Eros STX Global Corporation (NYSE:EROS) Co-Chairman and CEO,
Robert Simonds, commented on the recently completed merger between
Eros and STX. Mr. Simonds stated, “Now that we have begun the
integration process, we wanted to take a moment to reach out to all
of you as a group to express our tremendous excitement about what
this transaction means for us and the incredible opportunities in
front of us.
From the moment we first began discussing this combination, it
was clear to both companies that this transaction could represent
far more than a sum of the parts. Each of the companies and
respective teams brought compelling insights and experiences to the
table, but frankly neither company, on its own, could really move
the needle in the global media and entertainment landscape. We
believe we are now positioned to create a truly global digital
entertainment enterprise. Due to its rapid growth and increasing
broadband and internet availability in the market, India has become
one of the most important entertainment battlegrounds in the world.
You need look no further than Jio’s recent nearly $20 billion
capital raise, backed by some of the largest US-based technology
and venture capital investors, and largely centered on the rollout
of 5G throughout the country. Media and entertainment looks to play
a critical role in that massive regional growth.
Eros Now has one of the largest libraries of local and regional
language content in the Indian marketplace. It would take a
significant investment of capital for a competitor to even try to
replicate it. In fact, the independent, third-party valuation that
was done in February, 2020 (accordingly, not giving effect to any
benefit or detriment in value attributable to COVID) by one of the
market leaders providing global valuation services resulted in a
valuation of approximately $1 billion for the Eros library. Eros
Now also has a large and growing number of both paid subscribers
and registered users. As of June 30, 2020, Eros Now reached 33.8
million paid monthly subscribers and 205.8 million registered
users, increases of 60% and 24%, respectively, over the same period
last year. While the total revenues generated from Eros Now, and
the individual average revenue per user, still have room to grow,
we are in a unique and enviable position as, and have the ability
to remain, one of the top players in the digital OTT streaming
space in what has quickly become one of the fastest growing markets
in the world.
When you add STX content to the content running through the Eros
Now Prime platform, as well as the ultra-premium co-production
content we are producing with some of the largest global players
like Amazon and Netflix, we have laid the groundwork for a truly
massive opportunity.
STX has consistently been leading the innovation in Hollywood to
a cost-effective model for both the production and distribution of
feature film content. What initially began as an effort to produce
feature films at a significantly lower price point, and then to
utilize an innovative financing structure to cover approximately
50-70% of the cost of our feature films through a combination of
international minimum guarantees and production and tax incentives,
has recently expanded to a point where STX has been able to spend
dramatically less than its competition in marketing theatrical
releases for comparable films. That has meant substantially less
risk in each film produced, significantly greater profit potential
on each film in success with a far higher return on invested
capital for successful films relative to our competitors producing
similar movies.
Our cost structure and low overhead have allowed us to be
opportunistic in a sometimes uncertain and radically evolving
environment. One of the most important early lessons for STX was
not just about reducing production or marketing expenses or using
data-driven marketing strategies to identify and hyper-target our
audiences, but rather the ability to be extremely nimble and
creative in identifying and capitalizing on opportunities. As a
result of this corporate ethos, which interestingly is also
something Eros has infused into its corporate culture, we were able
to not only weather the theatrical shutdowns caused by the pandemic
but to pivot in our production and distribution strategies.
As stay-at-home orders and the closure of cinemas have resulted
in delays for the release of feature films and the halting of new
production, we have been able to decide, even up to the last
moment, how best to monetize our content, whether that is
theatrically, through OTT platforms or even in a Premium Video on
Demand launch. One recent example of this was one of our features
called My Spy which was originally intended to release
theatrically in April, 2020. We sold it to Amazon in what has been
a true win-win for both STX and Amazon as it has apparently become
one of the most successful Amazon ‘Original’ films ever.
We do continue to believe in the value of the theatrical
experience. This unique shared viewing experience is still of the
utmost importance to the biggest storytellers and stars on the
planet and our ability to deliver theatrical films efficiently
gives us a significant competitive advantage. While the current
pandemic has significantly delayed the release of our Gerard Butler
film Greenland in most territories, the performance over the
past two weekends in certain international territories has been
remarkable, with the film performing at or exceeding most of
Gerard’s other action films in those territories despite the fact
that theaters there are only permitting 50% capacity and limiting
the total number of showings each day.
While this pandemic continues to impact where consumers are able
to see the film and while consumers continue to evaluate how they
want to view feature content in the future, we will continue to be
able to deliver premium content where, when and how consumers want
to enjoy it without fundamentally challenging our business model.
Despite the business challenges arising from the pandemic, Eros STX
has seen a substantial increase in both new subscriptions and
consumer engagement on the Eros Now platform driven by increased
time spent at home as well as fewer out-of-home entertainment
options available. Eros Now has a strong slate of films and
original series scheduled for release over the coming quarters, and
the Company expects this to help drive continued growth in the
paying subscriber base in India and around the world. Consumers are
watching more content on the platform than ever before, an
acceleration of growth that will provide strong tailwinds to the
combined business for the coming quarters.
For today, there are several key takeaways we want to take the
opportunity to emphasize:
Guidance: For calendar 2022,
we forecast 50 million Eros Now monthly paying subscribers and
approximately $1 billion in revenue (assuming a normalization of
the global economy and media landscape by the end of 2020), $50
million in annual run-rate operating synergies and long-term EBITDA
margins of approximately 20% - 25%.
Communication: We will
prioritize open and transparent communication with our
shareholders, keeping you updated on our goals and strategic
objectives. We will proudly announce when we achieve them and
humbly acknowledge when we don’t, but we won’t keep you guessing
about it. As we stated previously, we will be announcing our
investor day where we will make a full presentation about our
company and financial goals. We will announce further details on
this once our new combined management team has finalized a
go-forward financial plan to take our company into the future.
Governance: Our board and
new combined management team are focused on implementing a robust
corporate governance framework from which we can operate going
forward.
Near Term Execution
Priorities: We will be diving more deeply into both
corporate strategy and financials on our upcoming investor day, and
in the meantime we would like to share the following key objectives
that we have identified as immediate priorities:
• Capital Structure -- seek to simplify and consolidate our
capital structure that extends maturities, reduces cost and expands
capital availability.
• Cash -- given the current COVID-19 pandemic and global market
uncertainties, develop cash management actions that minimize
spending in slower growth areas and prioritize investing in high
growth, strategically differentiating areas.
• Organization -- strive to build a high functioning, growth
centric and investor-focused management team, including several key
near-term hires.
• Strategic Partnerships -- seek to establish new and deepen
existing commercial relationships with global leaders in disruptive
consumer viewing platforms with strong long-term growth
prospects.
• Synergies -- work to realize the estimated US$50 million in
anticipated merger-related synergies, primarily relating to global
content production and monetization, overhead streamlining and
global tax benefits.
With all of that said, there is a tremendous amount of work
ahead of us at Eros STX to keep delivering premium content while
building the capital structure, synergized organization and
strategic partnerships that our company has the potential to
deliver. My Co-Chairman, Kishore Lulla, and I, together with our
combined management team, will work hard to accomplish significant
steps in these areas, and we are committed to getting this done
effectively. We fully recognize the importance of keeping our
investors informed, and we hope to build trust in our newly
combined leadership.”
About Eros STX Global
Corporation
Eros STX Global Corporation, (“Eros STX” or “The Company”)
(NYSE:EROS) 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. The company
was formed in July 2020 through the merger of two international
media and entertainment groups, Eros International Plc and STX
Entertainment. Merging the largest Indian OTT player and premiere
studio with one of Hollywood’s fastest-growing independent media
companies has created an entertainment powerhouse with a presence
in over 150 countries. Eros STX 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 Erosplc.com or STXentertainment.com until the company
launches its new ErosSTX.com site and logo in September
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information provided in this communication includes
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as amended, 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 the
Company’s business strategy and expectations concerning its and the
Company’s 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 the Company is
expecting, including, without limitation: the Company’s ability to
successfully and cost-effectively source film content; the
Company’s ability to achieve the desired growth rate of Eros Now,
its digital over-the-top (“OTT”)
entertainment service; the Company’s ability to maintain or raise
sufficient capital; delays, cost overruns, cancellation or
abandonment of the completion or release of the Company’s films;
the Company’s ability to predict the popularity of its films, or
changing consumer tastes; the Company’s ability to maintain
existing rights, and to acquire new rights, to film content; the
Company’s ability to successfully defend any future class action
lawsuits it is a party to in the U.S.; anonymous letters to
regulators or business associates or anonymous allegations on
social media regarding the Company’s business practices, accounting
practices and/or officers and directors; the Company’s dependence
on the Indian box office success of its Hindi and high budget Tamil
and Telugu films; the Company’s ability to recoup the full amount
of box office revenues to which it is entitled due to
underreporting of box office receipts by theater operators; the
Company’s dependence on its relationships with theater operators
and other industry participants to exploit the Company’s film
content; the Company’s ability to mitigate risks relating to
distribution and collection in international markets; fluctuation
in the value of the Indian rupee against foreign currencies; the
Company’s ability to compete in the Indian film industry; the
Company’s ability to compete with other forms of entertainment; the
Company’s ability to combat piracy and to protect its intellectual
property; the Company’s ability to maintain an effective system of
internal control over financial reporting; contingent liabilities
that may materialize, the Company’s exposure to liabilities on
account of unfavorable judgments/decisions in relation to legal
proceedings involving the Company or its subsidiaries and certain
of its directors and officers; the Company’s ability to
successfully respond to technological changes; regulatory changes
in the Indian film industry and the Company’s ability to respond to
them; the Company’s 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; the
Company’s ability to address the risks associated with acquisition
opportunities; risks that the ongoing novel coronavirus pandemic
and spread of COVID-19, and related public health measures in India
and elsewhere, may have material adverse effects on the Company’s
business, financial position, results of operations and/or cash
flows; challenges, disruptions and costs of closing the Merger and
related transactions, 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
Company’s A ordinary shares and/or the Company’s financial
performance; and uncertainty as to the long-term value of the
Company’s ordinary shares.
The forward-looking statements contained in this communication
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 the Company will be those that it has 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 the Company’s control. Should one or more of these risks
or uncertainties materialize or should any of the Company’s
assumptions prove to be incorrect, the Company’s actual results may
vary in material respects from what the Company may have expressed
or implied by these forward-looking statements. The Company
cautions that you should not place undue reliance on any of its
forward-looking statements. Any forward-looking statement made by
the Company in this communication speaks only as of the date on
which the Company makes it. Factors or events that could cause the
Company’s actual results to differ may emerge from time to time,
and it is not possible for the Company to predict all of them. The
Company undertakes 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200818005466/en/
Mark Carbeck Chief Corporate and Strategy Officer Eros STX
Global Corporation mark.carbeck@erosintl.com
Eros (NYSE:EROS)
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