Release Date: May 17, 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 positive tailwind and growth momentum in Q4 FY24, setting a promising outlook for FY25.
- The company saw a healthy 8.1% quarter-on-quarter growth and a 10.4% year-on-year growth in advertising revenue, driven by FMCG sector recovery.
- Subscription revenue grew by nearly 10% year-on-year, led by NTO 3.0 implementation and growth in digital subscription revenue.
- ZEE5 continues to post a moderately healthy increase in metrics quarter-on-quarter, with a 24.1% revenue growth in FY24.
- The company has initiated cost optimization measures, which are expected to drive a healthy margin improvement beginning Q2 FY25.
Negative Points
- FY24 was a challenging year for Zee Entertainment Enterprises Ltd (BOM:505537) due to macroeconomic headwinds and other external factors.
- The company has withdrawn its merger implementation application from the National Company Law Tribunal, which may impact strategic growth plans.
- There will be some onetime costs in the near term due to cost optimization initiatives, which may affect short-term financial performance.
- ZEE5 is expected to see some short-term aberration in financial performance as the company optimizes costs for long-term growth.
- The media and entertainment industry is facing intensifying competition, which may pose challenges for Zee Entertainment Enterprises Ltd (BOM:505537) in maintaining its market position.
Q & A Highlights
Q: How does the rationalization of costs impact Zee Entertainment's ability to compete in the medium to long term, especially with the recovery in FMCG advertising?
A: Punit Goenka, CEO: The largest rationalization has been in the technology part of the OTT business. We believe our platform is stable and competitive. The rationalization was necessary to eliminate accumulated inefficiencies. We are confident that the remaining team is capable of driving our growth plans.
Q: What is the outlook for advertising and subscription revenue for FY25 at the industry level?
A: Punit Goenka, CEO: The industry is expected to see healthy growth in high single digits for both subscription and advertising. The focus is on growing the pay TV ecosystem through the NTO structure.
Q: How should we look at the positioning of ZEE5 against competitors like Netflix and JioCinema?
A: Punit Goenka, CEO: ZEE5 is positioned as a holistic family entertainment platform, unlike competitors who focus on sports. We will continue to focus on quality content and frugality in our investments.
Q: What is the outlook for the Movies business? Are there any big releases planned?
A: Punit Goenka, CEO: We will focus on frugality and quality content rather than high-cost big bang films. Our recent successes have come from reasonably or low-cost content, and we will continue this approach.
Q: How is the arbitration proceeding in Singapore regarding the merger with Sony?
A: Punit Goenka, CEO: The arbitration proceedings in Singapore are ongoing. We withdrew from NCLT due to lack of resolution from Sony's side. The scheme remains court-approved and intact.
Q: How has the advertising revenue growth been in Q4, and is it sustainable?
A: Punit Goenka, CEO: The growth is sustainable and has come from improved performance across language markets and increased FMCG ad spending. We are cautiously optimistic about maintaining this trend.
Q: How will the cost optimization initiatives impact future profitability?
A: Rohit Gupta, CFO: There will be some onetime costs in Q1 FY25, but these initiatives will drive healthy margin improvement from Q2 FY25 onwards. Our long-term goal is to achieve 18% to 20% EBITDA margin by FY26.
Q: Are there any ongoing discussions with strategic or financial investors?
A: Punit Goenka, CEO: We would not like to comment on that at this time. Our current focus is on rebuilding the business and achieving sustainable growth.
Q: How does Zee Entertainment plan to handle content investment for ZEE5 amidst competition?
A: Mahesh Pratap Singh, Head of IR: We will be selective in our content investments, focusing on quality rather than quantity. Our previous investments in tech and marketing have set a strong foundation, allowing us to optimize costs while still delivering meaningful content.
Q: What is the impact of cost-cutting measures on the next quarter's profitability?
A: Rohit Gupta, CFO: There will be some onetime costs in Q1 FY25, but these measures are aimed at setting up the company for long-term profitability and margin improvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
