 + 0%
358 + 10 358
350 150 - 12%
- 10
130 +1
300 125
- 17 114
36%
250 100
32%
200 75
1Q'10 Advertising and Content sales, 1Q'11 1Q'10 Revenue im pact Cos t im pact 1Q'11
Sponsoring carriage fees, call
TV and other
in PLN million X% change vs. 1Q 2010 Revenue / EBITDA EBITDA margin
10

11. TVN entered spring season at #1 position
Good audience share performance at the entry to spring season
Year-on-year evolution impacted by improved distribution of main competitor
Autumn 50% - 0.5pp + 0.2pp - 2.5pp
Low season Spring season Low season Low season
season 40% 34,8%
22% 32,3%
30%
18,9% 18,4%
20% 16,6% 16,8%
20% 10%
0%
TVN Polsat TVP1 & TVP2
18%
1Q 2010 1Q 2011
16%
50% - 0.3pp + 1.2pp - 1.9pp
40% 37,2% 35,2%
14% 30%
23,1% 22,8% 21,4% 22,6%
20%
12% 10%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 0%
TVN Group Polsat Group TVP Group
1Q 2010 1Q 2011
TVP1 TVP2 Polsat TVN
Source: Nielsen Audience Measurement
Jan 2010 – Mar 2011, Peak time, 16-49
11

12. Healthy contribution of thematic channels
Average increase in subscriber base of 6%
TVN CNBC 5,1 + 6% Advertising and sponsoring revenues
up 6% driven by continuous growth of
TVN Meteo 8,2 + 7%
audience shares
TVN Turbo 8,3 + 6%
Carriage fees up 8% with subscriber
TVN Style
8,3 + 6%
base increase and 2% year-on-year
TVN 24 8,3 + 5% depreciation of PLN vs. EUR
0 2 4 6 8 10
… Number of CATV & DTH subscribers in March 2011 in million
…% Percentage growth in number of CATV & DTH subscribers in March 2011 (yoy)
12

13. ‘n’ platform
13

14. ‘n’ platform highlights: on track with guidance
• Subscriber base growth of 15% coupled with 5% improvement
in ARPU drove top line increase
– 25 thousand net post-paid additions in 1Q
• EBITDA nears breakeven owing to operating leverage
and impact of cost restructuring
– 27% higher top line with only 7% increase in programming costs
• Both subscriber and profitability metrics are well on track to
reach the full year guidance
14

15. Subscriber and ARPU growth drive financial performance
27% revenue growth reflects increasing subscriber base and ARPU
Strong operating leverage with almost two thirds of revenue growth to EBITDA
Revenue EBITDA
200 0
176 -2
+ 27%
150 138 -10
+ 92%
100 -20
- 25
50 -30
1Q'10 1Q'11 1Q'10 1Q'11
in PLN million X% change vs. 1Q 2010 Revenue / EBITDA
15

16. Subscriber base growth in line with expectations
Active post-paid subscriber base up 15%
with pace of growth well on track to reach full year target
Quarter-end subscriber base
81 thousand new post-paid
1000
+ 15% subscribers acquired in 1Q
25 thousand of net additions
500
830
724
Active subscriber base up
0
1Q'10 1Q'11
by 106 thousand year-on-year
Post-paid
Subscriber numbers in thousands
16

17. Healthy ARPU maintained despite impact of 4Q promotions
Quarterly post-paid ARPU evolution (in PLN)
60,1 60,3
59,2
60
60,3 60,2 59,9
60 50
58,3
57,3
40
Jan'11 Feb'11 Mar'11
50
Quarterly ARPU at PLN 59.9
ARPU growth at 5% year-on-year
40
1Q 2010 2Q 2010 3Q 2010 4Q 2010 1Q 2011 Quarter-on-quarter evolution reflects
temporary impact of Christmas sales
promotions on January figures
17

18. Strong shift in pre-paid towards HD offer
Quarter-end active customer bases
50
40
30
Successful introduction and
20 10x 38
roll-out of pre-paid HD offering
10
17 thousand new cards
0
4
2Q'10 1Q'11 activated in 1Q
Pre-paid HD recharged
400
- 17%
Pre-paid HD ARPU at PLN 16.6
200
307
256
ARPU of pre-paid SD offer at
0
1Q'10 1Q'11
PLN 12.2
Pre-paid SD recharged
Customer numbers in thousands
18

19. Online segment
19

20. Online segment highlights: strong growth reflecting market
leadership position
• Double-digit top line growth driven by continuous development
of online advertising market
– Total revenue, both reported and cash, increased by 12%
– Display cash revenue up 22% year-on-year compared to display
market growth of 14%
• EBITDA up 42% to PLN 20 million, reaching 34% margin
– Cash EBITDA margin improved to 33% from 32% year ago
– Onet portal standalone cash EBITDA margin stable at 41%
• Onet’s focus on premium inventory drives leadership
in online display
20

21. Online advertising continues to post double digit growth
Robust internet advertising market
High operating leverage drove significant increase in EBITDA
Revenue EBITDA and margin
80
30
58
+ 12%
52 20
60
4 + 42%
20
4 14 2
40 -2 18
+ 15%
16 34%
+ 12% 54 10
48 33%
20
32%
27%
0 0
1Q'10 1Q'11 1Q'10 1Q'11
Cash revenue Barter revenue
Reported EBITDA margin
in PLN million X% change vs. 1Q 2010 Revenue / EBITDA
Cash EBITDA margin
21

22. Onet maintains leadership position
focusing on premium online inventory
Onet Group leads Polish online market in key commercial thematic services
Utilisation and inventory of main portals in Poland
Page views (in billions)
14
Total Real Users reached 13.5 million,
Onet up by close to one million year-on-year
12 2,7
Usage is driven mainly by key premium
Real users (in millions)
1,9
10
thematic services such as News,
WP
Interia
Entertainment, Business, Lifestyle
Gazeta
8 0,8
0,4
Pricing for advertising in premium
inventory is 2-4 times higher than online
6
o2 average price and more than 10 times
0,3
4 pricing for social media
00:30 01:30 02:30 03:30 04:30 05:30 06:30 07:30
Time spent per user
Source: Megapanel PBI / Gemius for February 2011
22

23. Financial review 1Q 2011
23

24. TVN Group financial highlights
• Top line growth of 7% reflects further solid uptake in Pay TV and Online
revenues, coupled with stable TV performance
• EBITDA improved by 19% owing to:
– significant operating leverage in Pay TV and Online
– lower profitability of TV business reflecting muted market uptake coupled with
increased programming investment aimed at further strengthening of our schedules
• Net finance result driven mainly by interest expense with impact of FX offset by
risk management activities
• Net loss attributable to the owners of TVN S.A. amounted to PLN -40 million
• Gross Debt consists primarily of Eurobonds while Net Debt to comparable
EBITDA ratio maintained at 3.9x
24

25. Revenue - Growth driven by Pay TV and Online
800
+ 7%
+ 35 mn
+6
600
+1 + 38 - 11
400
547 582
200
0
1Q'10 Revenue TV 'n' Online Other revenue and 1Q'11 Revenue
conso adjustments
in PLN million
25

26. EBITDA - Growth reflects operating leverage in Pay TV
and Online, coupled with increase in TV programming cost
150 + 19%
+ 18 mn
+6
+6
100
+ 23
- 16
117
98
50
20%
18%
0
1Q'10 EBITDA TV 'n' Online Other EBITDA and 1Q'11 EBITDA
conso adjustments
in PLN million
EBITDA margin
26

27. Financing costs - Driven mainly by interest expense
PLN million 1Q 2011 1Q 2010
Interest income +6 +3
Interest expense - 92 - 68
- including interest on foreign exchange forward contracts - 10 -
Foreign exchange gains (losses) net, of which: + 12 + 120
- unrealized foreign exchange gains (losses) - 41 + 105
- fair value hedge impact + 47 -
Other finance expense, net -5 -9
Net finance result - 78 + 46
27

28. EBITDA to Net Profit Bridge
140
120
100
- 64
80
60 117
40 + 47
- 35
- 85
20
0
- 26
-20
-5 - 40
- 15
-40
-60
1Q'11 EBITDA Depreciation and FX loss before fair Fair value FX hedge Interest income & Other finance costs, Earnings before Income tax Net result to owners
amortisation value hedge impact expense, net net income tax of TVN S.A.
in PLN million
28

29. Cash flow - Generation supported by gain on FX hedge
1 000
+ 38
- 55 +3 + 37
750 -5 - 139
+6
500
802 785
688
250
0
Cash EoY Operating CF CAPEX Tax paid Interest, net Cash after Cash gain on Repurchase Other Cash EoP
1 1
2010 operations FX hedges of PLN bonds 1Q'11
in PLN million
1 Cash, cash equivalents, liquid financial assets available for sale and bank deposits above 3 months.
29

30. Stable leverage with Net Debt neutral repurchase
of PLN bonds
PLN million March 31, 2011 Maturity Distant maturity of gross debt
10.75% Senior Notes 1 2 379 2017 2017 and beyond
7.875% Senior Notes 1 702 2018 High liquidity
PLN Bonds 1 6 2013 PLN 688 million in cash
and bank deposits
Accrued interest 2 116 -
Cash and liquid assets 3 - 688 -
FX exposure successfully
hedged in 1Q
Net Debt 2 515 -
Comparable EBITDA 4 Redemption of remaining
647 -
(12-month rolling)
PLN bonds to be completed
Net Debt / EBITDA 3.9 -
by mid 2011
1 Nominal value.
2 Please note that according to our revised definition of Gross Debt bank guarantees are excluded from its calculation.
3 Cash, its equivalents, liquid financial assets available for sale and bank deposits above 3 months, excluding restricted cash.
4 Reported EBITDA excluding ‘n’ restructuring costs in 4Q 2010.
30

31. Conclusions
31

32. Positioned for growth: diversified revenue base
and revised positive market outlook
• Solid growth and contribution to profitability by Pay TV segment
reconfirming full year EBITDA positive guidance for ‘n’
• Online revenue performance in line with expectations while profitability
enhanced by high operating leverage
• Revision of 2011 guidance for expected TV advertising market
growth rate: mid single-digit
• Muted TV advertising market evolution in the beginning of 2011
triggered implementation of all measures necessary to maintain TV
segment’s leadership position in audience whilst securing profitability
32

33. Additional financial slides
33

34. TV channels: 1Q revenue and EBITDA evolution
TVN channel revenue TVN24 channel revenue Other thematic channels revenue
300 - 5% 80 80
252 + 16%
238 + 9%
66
54 57
200 49
40 40
100
0 0 0
1Q'10 1Q'11 1Q'10 1Q'11 1Q'10 1Q'11
TVN channel EBITDA and margin TVN24 channel EBITDA and margin Other thematic channels EBITDA and margin
- 23%
100 93 60% 40 80% 30 60%
71 + 15%
26
23 + 15%
16
50 37% 40% 20 60% 15
14 35%
25% 24%
30% 49%
47%
0 20% 0 40% 0 10%
1Q'10 1Q'11 1Q'10 1Q'11 1Q'10 1Q'11
in PLN million EBITDA margin
34

35. Revenue breakdown (by source)
PLN million 1Q 2011 1Q 2010 % change
Ad revenue
305 301 + 2%
(including online and ‘n’)
TV ad revenue (incl. ‘n’) 258 259 0%
Online ad revenue 47 41 14%
Sponsoring 26 29 - 10%
Audiotele, Teleshoping 10 7 + 35%
Internet subscription fees 4 6 - 21%
Carriage fees (incl. ‘n’) 44 40 + 10%
‘n’ subscription revenue 164 133 + 23%
Other 29 31 - 5%
TOTAL REVENUE 582 547 + 7%
35

36. Revenue breakdown (by segments)
PLN million 1Q 2011 1Q 2010 % change
TV Broadcasting & Production 358 358 0%
TVN channel 238 252 - 5%
Ad revenue 209 219 5%
Sponsoring 20 24 - 14%
Others 9 9 - 4%
TVN 24 channel 54 49 9%
Subscription fees 31 29 7%
Ad revenue 20 18 16%
Sponsoring 3 2 2%
Others 0 0 - 56%
Thematic channels 66 57 16%
Subscription fees 17 15 10%
Ad revenue 28 28 0%
Sponsoring 3 3 10%
Others 18 11 67%
Online 58 52 12%
Onet 51 45 12%
Ad revenue 43 36 17%
User generated 6 7 - 21%
Others 3 2 24%
Other 8 7 12%
ZUMI 6 6 - 4%
Other 1 0 239%
‘n’ Platform 176 138 27%
Subscription fees 164 133 23%
Other 12 5 152%
Other revenue 12 22 - 45%
Other reconciling items -23 -24 - 5%
Total revenue 582 547 7%
36

37. Thank you
37