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Entertainment Network (India) Ltd
Earnings Call Analysis
Summary
Q1-2025
Entertainment Network (India) Limited started the year strong with a 19.3% year-on-year increase in domestic revenue, reaching INR 109.4 crores. This growth was driven by a 10.8% rise in radio revenue and a significant quadrupling of digital revenue. EBITDA, excluding digital, rose from INR 19.2 crores last year to INR 20.5 crores, maintaining a margin of 21.8%. Net profit also increased to INR 5.8 crores. Notably, the company invested INR 15 crores in the Gaana platform, which boosted digital revenue from 11.8% to 25% of radio revenue. The company's cash balance stands robust at INR 355 crores.
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Ladies and gentlemen, good day, and welcome to the Entertainment Network (India) Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions]
Please note that this conference is being recorded. And I'll hand the conference over to Ms. Runjhun from EY Investor Relations. Thank you, and over to you, ma'am.
Thank you, Neha. Good evening, everyone. Welcome to the Q1 FY '25 Earnings Call of Entertainment Network (India) Limited. To take you through the results and answer your questions today, we have the management team from the company represented by Mr. Yatish Mehrishi, Chief Executive Officer; and Mr. Sanjay Ballabh, Chief Financial Officer.
The financial results and the presentation have been uploaded on the company's website and on the exchanges. Should you need any further information, you can please talk to us at EY IR team.
Before we begin, I would like to remind you that today's discussion might include forward-looking statements based on the current expectations and assumptions. These statements are subject to risks and uncertainties that could cause actual results to differ materially. The company undertakes no obligation to update these statements after today's call.
With that said, I will hand over to Mr. Yatish.
Thank you, Runjhun. Good evening, ladies and gentlemen. On behalf of ENIL, I extend a warm welcome to all of you for joining our Q1 FY '25 earnings call. I trust you had the opportunity to review our financial results. Please allow me to provide a brief overview of the same.
I'm pleased to share that we continued the momentum and began this year on a strong positive note. During the quarter, we clocked the domestic revenue of INR 109.4 crores, representing a robust growth of 19.3% year-on-year. This broad-based growth was driven by both our radio and digital segments, which grew by 10.8% and [ 4x ] Y-on-Y, respectively.
EBITDA for the year, excluding digital, stood at INR 20.5 crores as compared to INR 19.2 crores in Q1 FY '24. EBITDA margins were at 21.8%. Our PAT rose to INR 5.8 crores as compared to INR 4.4 crores in the same period last year.
Coming to our business segments. We continue to maintain our leadership position in FCT. We have grown ahead of industry, both in volume and value. Our FCT revenue for the quarter was at INR 75.2 crores as compared to INR 67.8 crores, a growth of 10.8% year-on-year. We have a volume market share of 24.3%.
Non-FCT segments, including digital, witnessed a growth of 43.6% year-on-year on the back of subscription revenue from Gaana.
Moving on to the digital front. As we had a promising improvement post integration of Gaana, during the quarter, we launched the improved version of the previous app, which was well received. This led to a strong digital revenue of INR 17.8 crores, contributing almost 25% of our radio revenues as compared to 11.8% in Q1 FY '24.
You would recall that we had guided earlier that our aspiration and ambition is to get 25% of revenues from the digital segment. We have made investments on this new platform, which is close to INR 15 crores this quarter. However, the key takeaway is that this is expected to come down in the subsequent quarters.
Our international market continues to be EBITDA positive at INR 1.5 crores for Q1 FY '25. Our balance sheet remains robust with a cash balance of INR 355 crores as of June 30, 2024.
In conclusion, our primary objective has always remained to maximize shareholder value on the back of sustainable growth and profitability.
With that, I would like to invite any questions you may have. Thank you very much.
[Operator Instructions] The first question is from the line of [ Akshay ] Sharma, an individual investor.
So my question is -- I would like to ask you is that Gaana [Technical Difficulty]
[ Akash, ] you are not audible. Can you repeat the question, please?
[Technical Difficulty]
Sorry for interrupting, [ Akash, ] I request you to join back the queue, your voice is [ breaking ].
So I was asking that what is the Gaana revenue and profitability for the Q1 FY '25?
[ Akash ], we don't -- generally, we don't give any forward-looking statements. But as I said, we're looking at investment and our aim is to make Gaana business profitable as soon as possible. That would -- I would be able to answer right now, but any further questions, we can write to [ Yogesh ] separately.
Okay. Okay. Apart from this, can you tell me about the inventory utilization for this quarter?
The inventory utilization -- just a moment.
Yes. Yes.
The inventory utilization for this quarter is about 72%.
[Operator Instructions] The next question is from the line of Shikhar Mundra from Vivog Commercial Limited.
Sir, I want to understand the economics of Gaana business like what are the revenues right now? And what are the expenses and how much are we investing? And at what level will be breakeven?
Okay. So Shikhar, to give you a certain perspective, the way we always envisage on Gaana as we took over in 1st December, we have gone ahead and done a pure subscription business. So it's not a free music business, unlike what Gaana erstwhile used to do or what Spotify does right now or what JioSaavn does. Our business is a pure subscription model. The -- it's more of a revenue share with the label business. And you have to pay to listen to music on Gaana. So it's a pure subscription model business what we look at.
Our pricing earlier used to be INR 299, which was not feasible. But recently, you would have seen from 1st July, we have increased the price to INR 599. As you look at any business, any new investment -- any new digital investment requires certain bit of incubation period, so we'll be investing for another couple of years into the business, into the product, into the product experience or recommendation engine, acquiring more and more subscribers.
Right now, it's a very healthy number what we have. So we have a very good base and a good market share in the subscription business, if I look at only the subscription business, I'm not looking at the free music subscription. Only the paid subscription business if I look at it, we have a healthy share of the market. And the way we look at is with our experience in the radio business and our presence, we believe we'll be able to drive this business profitable as soon as possible.
Okay. And what are the total number of subscribers right now?
I would not be able to address that, Shikhar, on this call. If you have anything, you can separately write to us on that part. But it's a very healthy number -- and it's a very healthy number what we have, and it's increasing day in day out on month-on-month basis.
Okay. And can you give me an idea about like the CAGR growth rate you are seeing there and the subscribers, if not the volume of subscribers?
See, the way we look at it is -- if you look at there, the market itself if we will look at in India, the last [ Wiki ] reports had about 200 million free music subscribers. So it's about behavioral change of the subscribers to pay for music. Earlier, you and me have paid for a CD or a cassette also for one -- and for one album also. So what we're looking at INR 599 per annum is not a major amount of money you would ask from the consumer.
So the way I look at it, it's not about [indiscernible] growth, it's about the potential you have. Right now, we are in a very initial stage of 6 months. As I said, we have a very healthy base. And I believe getting the right product, getting the content right, getting the experience right will help us drive the numbers.
And overall, also, if you look at in the competition side, everybody is looking towards subscription. So nobody is looking at acquiring consumers. Everybody is talking about getting more paid subscriber, be it Spotify, be it JioSaavn. So everybody is talking the same thing. So the entire ecosystem is working towards building the paid subscription business.
So from that perspective, I believe we are in a very, very good shape. It's about execution in the next couple of years to make the business really, really robust.
Okay. And is the subscription the only revenue we get? Or is there some advertisement component also?
No. So we don't believe it and for our Gaana business, it's pure subscription. We do our digital advertising business separately. But for Gaana, it is a pure paid model. And that's the way we have our relationship with the labels also.
Right. Right. And for the traditional business, we experienced a 20% growth. Is that right in revenues?
So on FCT pure, it was about 10%. Including everything, it is a 19% growth.
Okay. So when you say pure FCT, that's only the radio business, pure radio?
Pure radio business grew at 10.8%. But there were activation events and other businesses along with digital, which grew at 43%. So on a total level, the domestic business has grown by 19.3%.
Right. Right. And for the traditional radio business, I mean in that 10.8% growth, what was the split between like volume or revenue pricing increase?
So this time, it was a political -- there was a political business and as you know political business comes at a premium. There was some bit of price increase, about 5.8% of price increase. But I would not read much, it's [ one time ] because of the political. Good part to say on the pricing, it has stabilized, and we don't see any further drop. Maybe in the festival season, we'll see some with our price increase.
Quarter 1 generally is a weak quarter in media, you would know that. But because of the political business, the increase in the ER has happened.
Right. And so in spite of the -- like elections not being there, so you don't see a drop in prices or a drop in volumes going ahead?
So if I remove elections also this quarter, our price has remained stable. So I don't see any drop -- further drop in pricing happening.
Right. Right. And now let's say [ hypothetically ] we would have not made this investment in digital and Gaana like what would have been our EBITDA gain? Like how -- as an investor, how should we look at that?
So the way we look at it, it's an overall business, we look at is as a future -- being future ready. So it's an investment in digital we made. And this year, we -- as I spoke in my opening remarks also, we've done about INR 15 crores of investment in the Gaana platform for the quarter.
So you could count instead of INR 20.5 crores, which was our excluding digital business EBITDA, another INR 15 crores, it would have been about INR 35 crores to INR 36 crores.
But those INR 15 crores must have been used for building up a library also, so that's technically, you're building up your assets, right?
So library [ building, ] we don't buy content. It is all licensed content. So we talked about building library. It's more on the tech investment, a little bit of marketing, getting the product stable. There were people -- people on the HR side were required because as I said, we just acquired in December. So the first 6 months, we wanted certain costs to come in. But we -- as we believe this cost over the next few quarters will go down.
[Operator Instructions] The next question is from the line of Meghna, an individual Investor.
I had a few questions. First one was what has been the volume growth for radio this quarter?
Just a moment.
Yes. Sure.
About 3%.
Y-o-Y increase, right?
Yes. So that is something, we've got a political business where we have seen a price growth and which has led to a higher value growth.
Okay. And how have been the effective rates this quarter, the growth Y-o-Y? And how does it compare to pre-COVID levels?
So pre-COVID level, they are still down. We don't see that coming up very, very fast. But over year-on-year, it's about a 6% increase in price.
Okay. And can you shed some light on Gaana revenue? How is it performing this quarter? And how has the profitability been like?
So I've already mentioned in my earlier discussion, we believe over a period of few quarters, it will become much more robust. It's still initial days. It's been just 6 months, we have got into the business. We have stabilized the business with a robust paid subscription business. There have been certain investments, which are a bit frontloaded in the first and the second quarter. But we believe as we progress ahead, the business will become much and more robust and stable.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
We will take the questions from participants. Our first question is from the line of Deepan Narayanan from Trustline PMS.
Sir, can you give a little breakdown of these solutions part of the business, which has degrown by around 1%. So what is the reason for it? And which part of that segment has not grown yet?
So if you look at our multimedia solutions, business has grown well, except for one business, which is -- we used to do the digital content, Kareena Kapoor Khan for original content, which we have pushed into this quarter because as I said earlier also, our principal remains profitable growth. So we were not looking at a very good margin in this quarter. So we have pushed that business, that event, I would say, 2 activities into this quarter.
So the original content business, which we had done last year about -- almost about INR 1.5 crores has been pushed to this quarter, and that's the reason you have seen a marginal drop in that business. But otherwise, other business of multimedia solutions has grown 10%, activation has grown by about 42%.
Just as I said, this is the one business where we believe we wanted to have a much better margins because that remains our guiding principle across the company, and that's the reason we have been -- we have pushed that business to this quarter. So it's a pushback rather than anything to worry about it. We remain very, very optimistic about our non-FCT entire portfolio.
Okay. Understood. Sir, you told that excluding Gaana, the EBITDA would have been [ INR 35 ] crores, and we have invested something like around INR 15 crores during this quarter. So was this kind of investment was there in the Q4 FY '24 quarter or H1 we have started investing now only?
So Q4, [indiscernible] we had just taken over in December. By the time you stabilize the business, you realize certain things which we want to invest in, on data sciences, on recommendation engine, on getting the product experience better. So there were certain people required, certain bit of marketing to be done. So it's a planned expense. I would say for the first quarter, it's a little on the higher side. But as we see for the next quarter, this cost will come down.
So it's not that it'll come as a surprise to us. We have planned a certain bit of investment in Gaana for this year. And we are on track of it. It's just that certain costs come surprise to you when you start a new business. And as we make it more and more efficient, the cost will go down. So we believe this INR 15 crores is onetime in this quarter but subsequently -- in the subsequent quarters, it be a little lower than this. But it's been a planned [indiscernible].
Okay. Okay. Understood. And during last quarter call, you said that Gaana was around -- contributing around INR 9 crores, INR 9.5 crores kind of revenue run rate. So have you seen any increase in terms of revenue run rate because we have done a lot of investments or it is yet to be receivable in the coming quarters?
So you'll see much more robust in the subsequent quarters. As I said, this is the second quarter only after we took over. But we have seen, as I said, we see a healthy growth coming in plus we have changed the price from July 1. Our price was INR 299, now we increased the price to INR 599. So that impact would also happen over subsequent quarters. It may not happen in the immediate quarter because there are people who continue at INR 299 only, they change only when the renewal comes in.
But whatever we had planned in terms of the price increase, in terms of the cost efficiency, we are on track on it. We're seeing revenue growth. We are seeing subscription growth also.
Okay. Okay. Got it. So as we have now doubled our subscription rate, so even if we able to double our subscribers, that's when you are closer to our breakeven in terms of Gaana business. Is that assumption right?
See, the thing is the way it works is if you've already -- you will change the price only for the new customers. The old customer is already on that price. So the blended price will take a while to become double, correct? So only the new customers are coming at higher price. The old customer continues at the same price. We have sold the product at old price. We'll continue that. When he comes for a renewal, that is the time he will change. So the blended price will take a while to become double, Deepan.
[Operator Instructions] The next question is from the line of [ Vedant ] from Minerva Asset Advisors.
Yes. My first question was on the volumes of the traditional radio business. Can you give me some sort of split between how much government or political versus nonpolitical?
Yes. So if you look at overall volume growth, it has been about 3% for us. The political and government business contributes in this quarter are almost about 10% to 11%. So what happens is when the political business happens, the government business stops. So it's never been together because of the Code of Conduct coming in, you don't get government advertising happening.
So it actually replaces. It's just that you get a better pricing from political business. But if you want to look at nonpolitical, nongovernment business, 90% will be nonpolitical nongovernment, 10% was the contribution for government and political put together, about 11%, I would say.
Got it. Got it. And one more question on -- is there any update on the M-Ping business part of it? Are we planning on investing more over there? Just what's the quarter been like on M-Ping?
So it's very, very robust. We have done some learnings. We are looking at newer and newer [indiscernible]. I would not want to -- maybe offline, we can have a chat more on this, [ Vedant, ] but what we look at is this first year has been a great learning process. We're now looking at more and more accretion in our inventory.
Audio inventory, we have almost everything. We are now looking at can we -- just by looking at just audio, can we look at -- into video inventory also. So we have done that. And we believe it's a very robust business to continue in the next 2, 3 years. And this year is going to be another pivotal year as we move from not just doing audio inventory, but video inventory also.
Got it. Got it. My last question, would you have any guidance for growth in either in pricing and volumes for the next few quarters?
See, generally media -- for not just radio, any media, the price is -- any other supply demand in the H2, we believe, starting September could be a chance where we could look at certain price increases as the business comes back and the media is always skewed towards H2. So there could be some bit of price increase. We are optimistic or hopeful on that. But I don't see the price going down anymore.
Understood. Understood. And sir, just one last question. On this 90% part of the nongovernment nonpolitical, in this quarter, the price you're seeing remains sort of stable only?
Yes. They increased marginally. But as I always said, 1% or 2% price increase, up to 5%, I never look at a price increase or price drop because there are a lot of factors involved. It could be a station mix change, it could be a client mix change. It's not a uniform pricing, correct? So if you've been following us, so it's been stable, and I don't see any drop coming in, in that pricing.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
We have one more question from the participants, we will take that. Our question is from the line of Rahul Shah from Alpha Capital.
Sir, I just missed your initial statement, just wanted to know the cash balance.
Rahul, our cash balance is INR 355 crores as on 30th June.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Yes. Okay. Thank you, Neha. I would like to express my sincere gratitude to each one of you for the unwavering support you have been giving to the company. We continue to prioritize profitability and maximizing shareholders' wealth. The cornerstone of our journey is profitable growth, serving as our guiding principle for all our actions. Thank you very much for joining the call. Have a nice day. Thank you.
Thank you. On behalf of Entertainment Network (India) Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.