Eros International Plc Reports First Quarter Fiscal Year 2019 Results

MUMBAI: Eros International Plc (NYSE: EROS) (“Eros” or “the Company”), a leading global Indian film and digital studio, today announced unaudited financial results for the three months ended June 30, 2018.

Financial Highlights:

Q1 FY 2019 Highlights

· Revenue of $60.2 million in Q1 FY2019 compared to $60.8 million in Q1 FY2018.

· Reported strong Adjusted EBITDA(1) of $19.2 million in Q1 FY2019, compared to $15.8 million in Q1 FY2018, an increase of 21.5 % year-over-year.

· Adjusted EBITDA margin expanded to 31.9% in Q1 FY2019, compared to 26.0% in Q1 FY2018.

· Reported net debt of $186.8 million as on June 30, 2018, compared to $189.2 million as on March 31, 2018 and net leverage ratio of 2.28x. The net debt to equity ratio remains conservative at 18.9%.

(1)   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.”

Key Business Highlights:

· As of June 30, 2018, Eros Now worldwide paying subscribers increased by 248.3% year-over-year and 27.8% sequentially to 10.1 million. The Company is reiterating its guidance of 16 million paying subscribers by fiscal year end 2019.  

· As of June 30, 2018, Eros Now has exceeded 113 million registered users worldwide across APP, WAP and Web.

· Over the next year, Eros Now is planning to launch a stable of feature films, made-for-digital originals films and over 20 original episodic programs, all of which will be available exclusively on Eros Now to paying subscribers. Three original series, Side Hero, Flip and Smoke, will be launched in the next few weeks. Originals will feature popular names like Rohan Sippy, Kunal Roy Kapoor, Rajat Kapoor, Siddharth Anand and Pavan Kriplani in various capacities.

· Eros Now announced a partnership with InMobi, a leading global digital marketing platform. The partnership will for the first time enable advertisers to directly monetise on Eros Now’s video platform.

· Eros Now reinforced its mission of non-stop entertainment, anytime, anywhere with one-of-a-kind brand campaign ‘Bolo Kya Dekhogey.’ The campaign, which rolled out three television commercials, reiterates Eros Now’s leadership position in the movie category, offering its extensive movie library across languages.

· Eros released 14 films in Q1 FY2019 (one medium budget and 13 small budget films) as  compared to five films in Q1 FY2018 (one high budget, one medium budget and three small budget films). This is in line with Eros’ strategy of developing its own intellectual property and concentrating on content-driven films rather than high budget star-driven films.

· Bhavesh Joshi  (Hindi), Meri Nimmo (Digital release), Blackmail (Overseas), Haami (Bengali), Goodnight City (Bengali), Alinagarer Golokdhadha (Bengali) and others were the main revenue contributing films during the first quarter.

· Reliance Industries Ltd (“RIL” or “Reliance”) completed its acquisition of a 5% equity stake in Eros at a price of $15 per share for a total cash consideration of $46.6 million on August 6, 2018.

· On a pro forma basis including the $46.6 million equity investment from RIL, Eros’ net debt as of June 30, 2018 is $140.2 million and the net leverage ratio is 1.71x.

· Eros formed a ground-breaking joint venture with V. Vijayendra Prasad, one of India’s top screen-writers and directors. The exclusive collaboration will build a quality content pipeline through joint development of scripts and production and distribution of films and web-series.

· Eros also partnered with Phars Film, one of the UAE’s largest film distribution and exhibition networks. Eros also intends to partner with Pana Film, one of the largest Turkish film studios for Indo-Turkish co-productions.

· Eros releases ‘Bajrangi Bhaijaan’ in Turkey across 190 screens after over $45 million in box office collection in China.

· Eros also has a distribution partnership with Central Partnership in Russia, which may open new markets for Eros releases. These strategic partnerships not only help Eros augment its in-house content production model, but also expand the geographical canvas for content monetization.

Kishore Lulla, Eros’ Group Executive Chairman and Chief Executive Officer, stated:  

“We delivered a strong set of results this quarter, underscoring our market leadership, solid business fundamentals and continued growth in our digital platform, Eros Now.  As we continue to develop our digital offering and adapt to the dynamic global media landscape we operate in, I want to reflect on the journey we have taken so far. At our core we are, and always have been, a content company delivering premium Indian filmed entertainment to the masses with unparalleled distribution capacity. Almost 20 years ago, Eros developed the first vertically integrated film studio model in India. We combined premium content production and acquisition abilities with best-in-class international distribution reach. Over the last decade we have witnessed many of the major Hollywood studios make their entries into India. It is a testament to our content offering, brand strength and people that we have been able to maintain and grow our market share in the face of this competition.

We are also proud to have one the deepest and richest Indian content libraries in the world. Over the last 10 years Eros has been responsible for 30 of the top 100 highest grossing box office films in India. We must not forget that even in the digital age, premium content is still immensely valuable. Our industry relationships spanning over 40 years allow us access to the best talent across the nation. Our library is constantly evolving and replenished every year with new and innovative content that appeals to all consumers.

We continue to focus on appropriate budget films promising high IRR’s based on our unique portfolio approach. As we increase production across genres and languages, the stories we tell are driven and backed by pre-sale potential with reduced reliance on box office success. The real star of today is the story being told on screen. We are especially excited about our upcoming theatrical slate this year, in addition to our upcoming slate of Eros Now original releases.  Our content partnership with Reliance, new venture with V. Vijayendra Prasad and continued relationship with Aanand Rai are all instrumental to our future and will be keys to our success.”

Rishika Lulla, Chief Executive Officer, Eros Digital who received the award for ‘Women leadership in Industry’ at the Times National Awards for Marketing Excellence, commented:

“The continued strength of our digital entertainment offering was once again a significant driving force behind our solid start to Fiscal 2019. With our diversified and unparalleled library we continue to see growing consumer appetite for compelling content. We are excited to have the largest paying and registered users, beating our own target of 2 million every quarter to be at 10.1 million paying subs this quarter. Our new partnership with InMobi will also allow us to start monetising our 113 million plus registered user base while still being an SVOD model. Living up to our core philosophy of innovative and non-intrusive ad formats, we will also be experimenting with new concepts such as allowing brands to engage seamlessly with branded and high quality digital content.

We truly believe that Eros Now’s extensive content bouquet will satisfy the insatiable appetite of our audiences and further enhance our commitment to be the source of entertainment with penetration in 100 cities across India. This is a significant expansion and with the best talent on board in our industry for movies and originals, we aim to capture an even larger audience with our upcoming star studded ‘Originals’ slate starting with ‘Side Hero’, the first ever Indian original comedy-drama featuring Kunal Roy Kapoor and directed by Rohan Sippy.

India is undergoing a digital revolution which is further fuelled by Reliance Giga venture and other telcos bringing consumers a seamless connectivity experience, where  Indian OTT players are now leaving no stone unturned to lure the viewers to sign up. Eros Now with its matchless proposition of 52 weeks of 52 premiers across genre and languages is uniquely positioned to execute a wide distribution strategy with a library of over 11,000 films spread across over nine Indian languages. According to our proprietary data, the longest content format is the most engaging where the best movies on Eros Now gets viewed in less than two sessions and an engaged viewer returns at least three times a week, spending a minimum of 40 Minutes, making it safe to say that Eros Now is the best engagement platform.”

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

“I am pleased with our first quarter performance, highlighted by strong margin expansion, continued balance sheet strength and solid subscriber additions out of our Eros Now business. We believe the Company is now firing on all cylinders as our Adjusted EBITDA growth and margin expansion is at 21.5% and 587 bps respectively. This coupled with our conservative balance sheet with net debt leverage ratio of 2.28x has us poised for growth in the coming fiscal year. 

Having reached over 10.1 million paying subscribers in Eros Now through the end of the First Quarter, we are confident in continuing to grow our subscriber base over the next few years, especially given our premium content offering coupled with the large Indian and global market opportunities.”

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