ZEELNSEQ2 FY23November 17, 2022

Zee Entertainment Enterprises Limited

6,499words
50turns
6analyst exchanges
3executives
Management on call
Punit Goenka
Managing Director and CEO
Rohit Gupta
Chief Financial Officer
Mahesh Pratap Singh
Head Investor Relations
Key numbers — 38 extracted
99.99%
pport for the proposed merger Q2 FY23 Earnings Call Transcript November 11, 2022 with 99.99% of the equity shareholders who participated in the process, voting in favor of the scheme. We are
30 bps
ur enthusiasm with respect to our business trajectory. Firstly, on linear business, we have gained 30 bps network viewership share in Q2 FY23 and continue to be India's strong #2 TV entertainment network
28%
on of our investments in content, technology, and marketing. ZEE5 has clocked a revenue growth of 28% YoY during Q2 FY23, reflecting healthy traction and adoption. Now specifically coming to the fina
10%
doption. Now specifically coming to the financial performance; total revenues for Q2 FY23 are up 10% QoQ and 2.5% YoY aided by growth in Ad revenues, subscription revenues and other sales and service
2.5%
ow specifically coming to the financial performance; total revenues for Q2 FY23 are up 10% QoQ and 2.5% YoY aided by growth in Ad revenues, subscription revenues and other sales and services. Our Ad rev
4%
revenues and other sales and services. Our Ad revenues for the quarter grew at a healthy rate of 4% QoQ but are lower by 7% YoY. On year-on-year Ad revenues, in addition to the macroeconomic factors
7%
es and services. Our Ad revenues for the quarter grew at a healthy rate of 4% QoQ but are lower by 7% YoY. On year-on-year Ad revenues, in addition to the macroeconomic factors, previous year Q2 had h
rs,
4% QoQ but are lower by 7% YoY. On year-on-year Ad revenues, in addition to the macroeconomic factors, previous year Q2 had higher base due to strong spending coming out of COVID and Zee Anmol FTA Ad re
65%
ognition of our subscription revenues from Siti, pending a legal proceeding. Zee Music company saw 65% YoY growth in video views highlighting the strength of ZMC Music catalog and library. The YouTube
89 million
ing the strength of ZMC Music catalog and library. The YouTube subscriber base of ZMC increased to 89 million from 78 million in last 12 months. ZMC continues to be #2 music channel and has very young and new
78 million
of ZMC Music catalog and library. The YouTube subscriber base of ZMC increased to 89 million from 78 million in last 12 months. ZMC continues to be #2 music channel and has very young and new age catalog wi
Rs 32 crore
sic content to 10 years. The total impact of the change of useful life of music asset was positive Rs 32 crores on EBITDA. On a recurring basis impact is not going to be that material as our music inventory an
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Guidance — 20 items
Punit Goenka
opening
“Going forward all our investment decisions to make the sport segment a compelling value proposition for the company will continue to be taken with a prudent approach.”
Punit Goenka
opening
“Going forward we remain cautiously optimistic about the overall advertising sentiment gradually recovering through the second half of the fiscal which will further aid revenue growth.”
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
“However, we still have a lot of ground to cover and expect our financial performance to gradually improve in H2.”
Punit Goenka
qa
“So, what's the status from their compliance teams to understand whether they will be able to hold on to the shares comfortably and how does it work for their reporting perspective?”
Punit Goenka
qa
“So, for the timelines of the merger completion, we are working with a target that it should be completed within this financial year.”
Punit Goenka
qa
“our expectation is it will be about five to six weeks.”
Punit Goenka
qa
“But obviously post this next year we expect it to plateau and then come down.”
Punit Goenka
qa
“Can you talk about the amount you'll be paying and the returns that you expect and which channels the content will be broadcasted on?”
Punit Goenka
qa
“Also, the cash which the Mergeco will have, what's the plan to deploy that?”
Risks & concerns — 11 flagged
As you would have noted the underlying impact of the macroeconomic headwind across the industry continued to spill over in the second quarter of the fiscal.
— Punit Goenka
Given the weak macroeconomic environment and its implications on our operating context, we are pleased with our Q2 FY23 performance which showed sequential improvement from previous quarter and underscores our team's ability to adapt and execute through challenging times.
— Rohit Gupta
In the absence of a clear way ahead of NTO 2.0, near term outlook for subscription growth remains uncertain and muted.
— Rohit Gupta
The total impact of the change of useful life of music asset was positive Rs 32 crores on EBITDA.
— Rohit Gupta
While there has been a good pickup in revenues from theatrical and movies, content performance of movies generally has been softer than expected and this has caused a drag on margins.
— Rohit Gupta
I understand the headwinds from not having the FTA channel but I thought that the tailwinds from these two were much even stronger and despite that there was a decline on a YoY basis; do you still think that the sentiments are weak enough and how should we see them for the H2 because I think some part of the festive season already started in the Q2 itself?
— Sanjesh Jain
The sentiments were still weak in Q2 and this is largely driven on the back of the CPG or the FMCG companies taking a hit on their volumes because of the pricing of the input costs.
— Punit Goenka
So, therefore it was a weak in the Q2 itself.
— Punit Goenka
Because unlike last year where when the margins came under pressure, we significantly cut costs and that has further impacted revival of our channel’s market share.
— Rohit Gupta
The impact of that one-time impact in this quarter is Rs 32 crores.
— Rohit Gupta
Unfortunately, the industry doesn't work that way because these movies get sold even during production and if we were to wait for the film to be released in theater and then take the chance of buying the film there is a risk to that as well.
— Punit Goenka
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Q&A — 6 exchanges
Q
Thank you for the opportunity, I have two questions on the merger, so one is if you can provide an update on the timelines of merger completion. A related point is with respect to the number of days that your share will remain delisted that’s point one. Once the merger approvals are in place how many days will the share be de-listed, do you have clarity on that? The related question in this context is have you engaged with your institutional shareholders who have to report, they report their mark-to- market on a daily basis. So, what's the status from their compliance teams to understand wheth
Mahesh Pratap Singh
At this stage Vivek, we haven't had specific concerns or feedback on the timeline. Of course, as things progress, we will continue to remain engaged and we'll continue to articulate this. But at this stage there's not anything which we've gathered which is overly significant to talk about. The next question is from the line of Abneesh Roy from the Nuvama Institutional Equities. Please go ahead. My question is on ZEE5. One part is on the significant improvement in rating in both Android and iOS. What does this translate in terms of impact on revenue or subscriber base? It's good to see that num
Q
My first question is on the ICC event’s rights. Can you talk about the amount you'll be paying and the returns that you expect and which channels the content will be broadcasted on? Also, the cash which the Mergeco will have, what's the plan to deploy that? So, ICC the amount is confidential. We are not in a position to declare it right now. But as and when we have the clearance of ICC, we will share that with you. If the merger happens Kunal, then you know that you will have a formidable sports network in the mergeco and there's no reason why we would not use that as the platform. In the unli
Rohit Gupta
My second question is on inventory. We have seen a further increase in the first half. It's gone beyond Rs 7,000 crores. At what level does it stabilize? When do you expected to start moderating and also in terms of accounting policies on the inventory, have you engaged with Sony and are there any differences in the inventory accounting? Is there a possibility that you might have to write it down at some stage? The inventory increase, like I said in my opening remarks primarily is on account of the movies that have been added during the quarter. So, number of movies have been added and the mon
Q
Actually, most of the questions have been answered, a couple of more. So, one on ZEE5. I think we have taken a price hike last quarter if I am not wrong. So, how much of the growth can be attributed to price increase and how much of it is actually user that is question number one and second on music, I think in your opening remarks Rohit mentioned that Rs 32 crores is an impact on EBITDA. I just wanted to understand a bit more. Is it a change in amortization because if that is the case then probably incrementally also, we will have some impact and if we take that out, looks like on a QoQ basis
Rohit Gupta
The ZEE5 price hike the attribution of growth to that is miniscule Abhishek because we account for the revenue on a realized basis not on receipt basis. Even if you take a Rs. 100 price hike that will be attributable very limited on a 1-month basis. Therefore, the growth on the ZEE5 subscription is pretty much is coming on the back of new subscribers. I will take the last one but then music I will tell Rohit to answer. So, on the margins I think this year we should not expect any normalization of margins like we used to have at 24%-25% levels. This year will be subdued in terms of margins. Bec
Q
On the subscription side after we withdrew from FTA, have we seen a reduction in churn as in, in terms of users moving from pay TV to FTA not necessarily for Zee but for the industry as a whole since all broadcasters have kind of pulled out of FTA? And a related question so we have a 7% QoQ increase in subscription revenue so is that mostly coming from digital or has linear side also grown a little bit? Q2 FY23 Earnings Call Transcript November 11, 2022
Punit Goenka
No, the significant or maximum part of it is coming from digital. Linear is not shown any growth. What we have seen on your first question on the reduction in churn; absolutely the churn has been reduced. The subscriber base is now stable at the 53+ mark. In fact, in September if I remember I saw 53.8 so it's a healthy sign. We were hoping it will increase but that is not translated yet. The industry is going to wait and watch before we take a decision what way we want to go. One more question. I dropped off for a few minutes so I missed it. How many days will the stock be de-listed for in the
Q
Can you just let us know the contribution of three channels that we will let go off as part of merger? Their contribution to our current viewership share and Ad revenue? The Ad revenue part I cannot share. It is a bit confidential in nature. As you would understand that we have to still go and divest these channels. The viewership share is about 1% All India level.
Management
Q
Thanks Tanvi. Thank you everyone for your interest and thanks for joining us today. We hope all your questions were answered. Should you have any further clarification or questions feel free to reach out to us. Thanks again and look forward to speaking with you post our Q3 earnings.
Management
Speaking time
Punit Goenka
20
Moderator
8
Mahesh Pratap Singh
5
Rohit Gupta
4
Sanjesh Jain
4
Aditya Chandrasekar
3
Abhishek Kumar
2
Arun Prasath
2
Kunal Vora
1
Jinesh Joshi
1
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Opening remarks
Mahesh Pratap Singh
Thank you, Tanvi. Hello, everyone and welcome to our Q2 FY23 Earnings discussion. We have with us today our Managing Director and CEO Mr. Punit Goenka along with the 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 take some of your questions during the Q&A session. Before we get started, I would like to remind everyone that some of the statements made or discussed on today’s 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 will now hand the call over to Mr. Goenka for his opening remarks.
Punit Goenka
Thank you Mahesh. Good evening, everyone. I hope all of you are keeping well. Thank you for taking the time out this evening to interact with me and my team members on the performance in the second quarter of the financial year 2022-23. As you would have noted the underlying impact of the macroeconomic headwind across the industry continued to spill over in the second quarter of the fiscal. That said, we have been able to moderately grow our advertising revenues sequentially in the second quarter on the back of our network share gain and focused efforts from our Ad sales team. We remain hopeful of a steady recovery in the advertising environment during the second half of the fiscal given some of the green shoots due to a good monsoon and the onset of the festive season. We are utilizing this period to further strengthen the resilience and fundamentals of our business across all aspects. Our focused efforts and investments in content and user experience enhancements are displaying posit
Rohit Gupta
Thank you Punit. Welcome everyone. I hope you had the opportunity to review our Q2 FY23 results which have been uploaded on ours as well as website of stock exchanges. I'll focus my remarks on providing more context to our Q2 FY23 financial performance and our outlook for H2. Given the weak macroeconomic environment and its implications on our operating context, we are pleased with our Q2 FY23 performance which showed sequential improvement from previous quarter and underscores our team's ability to adapt and execute through challenging times. It is also important to note that we have continued to make room for investments in strategic areas through this phase and are confident of emerging as a much stronger business with marked improvement in underlying health and competitive advantage in our key businesses. Let me briefly talk about these lead indicators fueling our enthusiasm with respect to our business trajectory. Firstly, on linear business, we have gained 30 bps network viewersh
Mahesh Pratap Singh
Thank you Rohit. We'll now proceed for the Q&A session. I would request the moderator to take the discussion forward.
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