Key Highlights:
- Hosting a conference call and webcast on November 4, 2020 at
4:30pm EST to discuss our recent SEC filings, updated
forward-looking financial guidance and near-term strategic
priorities.
- ErosSTX expects for fiscal 2022 (ending March 31, 2022) revenue
of approximately $800 million, and a high single-digit EBITDA
margin1 .
- ErosSTX expects for fiscal 2023 (ending March 31, 2023) revenue
growth of at least 20% year-over-year to over $1.0 billion, and
that over 50% of fiscal 2023 revenue will be derived from digital
content distribution and platforms. ErosSTX expects fiscal 2023
operating cash flow will be approximately $100 million, as
incremental margins and cash conversion will meaningfully increase
as revenue increases.
Management is focused on six strategic imperatives to drive
shareholder value: (1) Enhance balance sheet and operating
cash flow, (2) Streamline ESGC corporate structure,
(3) Fully monetize Eros Now streaming platform, (4)
Drive growth in total company revenue, net income and EBITDA1,
(5) Form strategic partnerships, and (6) Enhance
investor communications.
Eros STX Global Corporation (NYSE: ESGC) (“ErosSTX”), a global
entertainment company, recently filed a transition 20-F report
containing a qualitative discussion of the legacy business of STX
Entertainment (“STX”), as well as legacy STX historical financial
statements in US GAAP. Additionally, the company filed a form 6-K
with the SEC including more information on such STX financial
information presented in the transition Form 20-F and providing
forward-looking guidance. Lastly, the company is providing an
update on its strategic priorities imperatives and financial
reporting calendar.
Legacy STX Historical Financials Filed in Transition Form
20-F
The company filed a transition Form 20-F last week with the SEC
that contains a qualitative discussion of legacy STX financial
results, in addition to the legacy Eros International Plc (“Eros”)
financial results that were first disclosed in Eros’ Form 20-F
filed on July 30, 2020. The transition 20-F also includes legacy
STX audited US GAAP financial statements for the 6-month period
ending March 31, 2020 and comparable period ending March 31, 2019
(un-audited), as well as legacy STX audited US GAAP financial
statements for the 12-month period ending September 30, 2019, with
two comparable prior annual periods.
STX focuses on co-production, acquisition and distribution of a
diverse portfolio of films each year. Most films in the STX slate
meet the following criteria: (1) a production budget of $5-$50
million, (2) one or more stars in signature roles, (3) a theatrical
release in the US with a substantially concurrent global release
through the company’s global distribution network, or a
theatrical/PVOD/streaming strategy when appropriate, and (4) a
financing structure designed to mitigate the company’s equity risk
exposure through a combination of tax incentives and international
license agreements to minimize production costs. STX seeks to
structure its international license agreements so that each film
will recover no less than the minimum guaranteed license fees under
such agreements. Tax incentives, where available, mitigate the
overall net production cost required to complete such films.
Consequently, this financing strategy seeks to minimize the
downside, while retaining a significant interest in the revenue
that the films may generate. STX also employs slate and
co-financing on a film-by-film basis to mitigate downside risk.
Additionally, STX develops and produces or co-produces scripted and
unscripted TV programming that is licensed to various TV and
streaming platforms. STX actively seeks opportunities to develop TV
content that is complementary to content on its other platforms.
STX uses a unique capital-efficient model for managing external
environment risks, such as COVId-19 impact on its theatrical
business. Additionally, the film marketing strategy of STX uses
first-party data for audience targeting in an attempt to maximize
the effectiveness of dollars spent, and targets box office
performance that is similar to peer films but with less marketing
expense than peer films.
The STX historical financial statements included in the
transition Form 20-F show that in fiscal 2017-19 legacy STX had a
net loss and EBITDA1 loss and operating cash flow, reflecting its
investment in content production and its growing content library.
Under US GAAP, STX is required to expense in the income statement
marketing and distribution costs upon release but amortize
production expenses to match the first cycle revenue window for
each film. Accordingly, like other film studios that report in US
GAAP, STX booked greater expenses relative to projected future
revenue as it was ramping its production and distribution. As the
content library scales, ErosSTX expects the net loss, EBITDA1 and
operating cash flow of the STX business to improve.
To this point, the most recently audited results published in
the transition Form 20-F for the 6-months ending March 31, 2020
show a narrowing of the net loss and EBITDA1 loss year-on-year and
positive operating cash flow. Net loss improved from $42.6 million
in the 6-months ending March 31, 2019 to $26.1 million in the
6-months ending March 31, 2020 and EBITDA1 improved from negative
$29.5 million in the 6-months ending March 31, 2019 to negative
$14.3 million in the 6-months ending March 31, 2020. Operating cash
flow improved from negative $133.9 million in the 6-months ending
March 31, 2019 to positive $10.3 million in the 6-months ending
March 31, 2020. ErosSTX believes the STX business is now at a
financial inflection point of realizing the sustainable benefits of
a well-established film library, while continuing to invest in
long-lived content ownership and revenue growth.
Six Strategic Imperatives to Drive Shareholder Value
Co-Chairman and CEO, Robert Simonds, commented on the company’s
near-term priorities and the current operating environment:
“We are outlining for shareholders the six strategic imperatives
that guide our management of the company; these priorities serve as
our beacon and we believe will drive shareholder value. We are
confident that we will show progress on these items in the coming
quarters, and we expect shareholders to evaluate the company based
on our progress. While the current operating environment remains
challenging and uncertain due to the COVID-19 pandemic, I am very
proud of the company’s response. With STX films, such as My Spy,
Horizon Line and Greenland, we quickly adapted our U.S.
distribution model from theatrical to a combination of premium
video-on-demand and streaming, and with what we believe are ROIs
that are comparable to or higher than our original greenlight
budget. In the case of Greenland, we still released the film in
international theatres and the film debuted at #1 in 22 countries.
This approach demonstrates that the STX star-driven films have the
opportunity to thrive no matter the distribution model. At Eros
Now, our global Indian-language streaming OTT platform, paid
subscriber growth continues to set records, with fiscal 2Q21
showing the fastest quarterly growth since inception. Additionally,
we are now using the full weight of our Eros production
capabilities to deliver fresh content to Eros Now, which we believe
will drive future subscriber growth. All of this gives me great
confidence in the company’s future, irrespective of the pandemic
and the recovery in global box office demand.”
The ErosSTX management team is focused on six strategic
priorities to drive shareholder value:
- Enhance balance sheet and operating cash flow: The
company intends to recapitalize its global debt structure,
extending debt maturities and simplifying the capital structure.
The company seeks to improve its cash conversion and visibility by
implementing improved financial and operational controls.
- Streamline the ESGC corporate structure: To enhance ESGC
shareholder value, the company will evaluate its corporate
structure, including a review of the Eros International Media
Limited (EIML) listing on the Indian Stock Exchanges, BSE and
NSE.
- Fully monetize Eros Now streaming platform: The company
intends to drive revenue, earnings and EBITDA growth by (1)
accelerating long-term subscriber growth, (2) driving higher
average revenue per user by enhancing direct-to-consumer global
reach and launching higher pricing tiers with the introduction of
English language content to the platform, and (3) launching
advertising monetization. In support of these objectives, the
company will increase its investment in content and marketing in
fiscal 2022 to drive higher cash flow returns in fiscal 2023/24.
The company will continue to invest aggressively in what it
believes is superior and differentiated content across all its
platforms and target markets.
- Drive growth in total Company revenue, earnings and
EBITDA1: As described in the form 6-K filed last week with the
SEC, the company is clarifying its previously issued guidance as
follows: The company expects for fiscal 2022 (ending March 31,
2022) revenue of approximately $800 million, which is consistent
with the previous forecast of $1.0 billion in calendar 2022, and a
high single-digit EBITDA margin1 for fiscal 2022, which is
consistent with the long-term outlook of 20% to 25% EBITDA margin1.
The company expects fiscal 2023 (ending March 31, 2023) revenue
growth of at least 20% compared to fiscal 2022 to over $1.0
billion, and that over 50% of fiscal 2023 revenue will be derived
from digital content distribution and platforms. This growth is
expected to be driven by expanding the company’s digital businesses
through Eros Now subscriber and revenue per subscriber growth and
increasing distribution and licensing of ErosSTX film and
television content to global digital platforms, including Amazon,
Apple, Netflix and Walmart. The company expects fiscal 2023
operating cash flow will be approximately $100 million, as
incremental margins and cash conversion are expected to
meaningfully increase as revenue increases. Additionally, the
company affirms its expectation, provided at the time of the
closing of the merger transaction, for $50 million in cash merger
synergies by the end of fiscal 2022 on a run-rate basis.
- Strategic Partnerships: The company will seek to
establish new, as well as deepen existing, commercial relationships
with global leaders such as Amazon, Apple, Microsoft, HBO and
Netflix, among others, which we believe will enable our business to
be nimble and responsive to a rapidly evolving and dynamic global
business environment.
- Enhance Investor Communications: The company intends to
improve its disclosure of key performance indicators, improve
connectivity with buy-side investors and expand sell-side analyst
coverage. The company is modifying its earnings reporting schedule.
The company expects to report full financial results every six
months (interims and full-year), and for the first and third fiscal
quarters intends to issue an update on key financial and
operational metrics. The company is not obligated to report
quarterly financial results because it is a foreign private issuer
under the Securities Act of 1933. The company believes this
modification to its reporting calendar is more consistent with its
long-term approach to managing the company, while still providing
shareholders with timely information about the company’s
performance.
Below is a list of the fiscal 2021 financial reports and the
expected reporting time frame:
- FY21 Interim Results (6-months ending September 30,
2020): January 2021
- FY21 Third Quarter Trading Update(3-months ending
December 31, 2020): March 2021
- FY21 Preliminary Results(12-months ending March 30,
2021): June 2021
The company will not issue a trading update for the first
quarter of fiscal 2021 given where we are in the calendar and given
the priority is to complete the required regulatory and financial
filings associated with the merger.
Hosting Investor Call on November 4, 2020 at 4:30pm
ET
The company is hosting a conference call and webcast for
investors on November 4, 2020 at 4:30pm ET to discuss the company’s
recent SEC filings, its updated forward-looking financial guidance
and its near-term strategic priorities. The call will be available
as a live webcast, which can be accessed at ErosSTX’s investor
relations website in the Events section. A replay of the webcast
recording will be available until 7 days after the initial webcast.
Dial-in information will be available on the day of the webcast
also on ErosSTX’s investor relations website in the Events
section.
Eros STX Global Corporation:
Eros STX Global Corporation, (“ErosSTX”) (NYSE: ESGC) is a
global entertainment company that acquires, co-produces and
distributes films, digital content & music across multiple
formats such as theatrical, television and OTT digital media
streaming to consumers around the world. Eros International Plc
changed its name to Eros STX Global Corporation pursuant to the
July 2020 merger with STX Entertainment, merging two international
media and entertainment groups. The combination of one of the
largest Indian OTT players and premier studio with one of
Hollywood’s fastest-growing independent media companies has created
an entertainment powerhouse with a presence in over 150 countries.
ErosSTX delivers star-driven premium feature film and episodic
content across a multitude of platforms at the intersection of the
world's most dynamic and fastest-growing global markets, including
US, India, Middle East, Asia and China. The company also owns the
rapidly growing OTT platform Eros Now which has rights to over
12,000 films across Hindi and regional languages and had 205.8
million registered users and 33.8 million paying subscribers as of
June 30th, 2020. For further information, please visit
ErosSTX.com.
Non-GAAP Measures
To supplement our consolidated financial statements, which are
presented in accordance with GAAP, we also use EBITDA and EBITDA
margin, which are not required by, or presented in accordance with,
GAAP. We believe that EBITDA and EBITDA margin facilitate
comparisons of operating performance from period to period, and net
debt facilitates a comparison of financial position and leverage,
and in each case, company to company, by eliminating potential
impacts of items that our management does not consider to be
indicative of our operating performance or financial position, as
applicable. We believe EBITDA and EBITDA margin provide useful
information to investors and others in understanding and evaluating
our consolidated results of operations and financial position in
the same manner as they help our management. However, our
presentation of EBITDA and EBITDA margin may not be comparable to
similarly titled measures presented by other companies. The use of
these non-GAAP measures has limitations as an analytical tool, and
you should not consider them in isolation from, or as substitute
for analysis of, our results of operations or financial position as
reported under GAAP. We define EBITDA as net loss, excluding income
tax provision, interest expense, interest income, and depreciation
and amortization. We define EBITDA margin as EBITDA divided by
revenue.
We provide estimates regarding certain forecasted financial
information in this release that are presented on a non-GAAP basis.
We cannot reconcile these non-GAAP projections to the most directly
comparable GAAP measure without unreasonable efforts because of the
unpredictable nature of certain significant items and the resulting
difficulty in quantifying the amounts thereof that are necessary to
estimate net loss. Specifically, operating expenses are impacted by
the completion of our closing process for the relevant fiscal
periods and we cannot predict the impact of discrete events on
these amounts. Material changes to any one of the exclusions could
have a potentially significant impact on our US GAAP results.
Non-GAAP Measures For the Year ended September
30, For the Six Months Ended March 31,
2017
2018
2019
2019
2020
(in thousands of dollars) (unaudited) Net loss
($86,361)
($193,195)
($138,001)
($42,606)
($26,113)
Income tax provision
387
811
708
359
161
Interest expense
15,943
18,934
22,134
11,629
10,718
Interest income
(116)
(99)
(213)
(51)
(43)
Depreciation and amortization
1,304
1,814
2,220
1,096
1,022
EBITDA (unaudited)
($68,843)
($171,735)
($113,152)
($29,573)
($14,255)
Cautionary Statement Regarding Forward-Looking
Statements
Information provided in this press release includes
“forward-looking statements” within the meaning of Section 27A of
the Securities Act, and Section 21E of the Exchange Act, and such
statements are subject to the safe harbors created thereby.
Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as “approximately,”
“anticipate,” “believe,” “estimate,” “continue,” “could,” “expect,”
“future,” “intend,” “may,” “plan,” “potential,” “predict,”
“project,” “seek,” “should,” “will” and similar expressions. Those
statements include, among other things, the discussions of our
business strategy and expectations concerning our market position,
future operations, margins, profitability, liquidity and capital
resources, tax assessment orders and future capital expenditures.
All such forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially
from those that we are expecting, including, without limitation:
our ability to successfully and cost-effectively source film
content; our ability to achieve the desired growth rate of Eros
Now, our digital over-the-top (“OTT”) entertainment service; our
ability to maintain or raise sufficient capital; delays, cost
overruns, cancellation or abandonment of the completion or release
of our films; our ability to predict the popularity of our films,
or changing consumer tastes; our ability to maintain existing
rights, and to acquire new rights, to film content; our ability to
successfully defend any future class action lawsuits to which we
are a party in the U.S.; anonymous letters to regulators or
business associates or anonymous allegations on social media
regarding our business practices, accounting practices and/or
officers and directors; our dependence on the Indian box office
success of our Hindi and high budget Tamil and Telugu films; our
ability to recoup the full amount of box office revenues to which
we are entitled due to underreporting of box office receipts by
theater operators; our dependence on our relationships with theater
operators and other industry participants to exploit our film
content; our ability to mitigate risks relating to distribution and
collection in international markets; fluctuation in the value of
the Indian rupee against foreign currencies; our ability to compete
in the Indian film industry; our ability to compete with other
forms of entertainment; our ability to combat piracy and to protect
our intellectual property; our ability to maintain an effective
system of internal control over financial reporting; contingent
liabilities that may materialize, our exposure to liabilities on
account of unfavorable judgments/decisions in relation to legal
proceedings involving us or our subsidiaries and certain of our
directors and officers; our ability to successfully respond to
technological changes; regulatory changes in the Indian film
industry and our ability to respond to them; our ability to satisfy
debt obligations, fund working capital and pay dividends; the
monetary and fiscal policies of India and other countries around
the world, inflation, deflation, unanticipated turbulence in
interest rates, foreign exchange rates, equity prices or other
rates or prices; our ability to address the risks associated with
acquisition opportunities; risks that the ongoing novel coronavirus
pandemic and its spread, and related public health measures in the
U.S., India and elsewhere, may have material adverse effects on our
business, financial position, results of operations and/or cash
flows; challenges, disruptions and costs of closing the merger and
related transactions (the “Merger”), integrating the Eros and STX
businesses and achieving anticipated synergies, and the risk that
such synergies will take longer to realize than expected or may not
be realized in whole or in part; the amount of any costs, fees,
expenses, impairments and charges related to the Merger and related
transactions; uncertainty as to the effects of the consummation of
the Merger and related transactions on the market price of the Eros
A Ordinary Shares and/or our financial performance; and uncertainty
as to the long-term value of the combined company’s ordinary
shares.
The forward-looking statements contained in this press release
are based on historical performance and management’s current plans,
estimates and expectations in light of information currently
available and are subject to uncertainty and changes in
circumstances. There can be no assurance that future developments
affecting us will be those that we have anticipated. Actual results
may differ materially from these expectations due to changes in
global, regional or local political, economic, business,
competitive, market, regulatory and other factors, many of which
are beyond our control. Should one or more of these risks or
uncertainties materialize or should any of our assumptions prove to
be incorrect, our actual results may vary in material respects from
what we may have expressed or implied by these forward-looking
statements. We caution that you should not place undue reliance on
any of our forward-looking statements. Any forward-looking
statement made by us in this communication speaks only as of the
date on which we make it. Factors or events that could cause our
actual results to differ may emerge from time to time, and it is
not possible for us to predict all of them. We undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future developments or
otherwise, except as may be required by applicable securities
laws.
1 EBITDA and EBITDA margin are financial measures calculated
other than in accordance with US GAAP. The Company believes that
these measures provides useful information to investors and others
in understanding and evaluating its consolidated results of
operations and financial position, as applicable, in the same
manner as they help our management. However, the Company’s
presentation of these measures may not be comparable to similarly
titled measures presented by other companies. The use of these
non-GAAP measures has limitations as an analytical tool, and they
should not be considered in isolation from, or as substitute for
analysis of, results of operations or financial condition as
reported under GAAP. For more information on these non-GAAP
measures, including how we calculate these measures and a
reconciliation to the most directly comparable US GAAP measure,
please refer to the reconciliation at the end of this release and
in the Company’s recently filed Form 20-F.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201102005530/en/
Investor Contact: Drew Borst EVP, Investor Relations
& Business Development Eros STX Global Corporation
drew@erosstx.com
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