Q4 2020 Eros International PLC Earnings Call

[music].

Good morning, ladies and gentlemen, and welcome to Aero City National Spiel sees fourth quarter in fiscal year and 2020 earnings call. This call is being broadcast live on the Internet and a replay of the call will be available on the company's website.

This morning, the company published its earning results on its website Aeros plc dotcom.

The company, we'd like to remind everyone listening that during this call it will be making forward looking statements under the safe Harbor provisions of the federal Securities laws.

The company's actual results may differ materially those projected under forward looking statements.

During the call. It the company will also discuss non-GAAP financial measures in talking about its performance you can find a reconciliation of these measures to GAAP financial measures in this company's press release.

I would now like to turn the call over to Mr. Kishore Lula Executive Chairman and CEO of AEROSURF International Plc. Please go ahead Sir.

Thank you good morning, everyone.

Thank you for joining our call.

Lastly, I wanted to highlight that we are expecting a module with the Sdx Entertainment, which was announced in April will be closing later today, but then of course the company will make a separate public announcement announcing the details of the transaction closing.

We are extremely excited about or future as a combined company and at the same time very proud and grateful for all your support on all the journey so far.

This point.

This quarter it represents yet another important step into companies transformation from a traditional will be producer and syndicate drove content, but somewhat unpredictable revenues to and we'll do the platform with a strong mix of growing high quality recurring revenues.

That being subscriber base now totals 30 million, which represents a growth rate of 56% Oreo. We believe that recent initiatives will not only increase the growth rate, but importantly, how much it by the source of revenue types.

Why do we expect the numbers are paying subscribers to continue to grow rapidly. We believe that innovative partnerships such as the what type of Youtube will lead to a considerable number of implement would be to see subscribers.

Outside of India with Apple only in partner could be up high hopes for the success of this global service, which we benefit from east subscription as the.

Continue to unlock markets.

On October we currently live in USA, Canada.

Becomes.

These initiatives will benefit revenues awnings free cash flow in subsequent years, an annualized benefit of this subscribers materialize elsewhere, what I've said on the will will also be additive to our earnings.

We are.

We have very high expectations, what are what type at Microsoft as Youre in providing a differentiated viewer experience borrow subscribers. Some of the initiatives are very exciting undifferentiated. Furthermore, our strategy technology relationship with Microsoft has accelerated by the global Entertainment shipped we expect to be fully migrated to the newest infrastructure with the brand new technology.

You stack in the next month.

Same time, we are laser focused on the R&D in the partnership with Microsoft dynamically doubled our content and make Eros now a language agnostic platform.

Our slate of the new programming for the forthcoming theaters in the open is the strongest our has been we have many exciting new projects, which we are working on.

While impacted by the covert 19 destruction of our production team was still able to at least three original during the peak or pandemic.

Which demonstrates that the determination in the innovation of our production platform.

Well that's the most important development in this quarter has been that unsuitable addition to our management team across the board, including the predictability CEO, India and Chicago Bulls, you Eros Studios in there. It has also encouraging for us to see such talent pool would their confidence in the feature of the in the future of the Eros, we're confident that they will add considerable value for the company at the quarter.

And we had a net debt to 176 million. We believe we can continue to bring down this over the coming years as we become professional positive under current plans to getting to a truly digital business and surpassing our goal of 50 million subscribers bitch subs in the next two years now I'll hand, it onto the Sheika, let chairman and CEO of digital.

Thank you Kate.

Good morning, everyone I'm pleased to announce Eros now has achieved 29.3 million monthly paid subscribers for the quarter ending.

Lots twentytwenty.

This past year has been strong it.

Now with marquee technology content and distribution partnerships with global powerhouses.

Microsoft only E. Apple you keep et cetera, which will all transplant comes along and hi, Eros now experience with the backdrop global changing consumer habit father feelings it so right.

We expect to migrate to on technology in Stockton Nexmo went back up.

In Italy.

Really functionality with the branding.

These technologies.

Last month Prima facie may not exciting however against the backdrop and expect our open mobile devices in India in the next two years, great Indian language content premieres on Eros now as well as a high on the English language South is launching soon technology will be a key component will help us further.

Hi, pacify outrageous subscriber growth.

That concludes our key metric.

In India Newsman best to target the entry level Kaufman bundled customers when we offer a value.

Distribution partner indirect cost.

Looking to focus on that doesn't do you have for our core strategy that we believe the truth quite strategy to target.

Page by the baby audience, and now with English language southwest on Eros now, we will penetrate the top eight setting and focus on increasing in a big way.

The impact a stay at home culture is not fully reflected in this quarter subscriber base. However, I'm, we stand now more than ever the importance of our large library and the ability to be nimble. We released original music. We original shows during the locked down and found that assumption for library of phones.

Now.

India is going to see above upside growth coming into the large screenplay smart TV.

Looking at video ads that primary driver for sale and adoption, which is.

By high speed broadband by GSK to buyback as an extreme and other services in the country, we have gearing up take advantages.

Well entrenched distribution network that we have built.

Yes, Hi, I'm a video view is in the country is great great drastically as more use is coming to the short.

No.

Hi.

Accident paid subscribers.

Yes, not south achieved a 15% conversion this quarter alone and we aim to grow and continue monetizing embarking on base to paid subscribers.

The changes in the ecosystem present really exciting opportunity unfolding Eros now and we are excited to be upon this digital transformation up to 91.

While providing invaluable customer experience.

I would now I would now like to pass the line to the whether they be see a Eros India.

Thank you are Sheika first for the benefit of Boulder My opinion to era I wanted to highlight some of our studios training.

As one of the leading participants in the Indian films Entertainment industry, We believe that our size scale and market position will continue contributing to growth in India and internationally, we have established our size and scale by aggregating a film library of how do the funds over the years.

We have demonstrated our market position by releasing domestically or globally in the language films, which has been consistently amongst the top grossing films in India over the past two years.

She have released 46 of the top 110 highest grossing box office phones in India or in the past decade also we do believe that we have very strong relationships with the Indian creative community and a reputation for quality production aeros as a brand as dominant across validation by for our worldwide with a 40 plus year history and it.

Synonymous with open affirms the multiple Indian languages as demonstrated by a consistent leading market office.

Box office market share. This means that we are well positioned to continue to shift the visiting and direct to consumer. These factors along with our discipline and worldwide distribution platform will enable us to continue to attract talent and some products have a quality that we believe is one of the best in our industry and we've been what we believe is continuing to be a strong film slate.

Yes, it sounds a leading actors in production houses with whom we have previously done hurt our biggest said.

We believe the combined strength of our new releases and our extensive boom library positions us well to build the new strategic relationships.

The most fundamental level. It is a deep rooted relationships that marquee Bollywood talent across acting detecting cinematography sounded music choreography that really makes the magic Eros has unparalleled global production capabilities augmented by innovative and rich partnerships with leading produces and platform and our most recent strategic collaboration with epic games, which as most of your with no other.

This is of the popular game fortnight will allow us to use ethics unrelenting across the production say paving the way for real time technology throughout India Entertainment, a combination of technology and creativity is fundamental to our formula of sustainable business success.

At this point I would like to pass on.

Well, Michael My colleague of pinpoint miserable CFO of Eros plc, and President of North America business right.

Thanks pretty good morning, everyone again, and thank you for joining us earnings call I want to share with you some of our financial highlights for this quarter in fiscal year end and then we will take some question. Okay. This year, we generated 155.5 million in revenues and 54.8.

Million, EBITDA, which represent a margin EBITDA margin of 35.3%.

You are up now business had a very strong year grishuk appointed out ending with 29.3 million monthly paid subscribers and 196.8 million registered users increases up 56% and 27% respectively, respectively over the same period last year.

You are now digitally released a total of 630 film in 12 different Indian languages over 8000 music audio and video files as well is over 500 units of short form in Eros now original and quickie content.

We ended the year with net debt of just 176.4 million, which implies a net debt to EBITDA ratio of 3.2 time.

Our trade receivables balances also degrees decrease the meaningfully from last fiscal year and now stands at 100 into 2 million.

We're very excited about our merger with Stx and with that thanks for listening we're now happy to take your questions.

Thank you will now begin the question and answer session. If you have a question. Please press star one and your telephone keypad, if you'd like to be removed from the Q. Please press the pound side or the Heskey. It's fair to speakerphone. Please pick up your headset first before you dialing once again a few other question. Please press star one of your telephone keypad.

And from Wells Fargo Sanjay Bus tour. Please go ahead.

I guess short congratulations on completing the merger with Stx.

You mentioned that you will be basically announcing the merger closing in the next couple of hours could you give a little bit of idea I look forward as here, but and then at around 2022 also an idea video revenues and EBITDA might be if you're gonna give that a ballpark figure they'll be really exciting.

See tankers on Jan Thank you for Wells Fargo for was supposed to Zee.

I think as a strategic vision or Eros Stx, we have various combinations to drive the long term growth of the diversified markets and provide more consistency revenue profile I.

I think you would have erosnow growth you will have the different este stx leases. The best late this year are there will be lot of details in the merger announcement. So I was going to be able to talk much on that but I think the lost on the closure of the merger.

When we announced or the revenues for the December nicely with 600 million for the company.

And I think you're not giving any guidance for this year or the next year in terms of everything goes to normalcy, but we are looking at after the normal season achieved.

We're looking at a 1 billion dollar.

Revenue for 2032.

Okay, that's exciting.

Some more question control for you.

We see the net debt for the combined company, probably will be down substantially as Brian mentioned receivables are down very substantially so as a net debt of some down and Stx has guarantee at $300 million in revenue coming in the next couple of years and JP Morgan is extending your credit line up $350 million.

So you probably will have the most amount of money you've ever had as a company can you give some guidance on or give some idea how your split will look like they do.

18 months to two years.

Yes, I can talk about you know as I said that at the completion of the merger I would like the new management of our CEO and co chairman Bucks events, and ER will present, the Chicago locals and and also at the warrant the CFO of the company to talk about the various exciting things, which are going to happen with this new car.

Let me, but just to give you does the money as director said from the previous announcement of the 70 April.

It is going to be deployed constant and we'll keep the leveraged through a and net debt because of the cash balances because they'd be announcements on you will reach for that.

And there is a full slate of also the Sps and Ross in that merger announcement I think they just you know we're not go see our survey of whatever you know this the last pieces of the module, which had to be technical done.

So I don't want us to take the tender away from the announcement, so let's wait for that but you would have an amazing slate I can promise you and Sdx has built a real enemies and slate and a lot of talent and as you know that Bob has an amazing relationship with the talent with the Hollywood industry I think he's going to capitalize this in a big way and you'll see the.

Yeah, that's coming out of Sps in the Hollywood also.

Thank you sure Yeah, I have some questions for risk our and Buddy.

Yes.

Oh.

But if you will have some background in advertising and sort of Ali Hussein.

When he joined for like.

You are registered users have almost.

Close to 20 million now at what point do you want to monetize away so users with.

Bringing advertising in just like Hulu does and up.

Got caught but just launched can you give a liberal feeling on Ben we should expect some kind of advertising revenue coming from you guys.

Sure Sunday, the strategic level in and as a big advertising driven marketing as you know price sensitivity, especially in emerging markets, such as India parts of Middle East Africa North.

You know Africa et cetera.

The other foundation market remains very high so we do believe that though the advertising revenues represents a significant opportunity for us to monetize because they are but your do realize that it also although we will see viewing experience in a significant based on current Eros now strategy on those streaming as inertia go would expand.

Well I'll tell you until the fact that we want to be an uninterrupted on demand going platform and continue to be really good quality audiences. As we move forward. We do recognize that the advertising revenue represents a significant market opportunity and.

What we really want to do is look at all of our strategic options in terms of investing in platforms and technology and as the market continues to mature and we see a significant uptick on the advertising revenue side is that we will definitely go all of this business models as our chairman and CEO Kishore just pointed out a you know there does though there is a long term strategic thinking going.

On the group as we.

So both with our merger partner and though do you can look forward to some exciting detections and that is all.

Richard I wanted to ask you about the Microsoft partnership, which gives us a highlighted.

So when do you expect the dubbing part of the technology to take place, but that is unbelievable market worldwide.

You can dive into different languages in India and other parts of the World can you give some a hub idea then we should expect the Microsoft dubbing technology to take place.

Hi, Sanjay great great to speak to you today, Microsoft partnership if something were really really excited about because it actually changes the entire giving experience for the customer and as I mentioned technology is actually going to become [laughter], then for us to stop meeting and expanding upon on K P eyes on performance.

The jobbing pot is particularly particularly interesting it's something that we're very focused on and we're currently in R&D stage to figure out the smell. It this way unless you seamless way for that to happen because the most important part of the dynamics of shopping and dining is that it should seem as natural as possible searching not interfere with the viewer.

Experience so that we can stop capitalizing on global trends of content crushing Gordon. So R&D is is underway and we're hoping to have a really really cool flashy and precise product on on that.

Wrapping up a couple of more things that you have a you said that NBC Peacock, we'll be launching can you give an idea of anyone to launch the peak our subscription service iOS Prime and how it'll integrated with yours now what kind of model will take place and how will it helped us get more supply.

Yes.

Actually show with NBC, and we have a great relationship wonderful guys and the way our deal actually works is we have that content libraries for Eros now so were looking to launch that within within the next you within the next few months and it wouldn't be just NBC.

He will have to me be announcing some of that really fun pieces of content to stop supporting the Eros now English language stoppage that what's most exciting about that is actually helps us to penetrate deeper into India. Its top eight cities, which have a higher sheriff's office. So as we continue to focus not only going wide on our subscriber base.

The comes really key in pivotal for us to drive those offices I thought.

Thanks, a lot, but she got one last question for your Kishore basically a you guys had mentioned at the merger.

Announcement about $50 million into synergies.

Vendors Compton mortgages can you give us an idea how these synergies will be achieved.

I would like this to leave it to Andy water to explain it.

You will explain what.

But I wouldn't want to.

Take all the questions.

This morning until the deals have published.

Okay I appreciate it. Thank you for taking all the question good luck.

Thanks again from the from Macquarie, We have to deliver please go ahead.

Thanks, So should we expect later today or in the next few days.

A separate release and even a call with more details on the merger announcement with things like you know targets and so is that to come in you know even in future.

Yeah, Hi, Tim money I think you'll expect it gets leads today about ammonia okay.

So more details will come in that so we just have to wait for that to come.

I think in two towers, you should have that and I think also you'd see that you know in this announcement, you'll see that we have you know will talk about the mystery and all those things, which you will get more color and you can then drop to the new management also you.

Okay. So we'll have to combined company numbers and then there's an investor day coming up as well.

Yeah, the image invested in the coming from these numbers will come later, but you will have some color on the guidance all cause some done on the 22 and what is the who you know criteria of the logic and what we're going to do you want you would have that.

Okay. So we'll wait for that.

So on the numbers that we do have then I'm. The March quarter, you had a revenue drop of about 50, 60% I just want to understand I'm for covert affected that toward the end of the quarter in March but can you speak to some of the components of that I mean, I would assume arrows now was probably still quite good and it was film TV that.

Suffered could you give us a little bit more color on on March.

Definitely definitely Tim I think you look at it even the last year announcement, we said that for this year over them use going to be a you know less than last year, because it'll give strong syndicating. This inflection point of view of waiting for whereby we are.

Trying to become a digital company rather than it or traditional media company and that's what has happened sort of doing to the allowing the recurring revenue and the subscriber growth on so we stopped syndicating last year and also you can look at this quarter. The March quarter was particularly borrowed from the studio point of view because of the core within the north theatrical releases and.

It does and the other syndication in TV, a point of view, but digital is growing.

Our revenue over if it doesn't items for the March 20 was anywhere between 70 to 80 million, we have even achieved with without the could affect about 50 506 million EBITDA, which is a remarkable achievement for Iraq's on management team and I think you know the future now you don't actually been seen the merger announcement, how we're looking at the future.

Ah, especially now with the Eros now and the inflection point has happened the recurring revenues going up that will help erosnow in a big way and also the digital component of the Iran spot and really excited about the future can.

Sorry, [noise] put out Arabs now really specifically pure if your page seven number was up three user number was up.

I mean, I would assume Aerosmith aeros how.

Revenue growth was probably still okay or was there anything in ARPU for example, or.

Anything and distribution deals that might have weighed on the revenue growth I just want to make sure Aeros now is healthy which I assume it is yes, no. It's very healthy no even look at it now you know so simple erosnow growth as being rightly said.

I've been talking since a couple of three years.

So b to C b to B to C. Revenues now you will see the men. The transition is happening say from B to B to C. B to C. Consumer ARPU, we people I think and then as we have guided the market about 50 million subscribers, but 2022, we will be on target to achieve that and I think the best thing would.

Beyond that how do we actually transition from B to B to C. B to C, which will result in more higher ARPU of revenues, which are subscribers in the next two years and I think this sort of a silver lining as you can say the covered could help us in achieving that naturally we couldn't get hit by the ticket is there a studio side.

Which is fine.

As long as we're going to achieve more subscriber growth in higher ARPU revenues and more engagement within the erosnow itself worldwide.

Okay.

A few more actually opened did you give a free cash flow number for the for the year end I Didnt know I didnt hear that.

No. We didn't I think is in the 20-F you can do this and please go through all the numbers and then.

We are catching up today anyway. So we can you all right I'll check that a couple of more than it is it possible are you willing or is it possible to give june numbers for aeros now for subscribers or anything.

Yes, I can do numbers I think I wish it yeah, and he will definitely be sharing the June June numbers in due course that went really really excited and we would have seen supported quite stronger than the previous quarter, which we just announced switches which is an actual much study fast we would have also seen some really great increased metric.

And that we track internally across things like time span engagement et cetera, and you would have also seen a more diverse profile side is coming in at a global scale as well.

Okay, Great I I noticed number you said consumption outside India was up 47%, so I'm assuming you're.

Ex India subscriber.

Penetration and usage is going up what should be good for ARPU correct.

Definitely and little to be launching in the balance countries with Apple. So we're currently or any kind of live in the U.S., Canada in India I'll deal with them, how but qualified factories show when looking forward to go after some rolling out yeah.

Great can I ask just two last ones. Please.

I don't know if you can answer this now maybe have to wait for the merger announcement that once.

Your together with Stx.

What more can you tell us about what content will be on Aeros now I assume they would have pre existing distribution deals with other.

Oh GT services, but is it like any new phones from them will come onto your service or is there any of their library that would be on arrows now.

Yeah, I think you know if you look at Erosnow not only from the Stx perspective, let's assume I'll talk about the gym and perspective now as we have a deal with NBC universal, thereby we have ex.

Thousand hours from Oh, Nbcuniversal, which compromises comprises of volumes.

Every continent, the new content and the episodic content stimulus kind of beauty, we'll see but the other studios, which we have finalized speaking balancing soon so you'll see a full erosnow Prime service and the major thing would be as Michigan.

Okay.

So.

We are targeting the eight metro cities the consumer of the service, thereby will the ARPU will go up and of course, you know depending upon the Stx you know disciplined slate and their output deals variable the India could be excluded from those these will be part of the Erosnow service or human until then on whatever they have signed or what.

However, we have to honor will honor that and in the future that would become the part of their since August.

Right, that's what I thought very last question debt net debt. You said was 176 what is the structure of the net debt now you had a convertible bond to believe that might be gone now could you fill us in on what the debt structure is.

Isn't really a june the convert that to zero onto the June there's not going what debt, but you are why don't you wait for the and I will spend for the merger today, you will happen that that figure of the combined entity.

So that that will be more exciting for your Tim okay, but its fixed debt, it's not convertible it's not no no no no no no not at all of the combined zero convertible debt. Okay. Alright, that's great. Thanks for taking all the questions. Thanks and have an industry.

Thank you, we'll now turn it back to Mr. Lula for closing comments.

Yeah. Thanks, so much I really want tank Oliver shareholders, all over friends or over team worldwide Oliver stakeholders for supporting US and we are embarking on a new joining today, which is in I'm really excited about over 40 years of starting Ross and this will become Eros Sdx mobile operations.

Really looking forward to working with my partners and the new stakeholders and the new boat, which is going to be an x. I think everybody has to come I think everyone.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.

[noise].

[music].

[music].

[music].