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Eros International Plc Reports Second Quarter FY 2019 Results

November 15, 2018

ISLE OF MAN, United Kingdom--(BUSINESS WIRE)--Nov 15, 2018--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 and six months ended September 30, 2018.

Financial Highlights:

(1) A reconciliation of the non-GAAP financial measures discussed within this release to our IFRS revenue and net income is included at the end of this release. See also “Non-GAAP Financial Measures”.

Key Business Highlights:

Eros Now worldwide paying subscribers reached 13.0 million, an increase of 251.4% year-over-year and 28.7% since last quarter. The Company is reiterating its previous guidance of 16 million paying subscribers by fiscal year end 2019. As of September 30, 2018, Eros Now has exceeded 128 million registered users worldwide across APP, WAP and Web. Eros Now premiered 16 films in Q2 FY2019 as well as 380 original short-form content pieces, including critically acclaimed short films. Eros Now premiered two original series, Side Hero and Smoke, to critical and commercial success. Eros Now announced a ground-breaking partnership with iQiyi, the largest Chinese online video streaming service. With this partnership, Eros Now becomes the first South Asian OTT player to penetrate the Chinese digital space. 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 across 86 channels worldwide, reiterates Eros Now’s leadership position in the premium entertainment category, offering an extensive multi language movie library. Eros released 17 films in Q2 FY2019 (four medium budget and 13 low budget films) as compared to seven films in Q2 FY2018 (two medium budget and five low budget films). This is consistent with Eros’ strategy of developing its own intellectual property and concentrating on content-driven films rather than high budget star-driven films. Revenues for the quarter were driven by releases of: Side Hero (Hindi) , Happy Phirr Bhag Jayegi (Hindi) , Manmarziyan (Hindi) , Patakha (Hindi) , Saakshyam (Telugu) , Tc.Gn - Take Care Good Night (Marathi) , Batti Gul Meter Chalu (Hindi) Blackmail and Nawabzaade (Hindi).

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

“We are pleased to announce another strong performance this quarter, highlighted by sequential revenue growth, improving margins and a solid capital structure. We also delivered strong growth at Eros Now, crossing 13 million paying subscribers, a sequential increase of 28.7%, and now have over 128 million registered users as of September 30, 2018. The media market in India is robust and growing, driven by rapid technological and socio-economic changes. We benefit from all areas of this growth, from ticket sales, digital downloads and advertising to pay television. While digital continues to be the main driver of our future growth, it’s important to remember that the television market in India is still growing at a strong pace – forecasted at c. 15% for the next few years, which provides strong tailwinds to our TV syndication business.

Being part of the largest independent Indian film studio with the biggest content library, we are well positioned to establish and maintain our role as a leader in the Indian OTT space given our brand-name, know-how and long-term relationships. As the most established Indian film studio, we also have one the deepest and richest content libraries. Over the last 10 years, Eros has been responsible for 36 out of the top 110 highest grossing Indian films at the box office. We are fortunate to have complete control over the content we create and benefit from the fact that our in-house content gives us the ability to create strong franchises, support and nurture new talent and ultimately give consumers the best possible entertainment choices. Eros Now pioneered online video streaming in India and we believe there is significant opportunity ahead as consumers continue to discover and consume entertainment they enjoy and we want to be there to help them on their journey.”

Rishika Lulla, Chief Executive Officer, Eros Digital, commented:

“Our latest results are a reflection of the Eros promise to deliver viewers a premium entertainment offering at the right price around the world. The recent launch of Eros Now originals, Smoke and Side Hero, is a testament to our strategy of delivering quality cinematic narratives to audiences on digital. We are humbled and excited by the audience appreciation and adoption of the originals, which have received several accolades and important “firsts.” Of note, Side Hero was the first Indian original series to generate 10 million views of a trailer and has the highest IMDB ratings of any original in India, while Smoke was the only original from India to be screened at Mipcom 2018 in Cannes earlier this year.

We remain focused on the OTT consumer and have an exciting pipeline of cutting edge original content lined-up for the rest of the year. This is in line with the Eros strategy of developing its own intellectual property and concentrating on content-driven films rather than high budget star-driven films.

According to our proprietary data, overall platform engagement continues to increase. Long form content continues to deliver the highest levels of engagement with the majority of Eros Now films being viewed in less than two sessions. An “engaged” viewer also returns at least three times a week, spending a minimum of 40 minutes on the platform. During the second quarter alone, we’ve seen a 25% increase in the number of sessions per subscriber. Our registered user base of over 128 million people gives us a unique opportunity to both monitor and learn from viewing habits as well as the ability to convert a portion of this base into monthly paying subscribers. Our large registered user base also represents a new revenue opportunity for us in the form of online advertising. We look forward to rolling out over 100 originals over the next 18 months in multiple languages, further bringing the Indian entertainment ecosystem together.”

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

“I am pleased with our second quarter performance as the business delivered strong EBITDA growth and margin expansion, continued balance sheet strength and exceptional Eros Now paying subscriber additions, outperforming market expectations. Our strong operating performance this quarter, as well as the previously announced investment from Reliance Industries, has helped reduce our net debt position to $162.1 million. This represents a comfortable net debt leverage ratio of 1.58x. In addition, our trade accounts receivable balance has reduced by $26.9 million and now stands at $198.0 million. Our strong operating performance coupled with our conservative balance sheet has us poised for growth in the coming fiscal years.

As our business evolves the majority of our future EBITDA will come from Eros Now. We therefore expect our adjusted EBITDA margins to continue to improve and target 35-40% margins for fiscal year 2020. Having reached over 13.0 million paying subscribers in Eros Now through the end of the second quarter, we are confident we can continue 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. To that end we have planned approximately $750 million in content investments over the next three years, which we expect to generate a meaningful ROI for our business.

On the strategic front we continue to look to identify ways to simplify our corporate and operating structure, with a view towards providing a clear and accessible investment proposition for investors. To that end, our internal senior management team has formed an internal committee to explore all potential options. We look forward to giving an update on our progress over the coming quarters.”

Eros Now

Partnerships & Distribution:

This quarter Eros Now continued its focus on large screen distribution deals in India with many leading television, ISP/Broadband and Android/Hybrid box partners. The Company also sharpened its focus on international distribution with several partnerships announced across Southeast Asia, South Asia and the Middle East. In total, Eros Now has 23 live distribution partners outside of India, 10 of which were signed in the quarter ended September 30, 2018. Expect to see more international distribution partnerships announced in the coming quarters, with a particular emphasis on UK, U.S., Middle East and Africa. Eros Now has expanded its footprint into the fast-growing Chinese market through a content partnership with Chinese online video-streaming service, iQiyi. iQiyi is one of the largest online video sites in the world, with nearly 6 billion hours spent on its service each month and over 500 million active monthly users. Eros Now has entered into a content licensing agreement with iQiyi to license its vast catalogue of Bollywood content with Eros Now branding that will be showcased on iQiyi. With this partnership, Eros Now becomes the first South Asian OTT player to make inroads into the Chinese digital space. Eros Now has extended its presence in the Malaysian market by partnering with leading Malaysian telecom player, Celcom Axiata Berhad, for their subscribed data plan “Video Walla.” Eros Now and Celcom’s partnership will further enhance the entertainment experience by providing Malaysian customers access to Eros Now’s vast library of original shows, music videos and more. Eros Now has entered the Indonesia market through a strategic distribution partnership with Xiaomi, a global technology leader. As previously announced in July of this year, Eros Now entered a strategic tie-up with Xiaomi’s Mi TV to offer an immersive content experience to consumers in India. With this new stage in the partnership, Eros Now will strengthen its presence and connectivity with Xiaomi’s users in key international markets like Indonesia. Eros Now partnered with FreeCharge, one of India’s leading digital marketplaces for financial services and products. Through this association, Eros Now will facilitate a free month of access to its vast library of movies, original shows, music videos and more for FreeCharge customers recharging pre-paid packages via the FreeCharge app. Eros Now entered into a strategic partnership with E-Vision, a fully-owned subsidiary of Etisalat, for its SVOD offering “eLife Video Packs.” This partnership further strengthens Eros Now’s existing presence in MENA region (Middle East and North Africa).With an ardent fan-base of Indian content including films, music and TV series, MENA countries have always been positively receptive towards Indian content. Bollywood content is also popular with the local Middle Eastern population in dubbed and subtitled formats – both of which are offered on Eros Now. Eros Now has entered into a partnership with leading fashion and lifestyle channel, FashionTV (“FTV”). With this association, Eros Now will be the first OTT player to venture into the fashion and lifestyle segment by providing consumers access to FTV’s 12+ live TV Channels and 145+ hours of VOD content. Eros Now has entered into a partnership with Grofers, a leading Indian online supermarket. As part of the association, Grofers’ Smart Bachat Club (SBC) Annual Plan will now have access to Eros Now’s rich library of over 11,000 film titles, original shows and music videos. The offer is available to both existing and new customers of Grofers SBC annual pack subscribers, which is currently priced at 449 Rupees per year. 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, reiterated Eros Now’s leadership position in the movie category, offering its extensive movie library across languages.

Content:

This quarter Eros Now successfully premiered 16 movies across seven Indian languages: Hindi, Marathi, Tamil, Telegu, Bengali, Kannada and Gujarati. Eros continues to invest in a diverse range of content to fulfil penetration across 100 cities in India.

Eros Now successfully premiered two cutting-edge originals recently, Side Hero and Smoke.

Side Hero is a fictionalized take on actor Kunaal Roy Kapur’s life in Bollywood as a perennially neglected side-actor. The eight episode series received much praise for its humorous take on Kunaal’s life, as his ambition to grab the leading role is constantly thwarted and he ends up being the sidekick. The leading digital portal Web Hash recently gave Side Hero the Best Web Series Award, and also gave Kunal Roy Kapoor the Best Actor award. The teaser trailer for Side Hero generated over 10 million views in less than one week, making it the most watched trailer of any Indian original. Smoke is a gritty crime drama in the spirit of Netflix’s Narcos. The crime drama is directed by Neel Guha and stars an eclectic ensemble cast of Kalki Koechlin, Mandira Bedi, Jim Sarbh, Amit Sial, Gulshan Devaiah, Satyadeep Mishra, Neal Bhoopalam, Prakash Belawadi, and others. The 11 episode series centers around a double-murder in the idyllic setting of Goa and pits an aggressive police chief against an underworld crime boss. Smoke premiered at MIPCOM in Cannes, and is the first Indian OTT original to be featured at the industry event. Smoke has since gone on to garner a 9.4 IMDB rating in just a few weeks of its release.

Given the recent launches of Smoke and Side Hero, as well as increased marketing efforts and distribution partnerships, Eros Now believes the next quarter will be a good point to measure the effectiveness of the launch of its originals. In the meantime, there are many interesting and exciting things to look forward to in Q3 FY2019 including:

Launch of 12 Fashion TV Channels and Original English Programming onto the Network Pakistani humor and television content will be introduced and promoted to audiences in India Launch of the cross genre series with Operation Cobra in Dec 2018 Screening of three Eros Now short films at the Berlin Film Festival, and the screening of the award winning The Monsoon Date at MAMI 2018

Over the coming months, Eros Now will 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. Global concepts that will entertain audiences are being produced internally. A selection of upcoming Eros Now original titles include:

Dashavatar with Anirudh Pathak: When mankind became corrupt and greedy, Vishnu, the protector of the realms, is incarnated to vanquish evil and save the world. Dashavatar tells this fascinating story of Vishnu’s reincarnations. (Target release December 2018/January 2019) Ponnyin Selvin with Krish Jagarlamudi: A multi-seasonal, multi-lingual show based on the famous Tamil novels. Written in five volumes, Ponniyin Selvan narrates the story of Arulmozhivarman – later crowned as Rajaraja Chola I - one of the kings of the Chola Dynasty, during the 10th and 11th centuries. (Target release March 2019) Flesh with Siddharth Anand: An eight-year-old girl goes missing and her NRI parents are forced to seek the help of a suspended female cop in their search for her. An ex-human trafficker is blackmailed to join the search or risk his sinful past catching with him. (Target release March 2019) Mrityulok with Zeishan Qadri: A story that shows a mirror to the ruthless, selfish face of the society and how we all are culprits in a system that offers no incentive to “be good.” (Target release March 2019) Bhumi with Pavan Kripilani: A survival thriller set in a dystopian version of Delhi which begs the question, how far is our reality from this supposedly fictional dystopia? (Target release April 2019) Crisis with Nikhil Advani and Gaurav Chawla: On the day of his 50 th birthday, Dr Gopichand Wadhwani – one of India’s top cardiologists – decides to follow his childhood dream and become a rapper. Crisis is a story of two generations coming together to help each other get from life what they want. (Target release May 2019) Sanyasi Raja with Prakash Jha: A fictional depiction of the infamous Bhawal case of West Bengal, in which a possible imposter claimed to be the prince of Bhawal, who was at that point presumed dead for over a decade. (Target release June 2019) Kurukshetra : The tribals thought they were Gods. The army thought they were militants. What they turn out to be, are five children with ‘superpowers’ emerging from a genetic mutation. And with destinies that, almost uncannily, resemble the trajectory of the Mahabharata. (Target release TBD) Blue Oak Academy : A teen-drama thriller that follows one young boy’s quest to exact revenge with the most prestigious academic institution of the nation. (Target release June 2019)

Apart from this, Eros also has a selection of upcoming short form content and short film anthologies to accompany this slate.

Technology:

As a brand, Eros Now remains committed to continuously improving the user experience through best-in-class technology and also adding several new and innovative features to the consumer viewing experience. This quarter Eros Now is undergoing an overhaul of the entire technology ecosystem and a new interface will be launched for large screen consumer devices. The Eros Now development team is devoting large resources to data sciences and analytics with the goal of being able to deepen insights from structured analysis of 1 st  party, 2 nd  party and 3 rd  party data to develop business intelligence across key business functions of content, marketing and subscriber monetization. This quarter Eros Now rolled out a significant refresh of the handheld device user-experience to the next major upgrade, based on data science’s learnings on customer journey and behavior patterns. Eros Now also launched a refreshed Apple TV interface with new functionality as well as an overhaul of the experience across mobile handsets.

Eros International Theatrical Release Slate

Eros has a solid stable of upcoming theatrical releases covering many genres and regional languages. Selected key titles include:

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