Q4 2019 Earnings Call

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Good morning, maybe your conference I'd number.

Okay.

Bye.

Euro four or five nine.

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Have your conference I'd number.

577 0459.

Document the spelling of your first and last name please.

Haven't K.E.V. I am.

Love from L.A.F.L.A.M. and E.

And your company name please.

Era A.I.E.R.A.

On your telephone number or you could firstly.

What was that.

May I have your telephone number area code firstly.

Having seven four.

265.

032.

In Q1, just a moment please.

Which we are proud of I look forward to sharing them with you in more detail. This year, we generated $304.6 million in gross revenues before the impact of IOP Rs adjustments compared to to $68.1 million in fiscal year, 2018, which represents a 13.6% growth growth rate on a like for like basis.

Adjusted EBITDA for the year was $103.8 million compared to $83 million last year, which represents an increase of 25.1%. Moreover, our adjusted EBITDA margins expanded significantly over the prior year to 38.4%.

Significantly above our initial market guidance of 35%.

This is the first time since fiscal 2015, we have achieved over $100 million in adjusted EBITDA.

We ended the quarter with $135.8 million of cash on our balance sheet on a 12 month trailing basis, our net debt as of year end was $145 million and our net leverage ratio remains conservative at 1.4 times. The majority of our debt has a long term maturity profile and we have no significant near term debt maturities.

Now turning back to the operations, our digital and ancillary businesses posted its strongest annual results ever generating a $123 million compared to 85 million.

In fiscal 2015, 19, which represent.

A growth rate of 44.8%. This includes our fast growing Eros now business.

This is also the first year, our digital business has generated more than our film and TV syndication businesses, which demonstrates our shift to digital is well underway.

Our theatrical business generated 69.5 million revenue this year compared to 79 million in fiscal 18, We released 72 films. This year as compared to 24 filmed in fiscal 2018, our TV syndication business generated $77.5 million of revenues this year compared to $97.2 million last year.

As of March 31, 2019, our euros now platform had over 154 million registered users and as Richard pointed out $18.8 million monthly paying subscribers.

We had previously guided the market to achieving 16 million paying subs by fiscal year end a target we were proud to achieve three months ahead of schedule.

The euros now business continues to grow at a fast pace fueled by increasing consumer demand higher internet penetration and most importantly, because of our compelling premium content.

To recap some of our highlights our digital business grew 45% over 100 million in adjusted EBITDA 18.8 million monthly paying euros, now subs and a conservative balance sheet, we want to thank you for being on this call and now we're happy to answer any questions.

Thank you at this time, ladies and gentlemen, the floor is open for questions in order to ask a question simply press Star then the number one on your telephone keypad.

If at any point. Your question has been answered you wish to remove yourself from the queue press the pound key.

Our first question comes from line of Tim Miller of Macquarie.

Hi, guys. Thanks, very much guys.

Several things to ask here actually.

Maybe first off on some fundamentals for the full year. It looks like your film release number was pretty good but your revenues were down I assume that is because of the mix of big budget versus smaller budget films.

And you referenced your shift to digital which is pretty clear with the digital ancillary growth just want to make sure you assume in your TV numbers were down you hear US now in digital and three numbers were up quite a lot. This is all I assume part of the the focus shift towards content production four arrows now and in some ways I guess deemphasizing the film and that and the TV distribution business. If you could just clarify that please.

Also on Aeros now.

You talk about.

The increase in conversion rates from 8% to 12% in your press release.

Are we talking about like a twofold are threefold increase in the price per sub on those.

Direct to consumer relationships. Those are the types of numbers I think we were talking about previously I want to make sure. Those are still the types of numbers, we're talking about now.

And then couple of other things you mentioned.

An impairment charge, which is quite a large number I thought.

A little surprised to see that given the monetization potential your film content on arrows now so if you could please.

To address that and I guess lastly.

You had.

I don't see a reference in the press release as to Sarbanes Oxley compliance.

I think this was something that you were looking toward at some point I Wonder if you could update us on that please thanks.

Yes.

Yes.

Good morning, Tim So I'll take the first question I think you are totally absolutely right as stated before that the focus is not on the high budget plans focus as you know if you look at it we had higher leases, but you don't medium releases, which have done well in the box office, but higher leases give us a bigger amount of historical revenues last year. So we had one big.

Hi budget slippage, we didn't have any in this we had.

Medium budget from the low budget.

And the focus is in the next two years to come is how do we become a digital company rather than only at historical or syndication company. That's what the focus is going to be.

Second question on.

The Eros now I would like to see go to one so that on the.

The version.

Hi, Tim the conversion rates bounced off from our own internal conversion rates in terms of how we've been able to convert alfano over time.

Jeter past performance. However, it's important to note that this doesn't include all involve any changes and ARPU as we are trying to reach out to tier two and tier three cities in India and moving out of Metro's to achieve scale, it's important for us to our pricing to remain competitive and conservative as we plan to achieve that to hit 50 million subs over the next three years.

Hey, Tim It's Frank let me answer the impairment charge.

So the impairment charge was part of is 36 under the IRS accounting rules, which require companies basically to reassess the carrying book value of assets. Both on a regular on annual basis and also in case of irregular events.

Examples of these irregular events include.

Major change in market conditions, or technology expectation of future losses or material change in the listed equity value or negative cash flows and this purpose the equity value of our company our market cap is gone down during fiscal year end 2019, due to the significant decline in the market value.

We tested impairment for carrying the value of net assets of the group exceeding our market capitalization and expenditure towards the purchase of content in film rights exceeding the positive cash flow from operations.

Accordingly, we recorded a non cash impairment loss of 423 million net of taxes as an exceptional item within the PML. This impairment loss recorded has been reduced from the carrying amount of goodwill trademark content bill of rights and long term advances to content vendors. This is a one time exceptional item, which has no cash impact no cash impact on the business.

And also you know this is it possible as soon as the market.

Capital position of the company goes up this could bid was back to the same value.

That's right.

So can I jump in on that so so there is no change in your assessment of the actual real value of the film content. It seems to me it's.

The value is still there I mean, you hear US now platform is growing you should be able to monetize that more effectively so its the other items that are that are creating the that's correct.

Okay.

And on on.

On your transition from small company status Sarbanes Oxley, Yes, I think you know we will transition to the sovereigns Oxley Act and I think when we will be filing what 20-F, so we'll be filing over.

Set us on that also.

We don't get into that in the next week.

Okay. So that will be for March 2019 year end do you expect you will be so thats actually quite in your 20 mechanics, and actually just relate to that.

This is your March quarter, you're reporting now and I understood. That's moving to full year results No Tim is the full year.

Yes, I know, it's clear to us for the year ended in March I Wonder if you could give us any any view on when you might be reporting your June quarter results and if there's anything at all you can say about the June quarter.

See I think the as we said that in a week.

Focuses on Eros now and how do we go with the subscribers as you guys said that three year target is 50 million subs. We are the focus of the company strategy is the digital revenues and secondly, working on the theatrical releases is the second thing. So how do we strengthen the BCC customers also not only the telco them not only the b to B to C.

That's the bulk of the company is doing so, thereby growing the subscriber base and reducing high premium content and higher EBITDA. So you've seen the EBITDA margins have gone up to 38.4%.

That is the resulting from the digital revenues as emphasized before.

Okay, and if you don't mind me asking one last question. Please I know its a lot.

The credit ratings downgrade that you had in India early June or so.

I know you put a release out couple of weeks ago, saying that you've you've paid all those bills and that should all be taking care of can you just update us on on really.

What happened in our we really sure that that situation is taken care of and is there something you can do now to get that credit rating reversed.

Yes, so I think the credit rating will be definitely we have taken over the credit agency attributable to us and that is nothing outstanding and we are in basically there is not a short term maturities are in the next 12 months and that is no technical default of any banks today, serving us of any default of any interest payments or any loan overview or any loan at gold you.

On day to day.

And if I could just add.

Look we've previously communicated publicly that all outstanding interest payments have been made.

Two.

In terms of care.

I've gotten used to care now.

Having really use to S&P and Moody's, but care, obviously as an Indian credit rating agency.

We are working with them to try to restore our investment grade status. It is highly unusual right to go 10 notches down.

Very unusual and so we're we're working with them there is a process in place to restoring your your.

As per their guidelines, but I think we're trying to restore it sooner if we can.

Two.

There were reports or there was kind of fake news or false reports about.

Moody's.

In their their withdrawal of their rating.

Just just to clarify for the record that we the company had asked Moody's.

Got to withdraw their credit rating withdraw their services quite frankly, just because we do not have any institutional public bonds outstanding.

We did the same thing with S&P as well.

So you asked moodys to withdraw coverage of arrows essentially that is correct that is correct.

Okay. That's an important point I think.

Alright.

Got more but I'll leave it to others and maybe jump on if there's if there's time with more thanks.

Thanks, Dan.

As a reminder, ladies and gentlemen, if you wish to ask a question simply press Star then the number one on your telephone keypad again that is star one.

We have a follow up question from Tim Nollen of Macquarie.

Well, Okay, I guess I'm back then.

So.

The accusations that drove down your share price over the last couple of months.

You referenced today in your press release that you had engaged skadden arps to do a full review I think it was 2016 of of everything basically.

I just wonder is there anything.

You can say that would be either the same or different now versus then.

In your corporate structure, you're reporting systems anything that.

Can reassure us that everything you know still holds from that Scadden review.

Yes, Tim the Sky, obviously that nothing has changed since the scan review came out per se.

In terms of our internal reporting except has gotten better.

As as you can.

And test, we've we've had grant Thornton.

As our order the fifth largest auditing firm in the world and they've consistently been been auditing. Our reports I think what's interesting too is if you look at.

The class action that happened in the past.

With some of the similar no barias people.

Who have done it our dart back at it again.

You will notice that that suit.

That class action was dismissed with prejudice, which is actually a pretty big deal.

And then the appeal was also dismissed so.

Now you see some of the same types of things again, and it's really the short and distort crap.

You know for lack of a better word.

That comes out and.

It's quite frankly.

Alarming to the market alarming to companies like ours and others and.

Well, it's something that we're going to we're going to take on.

So is there anything with your corporate structure or your payment systems or anything like that that is kind of brought about these these attacks that you can do differently going forward.

I think than we had just moving over internal controls so that it doesn't have to happen again, but.

The main point to note is any all the other shorter course, which have been published there is nothing new which has not been dismissed by the appellate court with prejudice, so and which was not covered by this cut into their review.

So that's that's the main point.

Okay.

Thanks.

And ladies and gentlemen, we have reached the allotted time for questions and answers today I would now like to turn the call back over to Mr., Acacia loulo for any additional or closing remarks.

Thank you.

Everyone. Thank you all of our shareholders. Thank you stakeholders for supporting the company.

And have a good day.

Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.