UFO Moviez India Ltd

NSE:UFO

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the UFO Moviez India Limited Q4 and FY '23 Earnings Conference Call hosted by Ventura Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Tushar from Ventura Securities Limited. Thank you, and over to you, Tushar.

[Tushar Pendharkar]

Thank you. Good day, ladies and gentlemen. On behalf of Ventura Securities Limited, I welcome you all to the UFO Moviez India Limited Q4 and FY '23 Earnings Conference Call. The company is today represented by Mr. Rajesh Mishra, Executive Director and Group CEO; and Mr. Ashish Malushte, Chief Financial Officer.

I would now like to hand over the call to Mr. Mishra for his opening remarks, post which we can start the question-and-answer session. Thank you, and over to you, sir.

[Rajesh Mishra, executive]

Thank you, Tushar. Greetings, everyone, and thank you all for joining our Q4 and FY '23 earnings call. Let me start with the updates and highlights for this quarter and financial year.

Q4 FY '23 commenced on a high note with the blockbuster release of Pathaan in January, reaffirming our -- in the success of budget Indian movies and setting an exciting tone for the quarter. However, the positive trend experienced in January did not continue throughout February. This was primarily attributed to the underperformance of movies like Shehzada and Selfiee as well as lot of mass appealing content during the month, impacting the theatrical revenues and leading to lower-than-expected outcomes in that particular segment.

Despite the challenges faced in February, March proved to be a better month with movies like Tu Jhoothi Main Makkaar and Bholaa, generating decent box office collections, contributing to the overall performance of the quarter.

While there was mixed performance from Hindi movies during the quarter, the regional cinema segment continued to perform well. Films like Varisu, Waltair Veerayya, Thunivu and Ved continued to generate significant box office collections, reflecting the diverse and appealing content preferences of our audiences.

Overall, the mix bag of content and big budget success of some films during the quarter had a positive impact on our advertisement revenue. Q4 FY '23 proved to be the best quarter in the fiscal year 2023 in terms of advertisement revenues with the company reporting INR 248 million in Q4 FY '23 and a total of INR 755 million of advertisement revenues for FY '23. The advertisement revenue has grown by approximately 28% over Q3 FY '23, and 240% over Q4 FY '22.

While the steady flow of content and recent successes has increased the corporate advertisers confidence towards in-cinema advertisement revenues, revenues from the central government advertising continued to be a challenge due to the reduced central government spending across mediums. However, state government and PSUs have begun allocating budgets towards in-cinema advertising.

FY '23 was the first year of uninterrupted operations after the global pandemic. Despite the lackluster performance and content volatility faced by the industry, the company has maintained a steady recovery, showcasing resilience and improvement across the business verticals.

Now let's move on to the headline numbers for the quarter and full year ended March 31, 2023. Consolidated revenue stood at INR 884 million compared to INR 561 million in Q4 FY '22. EBITDA in Q4 FY '23 was INR 115 million compared to an EBITDA loss of INR 119 million in Q4 FY '22. The EBITDA margin improved in Q4 FY '23 to 13% from minus [ 21.3% ] in Q4 FY '22. Loss at PAT level was INR 12 million compared to a loss of INR 189 million in Q4 FY '22.

For the full year FY '23, the consolidated revenue stood at INR 3,978 million compared to INR 1,639 million in FY '22. EBITDA improved to INR 339 million compared to an EBITDA loss of INR 472 million in FY '22. Loss at PAT level stood at INR 132 million compared to a PAT loss of INR 869 million in FY '22.

Regarding the consolidated funds question, the balance at the end of the quarter stood at INR 806 million. After considering outstanding debt as of March 31, 2023, the company continues to be net cash positive.

Looking ahead, the successful release of diverse content across languages, growing acceptance of Southern Cinema in pan-India markets, along with the exciting lineup of movies in Hindi and other languages is expected to drive significant business growth. I would like to take this opportunity to thank all our shareholders for their continued trust in the company.

With that, I open the floor to take your questions. My colleague Mr. Ashish Malushte, CFO, and I will be happy to take your questions. Thank you.

[Operator]

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] The first question comes from Vaibhav from Integrity Investments.

[Vaibhav Badjatya, analyst]

So in terms of advertising revenue -- central government, I'm sure the budgets and everything which have been finalized by now. So are you seeing any recovery in the [ central government ] and for the rest of the year because elections are also coming next year? So I'm sure the budgets has been finalized accordingly? So are you getting any indication that the things are things can be different this year or still, it is the same?

[Operator]

Vaibhav, you're voice is not clear. Can you please [indiscernible].

[Rajesh Mishra, executive]

I believe the question is related to central government advertising, your voice was a little unclear. So is that correct, your query is about central government advertising?

[Vaibhav Badjatya, analyst]

Can you hear me now properly? Am I audible now?

[Rajesh Mishra, executive]

Yes, yes. I can hear you. So as I mentioned in my opening remarks, the central government is still a challenge in the sense they have reduced their spend across mediums for a large margin. However, we continue to be engaged with the central government, the empanelment and [ rate division ] and also are coming up. And also, we are in discussion with the government. And looking at the future, we are hopeful to get some revenue out of from the central government. But as I've said, it is still a challenge on that front.

[Vaibhav Badjatya, analyst]

Okay. Okay. So as far as empanelment is concerned, I think around -- I mean in cinema is already -- I mean, they already have a...

[Rajesh Mishra, executive]

It is a question of renewal. So that is happening on a regular basis.

[Vaibhav Badjatya, analyst]

Okay. So a question of renewal. Okay. Okay. Okay. Okay.

[Rajesh Mishra, executive]

It's a procedure [indiscernible].

[Operator]

The next question comes from Niteen Dharmawat from Aurum Capital.

[Niteen Dharmawat, analyst]

My first question is, what is the consolidated cash position that we are having as of today?

[Ashish Malushte, executive]

So as of 31st March balance sheet, we continue to be in net cash. However, the net cash levels were at a level of INR 1 million. So our gross debt is INR 80.5 crores and our total cash and cash equivalents of INR 80.6 crores.

[Niteen Dharmawat, analyst]

Okay. And my second question is the in-cinema advertisement revenue, what is the percentage sharing that we are having right now with the theaters on an average basis compared to pre-COVID level?

[Ashish Malushte, executive]

Yes. So pre-COVID level in FY '20, the sharing was 36.4% when our revenues were around INR 155 crores, INR 150 crores in-cinema. And that sharing is on in FY '23 is at 60% when our revenue is at INR 75 crores.

The question would be why this sharing percentage has gone up. But in reality, the sharing amount that you see, which is INR 44 crores this year, and which was INR 53 crores in FY '20, the significant chunk of that is a minimum guaranteed amount. So unless we cross the minimum guaranteed amount, you don't see the benefits flowing in more proportion to the company.

And until that time, the percentage of sharing appears to be higher. In other words, if this INR 75 crores ad revenue for example, was up by 33% to INR 100 crores, the ratio would have come down significantly from 60% because a major chunk of this INR 44 crores of sharing is minimum guaranteed in a sense, and therefore, it is not going to go up in the same proportion.

So to answer your question, technically, 36% has gone up to 60%. But you -- my request is you need to consider that 60% is not a variable percent. As the revenues keep going up, this percent will keep coming down.

[Operator]

[Operator Instructions] The next question comes from Nitin Ghandi from KIFS Trade Capital Private Limited.

[Unknown Analyst]

Considering the time which we have passed through 2, 3 years for survival, what do you think that should be...

[Operator]

[Operator Instructions] The next question is from Aditya Sen from RoboCapital.

[Aditya Sen, analyst]

How is this quarter -- first quarter [ FY '24 ] trending as of now? Do we see upticks in terms of advertisement revenues? And how are the movies -- in the box office collection?

[Rajesh Mishra, executive]

So quarter 1 also, we are seeing some difficulties on the Hindi front. South continues to perform as usual. So it's business as usual in the South market.

As regards to the Hindi market, there is a certain difficulty that we have faced in the month of May, especially. But the June quarter -- I mean the month of June looks interesting with a couple of big releases, especially Adipurush coming up for release, and we hope to get very good results from this film. This is a highly anticipated and awaited film.

And there are other things also in the pipeline like Zara Hatke Zara Bachke, Maidaan is there and Satyaprem Ki Katha. Indiana Jones is also on the English movie that is also lined up. So it's a very strong lineup that we see for the month of June, and we have good hopes for this quarter.

[Aditya Sen, analyst]

Okay. So it would be more or less similar to Q4 because in Q4, we had Pathaan. In Q1, we will have Adipurush. So net-net, it would be more or less same in terms of revenue and the EBITDA?

[Rajesh Mishra, executive]

We also have certain order book in hand where the ROs have already been received for the quarter. So that also kicks in.

Secondly, these new movies that are lined up for release, they will draw additional business. So we should be in a better position.

[Aditya Sen, analyst]

Okay, sir. So any guidance for the full year FY '24, FY '25 in terms of revenue and EBITDA?

[Rajesh Mishra, executive]

Right now, we continue to be cautious and wait and watch out the -- as to how the fate of the film performs. Advertisement revenue is quite a lot linked to the fate of the films. So really difficult to give any guidance at this stage, except to say that we hope -- continue to be optimistic.

[Ashish Malushte, executive]

Aditya, all we'll say that the situation last year was really, really bad for our industry. And we have norm way from where we were a year back. In fact, a year back, the quarter before that show -- had a good Hindi -- the southern film is doing really well, and there were good hopes. But there after, the next 6 months of this year were bad versus when we are standing today, as Rajesh mentioned to you, one of the strongest indicator for us is the fact that we have been able to build the order book once again.

What it means is that there are advertisers who are ready to look at this medium on a longer-term period of 3 months, 6 months, a year, and therefore, we have our order book, and it's a quite good healthy order book that we have and that's a major difference. Now all we are hoping to see is that this order book where the advertisers want to commit their money should get a support from not really big, big films, but decent films where people feel like going back to cinemas and watching it. So that is what we are waiting and watching. The business has come up a big way from where we were a year back.

[Aditya Sen, analyst]

Right. So is it possible for you to quantify the order book that we have?

[Ashish Malushte, executive]

We have close to INR 20-odd crores of order book on hand right now on -- and this is purely on the corporate ad side. So one more thing, I think since you're tracking the business so closely, the recovery in our case is almost up to 58% on a full year basis as compared to pre-COVID levels on advertisement revenue in corporate alone. So when you see the total ad revenue, the recovery looks depressed. But if you see the corporate ad revenue alone, the recovery is 58%. And I would say that if you compare it with some of the listed multiplexes, over there, the recovery is slightly lower than this percentage.

So all we are seeing is that our business and our segment is also attracting the advertisers. Hopefully, next couple of quarters we -- better support from content and we should progress.

[Operator]

[Operator Instructions] We have a follow-up question from Niteen Dharmawat from Aurum Capital.

[Niteen Dharmawat, analyst]

So last quarter, we had -- Pathaan has a good release. So this quarter, starting April, how is Kerala Story doing?

[Rajesh Mishra, executive]

Kerala Story, good business, and it picked up on a word of mouth to a large extent. And there was increase in the number of screens also in subsequent weeks. So it did fair business, but it was a sleeper hit. So it becomes difficult to book business retrospectively on that. But if there is a good indication that people are coming to cinemas for good content, even if it is a non-star cast film, lower star cast. So content-driven flips will continue to work. That is our lessons from this.

[Operator]

We have a follow-up question from Nitin Gandhi from KIFS Trade Capital Private Limited.

[Unknown Analyst]

Having passed through more like a survival phase so critically, what do you think or what could be some 3 or 4 good moves, which can ensure some liability coming, reducing the minimum commitment guarantees or something and taking back the ad revenues significantly back to where they were? So -- and besides ad revenue, where -- as you can do something different? If you can share some thoughts or your plans or actions, it would be helpful.

[Rajesh Mishra, executive]

So the constant endeavor is keep the cinemas in the fold, keep improving our product mix, keep targeting key driver streams from an advertising perspective because when the good content comes, we have to be ready for the market. And as I've said, the advertisement revenue largely depends upon the success of films and a couple of good quarters can change that trend entirely. And that is what we hope for.

[Unknown Analyst]

What is the top movies collection as a percentage of revenue in ad?

[Ashish Malushte, executive]

Sorry. We didn't really get your question because we are not into film distribution business or the exhibition business. So the collection of the film won't really have any correlate -- I mean it has a direct correlation, but not -- there cannot be any direct comparison that we can tell you. For instance, if Kerala Story has done well, my service revenue from distribution services would be at the same level at which it would be if some other move had run in place of Kerala film. So if you can just clarify your question, probably we'll be able to address it well.

[Unknown Analyst]

Yes, sure. So when we say like Pathaan did well. So during that phase, based on your planning and -- space selling, what is the percentage of revenue that flow during that period? That's what I'm trying to understand. So then the...

[Ashish Malushte, executive]

In our business -- yes, yes. So I understood your question. The best part in our business is that we are not really dependent heavily on success of 1 or 2 or 5 movies. So in other words, if my total revenue, if you see, it's not that 20%, 30% comes from 1 or 2 or 3 films. But the situation that we currently are in and the situation is we are getting out of COVID period and in southern part of India, there is a very handsome recovery of business. In fact, in a few months, they have crossed the pre-COVID level of occupancy. We all have seen the way the films have done there in South.

But in non-South region, not just Hindi, but even the regional content, over there, we are not seeing this kind of a pickup. So when we keep highlighting that, okay, last quarter Pathaan did well. This quarter, we're expecting Adipurush should do well. It doesn't mean that these 2 or 3 films are going to contribute significantly to my total revenue. But the biggest challenge that we are handling it and handling it well in my opinion, is to get the advertisers back on our medium.

So as I explained for the previous -- during previous question that our order book, we are waiting for advertisers to come back and start spending. They need content. So if we get 2 or 3 good content, it need not be very high star cast -- but back-to-back, consistent content coming and doing well on box office, people, even in non-South region will start coming back to the theaters. And that will bring us back straightaway into pre-COVID levels.

So therefore, when we say we are watching this movie, closely, that's the importance for us. And not really 1 or 2 movies will change the fate of our business in a steady-state scenario.

[Unknown Analyst]

Yes, I do understand that there's a correlation. But is there any lead like relationships, 2 or 3 good movie increases and people turning back and subsequent month goes good for you as an advertiser?

[Ashish Malushte, executive]

That has been the trend that we have seen in the past. So what happens is the advertisers mind shift comes back to this medium and therefore, for instance, pre-Diwali. If we get the traction which starts from Adipurush where people slowly start coming back in non-Hindi centers back in theaters. And if this trend continues, versus the trend we'd say versus 4 months back, where there was all negativity around cinema and theaters and challenges being expressed openly.

If that goes behind us, and if you are in a steady state scenario, not even the better scenario, then during the festive season, Q3 when we have always seen fantastic uptick in our ad revenue. This year also, we'll be able to get better allocation and better revenues. So that is the reason why consistent supply of movies doing well on box office is important.

[Unknown Analyst]

Any comments on reducing your expense or having some control by converting minimum guarantee to some high variable or something?

[Ashish Malushte, executive]

Well, so we have two types of expenses. One is advertisement-related expenses and nonadvertisement-related expenses. If you see our number and compared with pre-COVID, our SG&A expenses where we have really extensively worked during COVID and post COVID. And our SG&A expenses have seen a reduction, and that reduction is down.

So currently, it used to be in the range of INR 77-odd crores, and -- which is now down to -- so from INR 92 crores, it's down to INR 77 crores. So there is a saving of INR 14 crores, INR 15 crores, which is about 17%, 18%. Almost 70%, 80% of that is permanent. So over there, we have exercised that control our expenses and got a permanent saving.

On the advertisement-related expenses, we generally believe that there is a good opportunity for us to increase the overall revenue. And at that point in time, moving it to high variable just from the point of view of trying to reduce my overall cost now or increase margins in maybe next 1 or 2 quarters would have a very negative impact in long run. For example, if today, I'm happy -- theater is happy receiving a certain MG. And tomorrow, I'm going to say 70% ad share. But 70% will always lose -- the moment they start generating decent revenue there beyond -- so therefore, moving to high variable is not really a solution. The solution is to make sure that the ad revenues keep going up, which is what you're seeing the trend for last 2, 3 quarters.

[Operator]

[Operator Instructions] There are no further questions. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Dusaba's conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.

[Rajesh Mishra, executive]

Thank you, everyone.

[Operator]

Thank you, sir.