Release Date: October 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zee Entertainment Enterprises Ltd (BOM:505537, Financial) reported a significant improvement in EBITDA margins, increasing from 9.7% in Q4 FY '24 to 16% in Q2 FY '25.
- The company has seen a consistent improvement in performance on a sequential basis, with robust free cash generation despite a challenging macroeconomic environment.
- Subscription revenues have shown healthy growth, with a 9% year-over-year increase, driven by price hikes and growth in digital subscribers.
- ZEE5's EBITDA losses have narrowed significantly, from INR 265 crores in Q4 FY '24 to INR 159 crores in Q2 FY '25, indicating progress towards profitability.
- The company has gained 100 basis points in viewership share quarter-on-quarter, strengthening its competitive position in the market.
Negative Points
- Advertising revenues declined by 8% year-over-year, reflecting ongoing headwinds in the ad environment.
- Overall revenues from operations decreased by 18% year-over-year, partly due to a muted movie lineup compared to a high base in the previous year.
- The company remains cautious about the sustainability of advertising revenue pickup beyond the festive season, as rural demand commentary remains uneven.
- ZEE5's revenue growth has been slower than expected, with the need for more subscribers to drive profitability.
- The company faces ongoing legal challenges, including an arbitration case filed by STAR, which could be costly and prolonged.
Q & A Highlights
Q: How is Zee Entertainment's financial position affecting content sourcing and movie production plans?
A: Punit Goenka, CEO, stated that the improved financial position allows better leverage in content acquisition, although content sourcing was not a challenge even a year ago. Zee plans to be at the forefront of movie production across languages, despite the high risks involved. The company will continue to invest in both co-productions and full productions, with a focus on strategic alignment with their core business.
Q: What is the outlook for advertising revenues, especially considering rural demand and the festive season?
A: Mahesh Singh, Head of Investor Relations, mentioned that after a muted start, there was a pickup in advertising revenues in September, which is expected to continue into the festive season. However, the company remains cautious about the sustainability of this trend post-festive season, as rural demand remains uneven.
Q: How is Zee5's financial performance trending, and what are the expectations for its EBITDA losses?
A: Punit Goenka, CEO, indicated that Zee5's EBITDA losses have been reducing consistently, and this trend is expected to continue. The focus is on increasing the number of paying subscribers and eventually raising prices, as Zee5 is currently the most cost-efficient OTT platform in India.
Q: What are Zee's plans regarding the music business, and how does it compare to movie production in terms of risk?
A: Punit Goenka, CEO, emphasized that music is a key pillar for Zee, with plans to continue investing in it. Music is considered a lower-risk venture compared to movie production, and Zee aims to enhance its music catalog and leverage its position as the second-largest music company in India.
Q: How does Zee view the competitive landscape following the merger of Reliance and Disney, and what are the implications for market share?
A: Punit Goenka, CEO, stated that Zee aspires to grow its market share continuously. The merger may give competitors more leverage in advertising, but Zee's focus remains on entertainment rather than sports, differentiating its strategy from competitors. The company is optimistic about maintaining its competitive position in both linear and digital segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
