Eros International Plc Reports First Quarter Fiscal Year 2018 Results

06-Oct-2017 Intellasia | BusinessWire | 6:56 PM Print This Post

Eros Now paying subscribers at 3.7 million, up 27.6% versus last
quarter

Operating Profit increases by 62.5%

ISLE OF MAN, United Kingdom–(BUSINESS WIRE)–Eros International Plc (NYSE: EROS) (“Eros” or “the Company”), a leading
global company in the Indian film entertainment industry, today reported
its quarterly financial results for the three months ended June 30, 2017.

Key Highlights

  • As of September 30, 2017, Eros Now paying subscribers increased to 3.7
    million from 2.9 million as of June 30, 2017. This represents a
    quarter-over-quarter increase of 27.6%. Over that same period,
    registered users have grown to over 75 million.
  • The Company’s latest Hindi release “Newton” has been selected as
    India’s official submission for the Best Foreign Language Film
    category at the US Academy Awards for 2018.
  • A Class action lawsuit against Eros was dismissed with prejudice by
    the United States District Court for the Southern District of New York
    on September 25, 2017.
  • Eros has approximately $115 million of cash on the balance sheet as of
    September 30, 2017.
  • The Company extended and reduced its Revolving Credit Facility from
    $85 million to $53 million as of September 30, 2017.
  • Consolidated revenue for the quarter ended June 30, 2017 decreased by
    14.4% to $60.8 million from $71.1 million in the prior year period.
  • Operating profit for the quarter ended June 30, 2017 increased by
    62.5% to $11.7 million from $7.2 million in the prior year period.
  • Adjusted EBITDA for the quarter ended June 30, 2017 decreased by 12.7%
    to $15.8 million from $18.1 million in the prior year period.
  • Library monetization across distribution channels within India and
    internationally was strong during the quarter, and contributed to the
    Company’s profitability and strong margins.
  • Eros Now launches Canvas plex tablet with Micromax.
  • Eros Now continues to grow its 10,000+ film library with latest
    content acquisition from Dharma Productions.
  • Eros Now launches new app on the 4K Apple TV.
  • Trinity, the Company’s franchise studio division, released its first
    spy-kids genre film, Sniff, which received very positive
    reviews and critical acclaim.

A reconciliation of the non-GAAP financial measures discussed within
this release to our GAAP operating results are included at the end of
this release. See also “Non-GAAP Financial Measures.”

Management Comments:

Jyoti Deshpande, Eros’ Group Chief Executive Officer and Managing
Director said:

Fiscal Year 2018 is off to a solid start with strong Revenue and EBITDA.
We also delivered very strong growth at Eros Now, crossing 3.7 million
paying subscribers, a growth of 28% over the previous quarter and now
have over 75 million registered users as of September end. Much of our
success is attributable to our focus on in-house production and a
well-balanced Hindi and regional film release strategy combined with
robust library monetization across distribution channels within India
and internationally. Last month, one of our recent releases, Newton, was
chosen as India’s official submission for the Best Foreign Language Film
category at the upcoming US Academy Awards. In addition, we have a
strong slate for the rest of Fiscal Year 2018. We continue to focus on
sensibly budgeted films that are content driven and backed by pre-sales
potential with lower reliance on box office success rather than big
budget big star cast high profile films. This is reflected in our
improving margins. Trinity Pictures, our franchise film label, continues
to work on exciting projects including the two Indo-China co-productions
and has begun work on over 20 new franchises which are in various stages
of production and development.

India is now the second largest telecom industry in the world owing to
exponential growth and data consumption, combined with huge investments
made in the sector. Our Eros Now strategy has always been focused on
mobile telecom operators, which is proving to be incredibly fruitful.
Our partners Reliance Jio, Airtel, Idea Celluar, Vodafone, and others
have been instrumental in helping us to capture an increasing connected
consumer audience in India. As the sector grows, and connectivity
further expands, Eros Now will continue to benefit.

Eros Now continues to reach new milestones and surpass expectations. We
are very excited about the outstanding prospects of Eros Now as we
experience transformational growth through the opportunities presented
by the digital explosion in India by working closely with our telecom
partners Reliance Jio, Airtel, Idea Cellular, Vodafone among others. As
a leading Indian film studio with a market leading share in new release
films and owner of a significant content library, we are uniquely
positioned to take advantage of our first mover advantage. I am
confident we will reach our Fiscal Year End 2018 target for paying
subscribers in the range of 6-8 million.

We thank our shareholders for their continued support and we remain
committed to delivering on our strategy and maintaining our market
leadership position within the Indian filmed entertainment sector while
we build and grow Eros Now to become the number one OTT player.

Prem Parameswaran, Group Chief Financial Officer and President of
North America also commented:

We posted solid financial results this quarter, despite modest output of
only five films compared to 14 in the comparable period last year. We
remain well-capitalized and able to deliver on our future film slate
plans as well as fund growth of Eros Now. We have a strong balance
sheet, with approximately $115 million of cash as of September 30, 2017.
We are well positioned to achieve our year-end targets.

Recent Operational Highlights

  • Five films were released in Q1 Fiscal Year 2018 of which one was high
    budget, one was medium budget and three were low budget films as
    compared to 14 films in Q1 Fiscal Year 2017, of which three were high
    budget, two were medium budget and nine were low budget films. This is
    in line with the Eros strategy of developing its own intellectual
    property by partnering with both Indian talent and International film
    companies that offer strategic benefits.
  • Sarkar 3 (Hindi), Oru Kidayin Karunai Manu (Tamil), and regional slate
    comprising Tujhae majha me, Posto and Aake were the main revenue
    contributing films during the quarter. Pre-sales and catalogue sales
    continued in the period and contributed to profitability and strong
    margins.
  • Eros has a compelling film slate planned for Fiscal Year 2018,
    including films such as Shubh Mangal Savdhan, Newton, Bhavesh Joshi,
    Happy Bhaag Jayegi 2, Mukkebaaz, Chanda Mama Door Ke, and Soorma to
    name a few Hindi films. In addition, Eros has a number of Tamil,
    Telugu, Punjabi, Bengali, Marathi and Malayalam films that we look
    forward to releasing during the year.
  • Eros Now has exceeded 75 million registered users worldwide across
    APP, WAP and Web.
  • Eros Now has reached 3.7 million paying subscribers as of September
    30, 2017, an increase of 27.6% over the previous quarter.
  • Eros’ platform agnostic strategy continues with Eros Now entering into
    new deals that cover the entire spectrum from OEM to broadband
    companies to significant platform service providers, all of which
    provide direct customer interface for Eros Now. Eros Now entered into
    deals with Micromax, Opera and Foxxum. Subscribers as of June 30, 2017
    do not include contribution from these deals.

Eros Now and Partnerships

Eros Now holds rights to more than 10,000 films, of which approximately
5,000 films are owned in perpetuity, and across Hindi and regional
languages.

Eros Now has secured the licensing rights to two of Dharma’s latest
releases, Badrinath Ki Dulhania and Ok Jaanu, along with other catalogue
films, including Shah Rukh Khan starring blockbusters Kuch Kuch Hota
Hai, Kabhi Khushi Kabhie Gham, Kal Ho Na Ho, Kabhi Alvida Naa Kehna and
Duplicate. Eros Now has acquired the global digital distribution rights
for these films for all territories outside of India on a non-exclusive
basis.

Eros Now currently has 10 original shows under production slated to be
released over Fiscal Year 2018 and Fiscal Year 2019. The genres span
across comedies, drama, mythological dramas, thrillers as well as
satires. We aim to break away from the norms of content that is
typically viewed during a linear experience by breaking boundaries in
the stories we tell and the scale in which they are shot. At least 50%
of Eros’ shows have been conceptualized by its writers’ rooms across
Trinity and Eros Now.

Eros Now continues to focus on numerous partnerships spanning OEMs,
Telco’s and broadband providers. Eros Now further expands reach with the
co-creation of the Micromax Canvas plex content-packed tablet. Through
this association consumers receive a one year subscription to Eros Now,
enabling them to stay entertained on the go. Eros Now also has an
association with Opera and Foxxum that will ensure Eros Now will be
downloadable on smart devices from Toshiba, Sharp, Hisense, Sony,
Samsung and Panasonic and others via their respective app stores which
are operated under brands serviced by Opera and Foxxum. Eros Now also
launched the new App on the 4K generation Apple TVs.

In order to make its streaming titles available to a wider audience,
Eros Now will soon be deploying its videos with Hindi subtitles. This
will make the service accessible to customers with hearing challenges as
well as be an avenue for people in the rural areas to improve literacy
skills. Using neural networks and leveraging Google’s speech API, Eros
Now will auto generate these subtitles or close captions for all their
videos.

The Company’s goal is to create value from its films and monetize the IP
beyond the traditional channels. The official movie game of Munna
Michael (endless running game), Shubh Mangal Saavdhan (match 3 game) and
Sniff (adventure game with exciting mysteries to solve) were launched
and have exceeded more than one million downloads. The Munna Michael and
Shubh Mangal Saavdhan games are available on Google Play, iOS Appstore
and other third party app stores like Opera and 9Apps. The Sniff game is
available on Google Play and other third party app stores like Opera and
9Apps.

Eros International Plc Financial Highlights:

(dollars in millions)       Three Months Ended June 30, 2017
  2017     2016     % change
Revenue 60.8 71.1 (14.4)%
Gross profit 25.9 23.1 12.1%
Operating profit 11.7 7.2 62.5%
Adjusted EBITDA(1) 15.8 18.1 (12.7)%

(1) Reconciliations of the non-GAAP financial measures
discussed within this release to our GAAP operating results are included
at the end of this release. See also “Non-GAAP Financial Measures.”

Financial Results for the Three Months Ended June 30, 2017

Revenue

In the three months ended June 30, 2017, the Eros film slate was
comprised of five films of which one was high budget, one was medium
budget and three were low budget as compared to 14 films in the three
months ended June 30, 2016, of which three were high budget, two were
medium budget and nine were low budget.

In the three months ended June 30, 2017, the Company’s slate of five
films comprised of one Hindi film, one Tamil film and three regional
films as compared to the same period last year where its slate of 14
films comprised five Hindi films, five Tamil films and four regional
films.

For the three months ended June 30, 2017, revenue decreased by 14.4% to
$ 60.8 million, compared to $71.1 million for the three months ended
June 30, 2016.

For the three months ended June 30, 2017, aggregate theatrical revenues
decreased by 36.9% to $23.6 million from $37.4 million for the three
months ended June 30, 2016, mainly due to a lower number of films,
especially high and medium budget Hindi films. Theatrical revenues in
the three months ended June 30, 2016 comprised revenues from Ki & Ka,
Housefull 3, 24, Sardar Gabbar Singh in comparison to a slate with fewer
films in the three months ended June 30, 2017 with Sarkar 3, Oru Kidayin
Karunai Manu and Posto.

For the three months ended June 30, 2017, aggregate revenues from
television syndication decreased by 11.2% to $17.4 million from $19.6
million for the three months ended June 30, 2016, mainly due to lower
new release television revenues partially offset by catalogue revenues.

For the three months ended June 30, 2017, the aggregate revenues from
digital and ancillary increased by 40.4% to $19.8 million from $14.1
million for the three months ended June 30, 2016 primarily on account of
contribution from Eros Now and catalogue revenues.

Three months

ended

  High   Medium   Low   Total
June 30, 2017 1 1 3 5
June 30, 2016 3 2 9 14

Revenue from India decreased by 40.5% to $25.4 million in the three
months ended June 30, 2017, compared to $42.7 million in the three
months ended June 30, 2016 mainly due to lower theatrical revenues
associated with fewer films released in the quarter ended June 30, 2017.

Revenue from Europe increased by 114.4% to $9.6 million in the three
months ended June 30, 2017, compared to $4.5 million in the three months
ended June 30, 2016. This was on account of higher catalogue sales
partially offset by lower theatrical revenues associated with fewer
films released in the quarter ended June 30, 2017.

Revenue from North America decreased by 85.7% to $0.2 million in the
three months ended June 30, 2017, compared to $1.4 million in the three
months ended June 30, 2016 mainly due to lower theatrical revenues
associated with fewer films released in the quarter ended June 30, 2017.

Revenue from the rest of the world increased by 14.2% to $25.7 million
in the three months ended June 30, 2017, compared to $22.5 million in
the three months ended June 30, 2016. This was due to higher catalogue
sales partially offset by lower theatrical revenues associated with
fewer films released in the quarter ended June 30, 2017.

Cost of sales

For the three months ended June 30, 2017, cost of sales decreased by
27.1% to $35 million compared to $48 million in the three months ended
June 30, 2016. The decrease was mainly due to lower amortization costs,
lower marketing, advertising and distribution costs associated with
fewer films released in the quarter ended June 30, 2017.

Gross profit

For the three months ended June 30, 2017, gross profit increased by
12.1% to $25.9 million, compared to $23.1 million in the three months
ended June 30, 2016. As a percentage of revenues, the Company’s gross
profit margin was 42.5% in the three months ended June 30, 2017,
compared to 32.5% in the three months ended June 30, 2016. This was
mainly due to lower cost of sales linked to film mix and contribution
from high margin catalogue revenues.

EBIT (Non- GAAP)

For the three months ended June 30, 2017, EBIT increased by 10.9 % to
$10.2 million compared to $9.2 million in the three months ended June
30, 2016. This was mainly due to lower cost of sales linked to film mix
and contribution from high margin catalogue revenues.

Adjusted EBITDA (Non- GAAP)

For the three months ended June 30, 2017, Adjusted EBITDA decreased by
12.7% to $15.8 million compared to $18.1 million in the three months
ended June 30, 2016 due to fewer theatrical releases in the quarter
partially offset by strong catalogue sales.

Administrative costs

For the three months ended June 30, 2017, administrative costs decreased
by 10.8% to $14.2 million compared to $15.9 million for the three months
ended June 30, 2016 mainly due to decrease in share based compensation.

Net finance costs

For the three months ended June 30, 2017, net finance costs increased by
68.6% to $5.4 million, compared to $3.2 million in the three months
ended June 30, 2016 mainly due to lower income from financing activities
and increased borrowing costs.

Income tax expense

For the three months ended June 30, 2017, income tax expenses increased
by 15.4% to $3 million, compared to $2.6 million in the three months
ended June 30, 2016. Effective income tax rates were 24.4% and 18.3% for
June 30, 2017 and June 30, 2016, respectively excluding non-deductible
share-based payment charges and gain/loss on fair valuation of
derivative liabilities. The change in effective rate principally
reflects a change in the mix of the profits earned from taxable and non-
taxable jurisdictions.

Net Income

For the three months ended June 30, 2017, net income decreased by 47.1%
to $1.8 million, compared to $3.4 million in the three months ended June
30, 2016.

Trade Receivables

As of June 30, 2017, Trade Receivables increased to $243.4 million from
$226.8 million as of March 31, 2017 mainly due to higher catalogue sales
in this quarter. Catalogue sales have payment terms that sometimes
extend up to a year. The Company collected over $30 million of trade
receivables post June 30, 2017.

Net Debt

As of June 30, 2017, net debt increased to $165.7 million from $157.6
million as of March 31, 2017.

Conference Call

The Company will host a conference call on Friday, October 6, 2017, at
8:30 AM Eastern Standard Time.

To access the call please dial 646 254 3366 or 877 280 2296 from the
United States, or +44(0)20 3427 1907 or +44(0)80 0279 5736 from outside
the U.S. The conference call I.D. number is 6596872. Participants
should dial in 5 to 10 minutes before the scheduled time.

A replay of the call can be accessed through October 13, 2017 by dialing
719 457 0820 or 888 203 1112 from the U.S., or +44(0)20 7984 7568 or
+44(0)80 8101 1153 from outside the U.S. The conference call I.D. number
is 6596872. The call will be available as a live webcast, which
can be accessed at Eros’
Investor Relations website
. A replay of the webcast recording will
be available until October 5, 2018.

Non-GAAP Financial Measures

Net Income

The Company uses the term Net Income, as the International Financial
Reporting Standards (“IFRS”) define the term as synonymous with profit
for the period.

Adjusted EBITDA

In addition to the results prepared in accordance with IFRS provided in
this release, the Company uses Adjusted EBITDA. The company uses
Adjusted EBITDA along with other IFRS measures to evaluate operating
performance. Adjusted EBITDA is defined by the Company as net income
before interest expense, income tax expense and depreciation and
amortization (excluding amortization of capitalized film content and
debt issuance costs) adjusted for impairments of available-for-sale
financial assets, profit/loss on held for trading liabilities (including
profit/loss on derivatives) share based payments and transaction costs
related to equity transactions.

Adjusted EBITDA, as used and defined by us, may not be comparable to
similarly-titled measures employed by other companies and is not a
measure of performance calculated in accordance with GAAP. Adjusted
EBITDA should not be considered in isolation or as a substitute for
operating income, net income, cash flows from operating investing and
financing activities, or other income or cash flow statement data
prepared in accordance with GAAP. Adjusted EBITDA provides no
information regarding a company’s capital structure, borrowings,
interest costs, capital expenditures and working capital movement or tax
position. However, our management team believes that Adjusted EBITDA is
useful to investors in evaluating our results of operations because this
measure:

• is widely used by investors to measure a company’s operating
performance without regard to items excluded from the calculation of
such, term, which can vary substantially from company to company
depending upon accounting methods and book value of assets, capital
structure and the method by which assets were acquired, among other
factors;

• help investors to evaluate and compare the results of our operations
from period to period by removing the effect of our capital structure
from our operating structure; and

• is used by our management team for various other purposes, including
presentations to our board of directors, as a basis for strategic
planning and forecasting.

See the supplemental financial schedules for a reconciliation of
Adjusted EBITDA to Net Income.

Cautionary Statement Concerning Forward-Looking Statements

Some of the information presented in this press release and in related
comments by Eros’ management contains forward-looking statements. In
some cases, these forward-looking statements are identified by terms and
phrases such as “aim,” ”anticipate,”
“believe,” “feel,” “contemplate,” ”intend,” ”estimate,” ”expect,” ”continue,” ”should,” ”could,” ”may,” ”plan”’ ”project,” ”predict,”
“will,” “future,” “goal,” “objective,” and similar expressions and
include references to assumptions and relate to Eros’ future prospects,
developments and business strategies. Similarly, statements that
describe Eros’ strategies, objectives, plans or goals are
forward-looking statements and are based on information available to
Eros as of the date of this press release. Forward-looking statements
are subject to risks, uncertainties and assumptions that could cause
actual results to differ materially from those contemplated by the
relevant statement. Such risks and uncertainties include a variety of
factors, some of which are beyond Eros’ control, including but not
limited to market conditions and economic conditions. Information
concerning these and other factors that could cause results to differ
materially from those contained in the forward-looking statements is
contained under the caption “Risk Factors” in Eros’ Annual Report on
Form 20-F filed with the U.S. Securities and Exchange Commission. Eros
undertakes no obligation to revise the forward-looking statements
included herein to reflect any future events or circumstances, except as
required by law. Eros’ actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements.

Seasonality

The Groups’ financial position and results of operations for any period
fluctuate due to film release schedules. Film release schedules take
account of holidays and festivals in India and elsewhere, competitor
film releases and sporting events.

About Eros International, Plc

Eros International Plc (NYSE: EROS) is a leading global company in the
Indian film entertainment industry that acquires, co-produces and
distributes Indian films across all available formats such as cinema,
television and digital new media. Eros International Plc was the first
Indian media company to list on the New York Stock Exchange. Eros
International has experience of over three decades in establishing a
global platform for Indian cinema. The Company has a competitive
advantage through its extensive and growing movie library comprising of
over 3,000 films, which include Hindi, Tamil, and other regional
language films for home entertainment distribution. Eros International
has built a dynamic business model by combining the release of new films
every year with the exploitation of its film library. The company also
owns the rapidly growing OTT platform Eros Now. For further information
please visit: www.erosplc.com

EROS INTERNATIONAL PLC

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL
POSITION

         
Note June 30, 2017 March 31, 2017
(in thousands)
ASSETS
Non-current assets
Property, plant and equipment 10,319 10,354
Goodwill 4,992 4,992
Intangible assets — trade name 14,000 14,000
Intangible assets — content 6 891,819 904,628
Intangible assets — others 4,039 4,360
Available-for-sale financial assets 29,693 29,613
Trade and other receivables 1 8,568 11,443
Income tax receivable 993 1,051
Restricted deposits 361 335
Deferred income tax assets   112   112
Total non-current assets $ 964,896     $ 980,888  
 
Current assets
Inventories $ 330 $ 214
Trade and other receivables 1 280,500 242,762
Current income tax receivable 229 253
Cash and cash equivalents 114,717 112,267
Restricted deposits   7,012   6,981
Total current assets   402,788   362,477
Total assets $ 1,367,684 $ 1,343,365
 
LIABILITIES
Current liabilities
Trade and other payables $ 100,931 $ 120,082
Acceptances 3 8,968 8,935
Short-term borrowings 2 190,643 180,029
Current income tax payable   8387   7,055
Total current liabilities $ 308,929     $ 316,101
 
Non-current liabilities
Long-term borrowings 2 $ 89,801 $ 89,841
Other long – term liabilities 5,229 5,349
Derivative financial instruments 12,370 12,553
Deferred income tax liabilities   37,564   35,973
Total non-current liabilities $ 144,964     $ 143,716
Total liabilities $ 453,893 $ 459,817
 
EQUITY
Share capital 4 $ 31,882 $ 31,877
Share premium 400,155 399,686
Reserves 446,772 436,997
Other components of equity (48,080) (48,118 )
JSOP reserve   (15,985)   (15,985 )
Equity attributable to equity holders of Eros International Plc $ 814,744 $ 804,457
Non-controlling interest   99,047   79,091
Total equity $ 913,791 $ 883,548
Total liabilities and shareholder’s equity $ 1, 367,684 $ 1,343,365

Contacts

Eros International Plc
Mark Carbeck, +44 (0)20 7258 9909
Chief
Corporate & Strategy Officer
Email: mark.carbeck@erosintl.com
or
Media:
Sloane
& Company
Kristen Duarte, 212-446-1890
Email: kduarte@sloanepr.com

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