ZEELNSEQ1FY23August 18, 2022

Zee Entertainment Enterprises Limited

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Management on call

Punit Goenka

Managing Director and CEO

Rohit Gupta

Chief Financial Officer

Mahesh Pratap Singh

Head Investor Relations

Key numbers — 40 extracted

rs,

pe all of you are doing well. Thank you for joining us today to interact with me and my team members, on the Company’s performance in the first quarter of the financial year 2023. As you all must ha

90 million

ieve that there is enough headroom for the growth of pay TV in the country. India still has about 90 million households who are yet to own their first TV sets, which represents a long runway for TV subscrip

16.1%

e is showing early signs of stability and recovery. The viewership share for the quarter stood at 16.1% and while that’s 100 bps lower QoQ, adjusted for Zee Anmol FTA withdrawal, we have gained viewers

100 bps

s of stability and recovery. The viewership share for the quarter stood at 16.1% and while that’s 100 bps lower QoQ, adjusted for Zee Anmol FTA withdrawal, we have gained viewership share in Q1FY23 compa

43%

mony of our market leadership and strong momentum in Zee5. Zee5 has clocked a revenue growth of 43% YoY during Q1FY23, reflecting healthy traction and adoption. Zee5 QoQ revenue is flat as we have

Rs 599

and has also taken two price hikes – from 499 to 599 in mid March 2022, and a second hike from Rs 599 to 699 in mid – July, a total increase of 40%. We continue to evaluate B2B deals opportunistically

40%

to 599 in mid March 2022, and a second hike from Rs 599 to 699 in mid – July, a total increase of 40%. We continue to evaluate B2B deals opportunistically and periodically when some of these deals co

4.0%

erformance. Now specifically coming to the financial performance, total revenue for Q1FY23 grew 4.0% YoY to Rs. 18,457 mn, from a low base of Covid impacted Q1FY22. Our revenues are lower by 20.5% c

Rs. 18,457

Now specifically coming to the financial performance, total revenue for Q1FY23 grew 4.0% YoY to Rs. 18,457 mn, from a low base of Covid impacted Q1FY22. Our revenues are lower by 20.5% compared to previous

20.5%

4.0% YoY to Rs. 18,457 mn, from a low base of Covid impacted Q1FY22. Our revenues are lower by 20.5% compared to previous quarter, impacted by lower revenues across all key drivers of Ad revenues, S

5.4%

er this in a bit more detail, so you have a better context. Our Ad revenue for the quarter grew 5.4% YoY but were lower by 12.8% QoQ. QoQ drop was a function of two key items. First was the Zee Anmo

12.8%

ail, so you have a better context. Our Ad revenue for the quarter grew 5.4% YoY but were lower by 12.8% QoQ. QoQ drop was a function of two key items. First was the Zee Anmol FTA withdrawal from

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Guidance — 20 items

Punit Goenka

opening

“We are building a strong tech foundation for the company, and this tech centre will be instrumental in augmenting our offerings in the future.”

Punit Goenka

opening

“We are certain that going forward, the targeted investments being made into the business will aid mid to long-term growth.”

Punit Goenka

opening

“As our overall revenue growth recovers, we remain confident that the margin recovery will be equally quicker.”

Rohit Gupta

opening

“B2B revenues by nature tends to be lumpy and we expect some of the accretive subscription deals to convert in the due course, which will help soften the pressure on subscription revenue trendline somewhat.”

Rohit Gupta

opening

“We will continue to monitor NTO 2.0 guidelines and will be prepared to implement the same for improved longer term revenue outcome.”

Rohit Gupta

opening

“To sum up, while we had a challenging Q1 along expected lines, we expect our financial performance to gradually improve as we progress through the year.”

Rohit Gupta

opening

“As revenues scale up in subsequent quarters, we will expect margins to start inching up.”

Rohit Gupta

opening

“Growth revival is our key focus and while Q2 will see recovery from Q1 levels, H2 is where we expect pace of recovery to really gain momentum.”

Punit Goenka

“What we are doing from our strategy point of view, Abneesh, was from the day one we had taken a strategy that we will be a pan India film production company and therefore our portfolio or our portfolio of films spans across 5 to 6 languages.”

Punit Goenka

“Hopefully once we have established our credibility etc., we will find the right balance and the right price points in which we will be also happy and even the B2B partners will be happy.”

Risks & concerns — 13 flagged

B2B revenues by nature tends to be lumpy and we expect some of the accretive subscription deals to convert in the due course, which will help soften the pressure on subscription revenue trendline somewhat.

— Rohit Gupta

So because currently there is a rural slowdown, is there a rethink on FTA and are all the 4-5 large broadcasters also following this and are they also maintaining the discipline?

— Abneesh Roy

If I see Punit, the market share ex of the Anmol impact of 100 bps, the market share has been stable last three quarters at 17.1 to slightly down 17.5-17.8.

— Abneesh Roy

My question is you have significantly invested in seeing this as a challenge but it has not fructified.

— Abneesh Roy

Will that be a fair assumption and majority of this decline has largely come from the B2B side of it?

— Sanjesh Jain

Overall subscription revenue there is a decline.

— Punit Goenka

There is an underlying decline, ex of even this B2B category.

— Sanjesh Jain

If I look at our revenue this quarter it was down by about 7.4% year-over-year but in the past few quarters, the decline has been in the range of about 1% to 3%.

— Jinesh Joshi

Because the decline appears to be slightly steep vis-à-vis previous quarter?

— Jinesh Joshi

Punit, I was asking about the subscription revenue decline.

— Arun Prasad

Even after adjusting for the growth in ZEE5 revenue on YOY basis there is a large decline on the linear TV.

— Arun Prasad

Very difficult for me to understand that how can an advertiser advertise for 60 days and then for the rest of the year not advertise at all?

— Punit Goenka

The average age of the inventory will be difficult for us to give you right away but I am sure Mahesh can share with you offline.

— Punit Goenka

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Q&A — 8 exchanges

My first question is on the FTA and market share. So because currently there is a rural slowdown, is there a rethink on FTA and are all the 4-5 large broadcasters also following this and are they also maintaining the discipline? Because in the past also we have seen that the discipline gets broken and if the macro would not have worsened when do you think the FTA Anmol removal would have been compensated by the subscription revenues? I understand the macro has changed but if you could answer all these questions.

Punit Goenka

Firstly, on the FTA side, we have taken a collective call as an industry. It's not about just one player or two players that we will support this in favor of the subscription revenue growth that we want to see. As the removal has been just about 4 months, still early to talk about the impact it would have had. In the normal circumstances we had anticipated that at the end of 1 year we could have recouped at least 40% odd from the subscription uplift that the DTH operators were estimating and the balance part of that would have to be recouped from the advertising piece. If I see Punit, the mark

Can you help us understand what was the ad revenue, underlying ad revenue if one were to adjust for the FTA which has hurt this quarter? So to understand what is the underlying growth and the related question to that is can you help us understand the sub industry—we understand that FMCG was going through trouble—but how has the other industry like auto, telecom, new commerce how have they performed? Is there any very different ad spending behavior within the subsegment? So that would be my first question.

Punit Goenka

I'll take the second question and the first one I'll give Rohit to answer for you. In terms of advertising sectors FMCG is the largest advertiser on television and more so for a network like ours which is a very female skewed network. As you know we don't have a sports bouquet in our portfolio and therefore our dependence on FMCG is far greater. All the other sectors like auto, consumer durables, telecom etc. constitute anywhere between 6% to 8% of the total ad spends in the market. They don't really skew the spending as much. They have been in the same ballpark maybe 100 bps plus minus. But i

I have a question on the domestic subscription side. If I look at our revenue this quarter it was down by about 7.4% year-over-year but in the past few quarters, the decline has been in the range of about 1% to 3%. I know you mentioned something about B2B deals not fructifying this time around but apart from that is there any other specific factor which we should ideally be looking into? Because the decline appears to be slightly steep vis-à-vis previous quarter?

Punit Goenka

No nothing that we can point any fingers to right now because it's too short a period. If we see any trend we will certainly come back to our guidance. Q1FY23 Earnings Call Transcript August 12, 2022 Secondly with respect to inventories I think this got addressed in the previous question, despite a jump from about 6,300 crores to about 6,700 crores in this particular quarter; what I was trying to understand is that the cost of that movie typically gets expensed immediately on theatrical release. The question was again if you can just help us clarify that if only six movies are released then on

One is the viewership share before also we had taken channels of free dish in FY20 prior to COVID. At that time our viewership share was around 18.5%. So, to that extent that number and the current 16.1%, are they comparable? Just to understand better that’s question one. Secondly if I look at slide #5, it appears that the weekly impressions and weekly reach of TV have marginally declined and just wanted your perspective on this data and what should one infer based on this? And thirdly in terms of the receivables that are outstanding from related parties, if you can give an update on that, tha

Punit Goenka

So, on your first part on the viewership share pre-COVID and the current viewership share the two are not comparable because the BARC Universe keeps changing and if I remember correctly in 2021, we had a reset in the BARC Universe where they had added based on the IRS survey that was conducted in 2019. So that data you can get from BARC as to when the universe changed and therefore you will get your answer from there. On your second question about impressions, you're right that impressions have fallen this quarter but it's largely on account of time spent and which is impacted due to the sever

Punit, I was asking about the subscription revenue decline. Even after adjusting for the growth in ZEE5 revenue on YOY basis there is a large decline on the linear TV. Is it indication that cord-cutting is accelerating in India? That means if more and more people are not subscribing to our channels and this is probably the industry wide phenomenon, is it also the reach is also getting affected because of this and again that will have a bearing upon the ad revenue growth?

Punit Goenka

So, if you look at the reach for the last three quarters has been pretty stable. There was a marginal dip four quarters back. Therefore, we cannot attribute this to any cord-cutting. It is basically lesser consumption that's taking place which means time spend is lower. People are not able to spend time in front of the television set and the reason we have attributed to that, is the majority power cuts that were witnessed in several cities and states of the country during the heat wave as well as the whole power supply shortage. Do you expect this to be bounce back in couple of quarters? Certa

On the market share side, the only way to get it back is to do better content that is far more engaging with the viewers and we are focused on the markets of the flagship Hindi, Marathi and Tamil. These are the three areas where we are completely focusing on. In terms of kind of content, as you know the obvious mix is still soap operas dominate the content on these GEC channels of course sprinkled with some garnishing of the non-fiction shows and we will continue the same route. On the inflationary pressures because Q2 has just started, we have seen some amount of positivity but nothing that g

Management

Would it be possible for you to explain to us how the inventory, the duration of the inventory in terms of movies? I mean obviously we know the amortization policy is 5 years for movies and less for other content. So, at an aggregate movie shows and content inventory, is it possible to quantify in terms of how much, what is the duration of that? That’s question one. Secondly in terms of the music business you put out a slide on that. Can you talk a little more on that? What kind of revenue growths there? What kind of monetization schemes you are seeing there and give us an update there?

Punit Goenka

The average age of the inventory will be difficult for us to give you right away but I am sure Mahesh can share with you offline. The music business is seeing good growth. Do we have the numbers? The growth numbers on the music company? Let us check that. We have our video views growth, but revenue growth, we don’t share. Vivekanand you can take off-line with Mahesh please. We don’t have the numbers here right now. We have the growth number in terms of the video metrics, but the revenue is something we don’t share. Sure. Okay, I will take this offline. Q1FY23 Earnings Call Transcript August 12

Thanks Steven. Thanks everyone for joining us today on our earnings call. We hope all your questions were answered. If there are any further questions, please feel free to reach out to us. Thanks, and looking forward to speaking with you next quarter. Have a great evening and great weekend. Thank you.

Punit Goenka

Wish you all a Happy Independence Day.

Speaking time

Punit Goenka

Moderator

Sanjesh Jain

Rohit Gupta

Mahesh Pratap Singh

Vivekanand

Arun Prasad

Abneesh Roy

Jinesh Joshi

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Opening remarks

Mahesh Pratap Singh

Thank you, Steven. Hello, everyone and Welcome to Zee Entertainment’s Q1 FY23 Earnings discussion. We have with us today our Managing Director and CEO Mr. Punit Goenka along with senior management team. We will start with opening remarks from Mr. Goenka followed by commentary on operating and financial performance by Mr. Rohit Gupta, our Chief Financial Officer. We will subsequently open the floor for questions and answer session. Before we get started, I would like to remind everyone that some of the statements made or discussed on today’s conference call will be forward-looking in nature and must be viewed in conjunction with risks and uncertainties we face. The company does not undertake to update any of these forward-looking statements publicly. With that I would hand the call over to Mr. Goenka.

Punit Goenka

Good evening, everyone! I hope all of you are doing well. Thank you for joining us today to interact with me and my team members, on the Company’s performance in the first quarter of the financial year 2023. As you all must have observed, the media & entertainment sector is at the cusp of higher structural growth with numerous opportunities to capitalize. But on the other hand, the industry is also facing near-term challenges emerging from macro- economic factors, leading to high volatility in the overall advertising ecosystem. That said, these challenges are also an opportunity to build stronger and agile business models. Amidst this scenario, the tenacity displayed by the Company, has enabled us to continue making good progress on the strategic priorities set across the business. Q1FY23 Earnings Call Transcript August 12, 2022 We are witnessing significant investments being made across the industry, which is a firm testament that the sector will continue to be a hugely attractive pro

Rohit Gupta

Thank you Punit. Welcome everyone. I hope you had an opportunity to review our Q1 results which have been uploaded on ours as well as on the website of stock exchanges. I'll focus my remarks on providing more context to our Q1 financial performance and share our outlook. As discussed during our last earnings call in May, FY23 was commencing on a challenging note and particularly the first half of the year was anticipated to see immediate impact of withdrawal of Zee Anmol from DD FreeDish, coupled with a difficult macroeconomic backdrop of heightened inflation, weak volume growth for Brands and resultant pressure on Ad revenues. Given all that setup, Q1FY23 performance was soft along the expected lines, however, there are encouraging bright spots across all key segments as well, and these give us confidence in the gradual recovery as we progress through the year. We continue to be India’s strong #2 TV Entertainment network and our viewership share is showing early signs of stability and

Mahesh Pratap Singh

Thanks Rohit. Steven we can open the questions and answer. Would you just instruct participants for Q&A. Q1FY23 Earnings Call Transcript August 12, 2022

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