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Hemisphere Media Group Announces Fourth Quarter and Full Year 2017 Financial Results

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Fourth Quarter and Full Year Financial Performance Negatively
Impacted by Hurricane Maria in Puerto Rico; Remainder of the Core
Businesses is Solid

Hemisphere Media Group, Inc. (NASDAQ:HMTV) ("Hemisphere" or the
"Company"), the only publicly traded pure-play U.S. media company
targeting the high growth U.S. Hispanic and Latin American markets with
leading broadcast and cable television and digital content platforms,
today announced financial results for the fourth quarter and full year
ended December 31, 2017.

President and Chief Executive Officer of Hemisphere, Alan Sokol, said,
"Our businesses outside of Puerto Rico continued their strong
performance in the fourth quarter. However, our overall results were
significantly impacted by the disruption to our Puerto Rico business
caused by Hurricane Maria. As power and other services are being
restored to the island, our business is improving and we expect
continued recovery over the coming months and are optimistic that the
market will to return to pre-storm levels.

WAPA suffered significant declines in revenues in the fourth quarter due
to the loss of power and services in Puerto Rico. Revenues did improve
over the course of the fourth quarter reflecting the progress in
restoring power. Notwithstanding the challenging business environment,
we successfully executed a new multi-year retransmission agreement at
the largest fee increase in our history--a testament to the power of
WAPA's brand and its high-quality programming.

With respect to our U.S. cable channels, we continue to defy overall
subscriber trends by delivering strong organic subscriber growth. WAPA
America's authoritative coverage of Hurricane Maria resulted in an
expansion of distribution across multiple operators. In addition, the
fourth quarter was the strongest advertising quarter in the history of
both Cinelatino and WAPA America and we are excited about our
advertising momentum for 2018.

In terms of our new investments, Canal 1, a national broadcast network
in Colombia, has shown impressive ratings growth in just its first few
months since re-launch, and Pantaya, our OTT joint venture with
Lionsgate, is off to a terrific start, ranking among the highest
grossing entertainment apps on both iOS and Android.

Overall, although the situation in Puerto Rico has caused disruption to
our business, we continue to attract subscribers and advertisers, and we
are well-positioned as leaders driving the future of Hispanic content
consumption."

Financial Results for the Three and Twelve Months Ended December 31,
2017

Net revenues were $24.0 million for the three months ended December 31,
2017, as compared to net revenues of $39.4 million for the comparable
period in 2016. The decrease in the three months ended December 31, 2017
was due to an $11.6 million decline in advertising revenue driven by the
negative impact of Hurricane Maria, particularly the widespread loss of
power. Additionally, in 2016 the Company benefited from political
advertising of $1.8 million, which did not occur in 2017. Subscriber and
retransmission fees decreased $2.5 million due to the interruption
resulting from Hurricane Maria to pay television subscriptions of
multi-channel video distributors in Puerto Rico that distribute the
Company's networks, as well as the termination of carriage of Televisión
Dominicana by AT&T in September 2017. Other revenues, which are
primarily related to the licensing of the Company's content to third
parties, grew $0.4 million, due to the timing and availability of the
content licensed. Excluding political advertising revenue in the prior
year period, net revenues decreased $13.7 million for the three months
ended December 31, 2017.

Net revenues were $124.5 million for the twelve months ended December
31, 2017, as compared to net revenues of $138.5 million for the
comparable period in 2016. The decrease in the twelve-month period was
due to a $14.5 million decline in advertising revenue driven by the
impact of Hurricanes Irma and Maria on the television advertising market
in Puerto Rico. Additionally, in 2016, the Company benefited from
political advertising of $2.6 million, which did not occur in 2017.
Subscriber and retransmission fees increased $1.6 million, due to annual
rate increases and subscriber growth, which was offset in part by the
interruption resulting from Hurricanes Irma and Maria to pay television
subscriptions of multi-channel video distributors in Puerto Rico that
distribute the Company's networks, and the termination of carriage of
Televisión Dominicana by AT&T in September 2017. Other revenues
increased $1.4 million, due to the timing and availability of content
licensed to third parties. Excluding political advertising revenue in
the prior year period, net revenue decreased by $11.5 million for the
twelve months ended December 31, 2017.

Operating expenses were $24.6 million for the three months ended
December 31, 2017, as compared to operating expenses of $26.8 million
for the comparable period in 2016. The decrease in the three months
ended December 31, 2017 was due to lower programming and production
costs, as WAPA implemented cost savings measures following Hurricane
Maria, and lower stock-based compensation expense, offset in part by
incremental Hurricane Maria related expenses of $0.8 million. Operating
expenses for the twelve months ended December 31, 2017 were $99.1
million, as compared to $98.5 million for the comparable period in 2016.
The increase for the twelve-month period was due to incremental costs
related to Hurricane Maria, and higher transaction costs incurred in
connection with the refinancing of the Company's Term Loan in the first
quarter of 2017, partially offset by lower stock-based compensation
expense.

Net loss was $22.0 million for the three months ended December 31, 2017,
as compared to net income of $5.9 million in the comparable period in
2016. Net loss for the twelve months ended December 31, 2017 was $13.4
million, as compared to net income of $18.0 million in the comparable
period in 2016. The declines in net income were due to lower revenues as
a result of the impact of Hurricanes Irma and Maria and loss on equity
investments. Additionally, on December 22, 2017, the Tax Cuts and Jobs
Act amended the Internal Revenue Code and lowered the U.S. corporate
federal tax rate. This had the effect of increasing the reported income
tax expense by $13.6 million in the three and twelve month periods,
primarily due to the reduction in the likelihood of the utilization of
foreign tax credits created by income taxes paid in Puerto Rico and the
revaluation of our deferred tax asset at the lower corporate tax rate.

Adjusted EBITDA was $6.8 million for the three months ended December 31,
2017, as compared to Adjusted EBITDA of $20.4 million for the comparable
period in 2016. Adjusted EBITDA for the twelve months ended December 31,
2017 was $51.2 million, as compared to Adjusted EBITDA of $64.3 million
for the comparable period in 2016. Adjusted EBITDA, excluding political
revenue, for the three and twelve months ended December 31, 2017
decreased $11.8 million and $10.5 million, respectively.

As of December 31, 2017, the Company had $211.2 million in debt and
$124.3 million of cash. The Company's leverage ratio was approximately
4.1 times, and net leverage ratio was approximately 1.7 times.

As previously announced, the Company implemented a share repurchase plan
during the third quarter of 2017. During the fourth quarter, the Company
repurchased approximately 900,000 shares of common stock at a weighted
average price of $12.32, for an aggregate purchase price of $11.2
million. The Company will evaluate with its Board the share repurchase
program in the context of its overall capital allocation plans

During the year, the Company funded $40 million in investments, which is
in line with the previously announced guidance range of $35-$40 million.

In the fourth quarter, the Company received $3.25 million in insurance
proceeds related to property and casualty damage in Puerto Rico. The
Company has prepared claims under its property and casualty policies
totaling approximately $13 million. The Company is optimistic that it
will receive the majority, if not all of the remaining funds during
2018. Additionally, the Company's business interruption policies have
combined limits of $10 million, per occurrence. The Company expects two
occurrences under its policies. The Company is preparing business
interruption claims to recover a significant portion of the income loss
from Hurricanes Irma and Maria. The Company believes it will receive
proceeds under the business interruption policies over the next several
quarters, although not all damages will be covered.

Due to the effects of Hurricane Maria, the Company withdrew previously
issued guidance for the year ending December 31, 2017. Given the
uncertainty around the recovery in Puerto Rico, the Company is not in
position to issue 2018 guidance at this time.





The following tables set forth the Company's financial performance for
the three and twelve months ended December 31, 2017 and 2016, as well as
select financial data as of December 31, 2017 and December 31, 2016:

                       

HEMISPHERE MEDIA GROUP, INC.
Comparison of
Consolidated Operating Results

(amounts in thousands)

 
 
Three Months Ended December 31, Year Ended December 31,
  2017                   2016     2017                   2016  
(Unaudited) (Audited)
                                   
Net revenues $ 23,952   $ 39,407   $ 124,464   $ 138,525  
Operating expenses:
Cost of revenues 9,539 10,646 39,965 41,293
Selling, general and administrative 10,592 10,558 39,437 38,333
Depreciation and amortization 4,005 4,108 16,228 16,608
Other expenses 445 1,492 3,501 2,262
(Gain) loss on disposition of assets   (25 )   -     (23 )   6  
Total operating expenses   24,556     26,804     99,108     98,502  
 
Operating (loss) income   (604 )   12,603     25,356     40,023  
 
Other (expense) income:
Interest expense, net (2,816 ) (2,872 ) (10,905 ) (11,651 )
Loss on impairment of fixed assets (13 ) - (546 ) -
Loss on equity investments (9,435 ) - (11,885 ) -
Gain from insurance proceeds   3,250     -     3,250     -  
Total other expense   (9,014 )   (2,872 )   (20,086 )   (11,651 )
(Loss) income before income taxes (9,618 ) 9,731 5,270 28,372
 
Income tax expense   (12,426 )   (3,809 )   (18,706 )   (10,372 )
Net (loss) income $ (22,044 ) $ 5,922   $ (13,436 ) $ 18,000  
 
 

Reconciliation of net (loss) income to Adjusted EBITDA:

Net (loss) income

$

(22,044

)

$

5,922

$

(13,436

)

$

18,000

Add (Deduct):

 

Income tax expense

12,426

3,809

18,706

10,372

Other expense

9,014

2,872

20,086

11,651

(Gain) loss on disposition of assets

 

(25

)

-

(23

)

6

Transaction and non-recurring expenses

1,748

1,558

4,862

2,993

Hurricane related expenses

753

-

753

-

Depreciation and amortization

4,005

4,108

16,228

16,608

Stock based compensation

 

964

   

2,169

   

4,068

   

4,691

 

Adjusted EBITDA

$

6,841

 

$

20,438

 

$

51,244

 

$

64,321

 
 
 

Selected Financial Data:

(amounts in thousands)

        As of               As of    
December 31, 2017 December 31, 2016
(Audited) (Audited)
 
Cash $124,299 $163,090
Debt (a) $211,214 $213,347
 
Leverage ratio (b): 4.1x 3.3x
Net leverage ratio (c): 1.7x 0.8x
 

(a) Represents the aggregate principal amount of the debt.
(b)
Represents gross debt divided by Adjusted EBITDA for the last twelve
months. This ratio differs from the calculation contained in the
Company's amended term loan.
(c) Represents gross debt less cash
divided by Adjusted EBITDA for the last twelve months. This ratio
differs from the calculation contained in the Company's amended term
loan.


The following table presents estimated subscriber information
(unaudited):

 

              Subscribers (a)
(amounts in thousands)
   
December 31, 2017                       December 31, 2016

U.S. Cable Networks:

WAPA America (b) 4,362 4,189
Cinelatino (c) 4,424 4,588
Pasiones (c) 4,450 4,620
Centroamerica TV 4,127 4,063
Television Dominicana (c) 1,876 3,249
Total 19,239 20,709
 

Latin America Cable Networks:

Cinelatino 16,087 15,430
Pasiones 14,776 13,235
Total 30,863 28,665
 
 

(a) Amounts presented are based on most recent remittances received from
our Distributors as of the respective dates shown above, which are
typically two months prior to the dates shown above.

(b) Excludes digital basic subscribers. Subscribers to WAPA America
including digital basic subscribers decreased 6.1% from December 31,
2016 to December 31, 2017. The subscriber total for WAPA America as of
December 31, 2017 does not reflect the incremental subscribers to WAPA
America as a result of the expanded distribution provided by certain
distributors following Hurricane Maria.

(c) Subscriber figures for all periods presented above include
subscribers in Puerto Rico, which were negatively impacted in the
December 31, 2017 period as a result of Hurricane Maria.







Non-GAAP Reconciliations

Within Hemisphere's fourth quarter and full year 2017 press release,
Hemisphere makes reference to the non-GAAP financial measure, "Adjusted
EBITDA." Whenever such information is presented, Hemisphere has complied
with the provisions of the rules under Regulation G and Item 2.02 of
Form 8-K. When presenting Adjusted EBITDA, Hemisphere's management adds
back (deducts) from net income, if any, depreciation expense,
amortization of intangibles, loss (gain) on disposition of assets,
transaction and non-recurring expenses including hurricane related
expenses, income tax expense, interest expense, stock-based
compensation, and other (expense) income items. The specific reasons why
Hemisphere's management believes that the presentation of this non-GAAP
financial measure provides useful information to investors regarding
Hemisphere's financial condition, results of its operations and cash
flows has been provided in the Form 8-K filed in connection with this
press release. A reconciliation of net income to Adjusted EBITDA can be
found above in the table that sets forth Hemisphere's financial
performance for the three and twelve months ended December 31, 2017 and
2016.

Conference Call

Hemisphere will conduct a conference call to discuss its fourth quarter
and full year 2017 results at 10:00 AM ET on Monday, March 5, 2018. A
live broadcast of the conference call will be available online via the
company's Investor Relations website located at http://ir.hemispheretv.com/.
Alternatively, interested parties can access the conference call by
dialing (877) 497-1436, or from outside the United States at (262)
558-6292, at least five minutes prior to the start time. The conference
ID for the call is 2689749.

A replay of the call will be available beginning at approximately 1:00
PM ET on Monday, March 5, 2018 by dialing (855) 859-2056, or from
outside the United States by dialing (404) 537-3406. The conference ID
for the replay is 2689749.

Forward-Looking Statements

Statements in this press release and oral statements made from time to
time by representatives of Hemisphere may contain certain statements
about Hemisphere and its consolidated subsidiaries that are
"forward-looking statements" within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. These include, but are not
limited to, the effects of Hurricane Maria in the short and long-term on
Hemisphere's business and the advertising market in Puerto Rico as well
as Hemisphere's customers, employees, third-party vendors and suppliers,
the effect on retransmission and subscriber fees that Hemisphere
receives, the timing under which power is fully restored to all of
Puerto Rico, short and long-term migration shifts in Puerto Rico,
Hemisphere's ability to timely and fully recover proceeds under our
insurance policies, statements relating to Hemisphere's future financial
and operating results (including growth and earnings), plans,
objectives, expectations and intentions and other statements that are
not historical facts. These statements are based on the current
expectations of the management of Hemisphere and are subject to
uncertainty and changes in circumstance, which may cause actual results
to differ materially from those expressed or implied in such
forward-looking statements. Without limitation, any statements preceded
or followed by or that include the words "targets," "plans," "believes,"
"expects," "intends," "will," "likely," "may," "anticipates,"
"estimates," "projects," "should," "would," "expect," "positioned,"
"strategy," "future," or words, phrases or terms of similar substance or
the negative thereof, are forward-looking statements. In addition, these
statements are based on a number of assumptions that are subject to
change. Factors that could cause actual results to differ materially
from those expressed or implied by the forward-looking statements are
discussed under the headings "Risk Factors" and "Forward-Looking
Statements" in Hemisphere's most recent Annual Report on Form 10-K,
filed with the Securities and Exchange Commission ("SEC"), as they may
be updated in any future reports filed with the SEC. If one or more of
these factors materialize, or if any underlying assumptions prove
incorrect, Hemisphere's actual results, performance, or achievements may
vary materially from any future results, performance or achievements
expressed or implied by these forward-looking statements.
Forward-looking statements included herein are made as of the date
hereof, and Hemisphere undertakes no obligation to update publicly such
statements to reflect subsequent events or circumstances.

About Hemisphere Media Group, Inc.

Hemisphere Media Group, Inc. (NASDAQ:HMTV) is the only publicly traded
pure-play U.S. media company targeting the high growth U.S. Hispanic and
Latin American markets with leading broadcast and cable television and
digital content platforms. Headquartered in Miami, Florida, Hemisphere
owns and operates five leading U.S. Hispanic cable networks, two Latin
American cable networks, and the leading broadcast television network in
Puerto Rico, and has ownership interests in a new broadcast television
network in Colombia and a Spanish-language OTT service in the U.S.

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