EDITED TRANSCRIPT Eros STX Global Corporation – Business Update Call
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NOVEMBER 04, 2020 / 9:30PM GMT, Eros STX Global Corporation – Business Update Call REFINITIV STREETEVENTS EDITED TRANSCRIPT Eros STX Global Corporation – Business Update Call EVENT DATE/TIME: NOVEMBER 04, 2020 / 9:30PM GMT REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. 1 NOVEMBER 04, 2020 / 9:30PM GMT, Eros STX Global Corporation – Business Update Call CORPORATE PARTICIPANTS Adam Fogelson: STX Films - Chairman Andy Warren: Eros STX Global Corporation - CFO Bob Simonds: Eros STX Global Corporation - Co-Chairman & CEO Drew Borst: Eros STX Global Corporation - EVP Investor Relations & Business Development Noah Fogelson: Eros STX Global Corporation - Co-President Rishika Lulla Singh: Eros STX Global Corporation - Co-President & Director CONFERENCE CALL PARTICIPANTS Eric Katz, Wolfe Research, LLC - Research Analyst Robert Routh, FBN Securities, Inc., Research Division - Research Analyst Robert Fishman, MoffettNathanson LLC - Analyst Ted Cronin, Citigroup Inc., Research Division - Research Analyst Tim Nollen, Macquarie Research - Senior Media Analyst PRESENTATION Operator Good afternoon, ladies and gentlemen, and welcome to Eros STX Global Corporation Business Update Call. This call is being broadcast live on the Internet, and a replay of the call will be available on the company's website. The company published earlier certain financial information, including a 20-F transition report and 6-K filing which are available on the company's website. The company would like to remind everyone listening that during this call, it will be making forward- looking statements under the safe harbor provisions of the federal securities laws. The company's actual results may differ materially from those projected under forward-looking statements. During the call, the company will also discuss non-GAAP financial measures in talking about its performance. You can find a reconciliation of these measures to the GAAP financial measures in the company's press release. I would now like to turn the call over to Bob Simonds, CEO and Co-Chairman of Eros STX Global Corporation. Please go ahead, sir. ───────────────────────────────────────────────────────────────────────────────────── Bob Simonds, Eros STX Global Corporation - Co-Chairman & CEO Good afternoon, everyone, or good morning or good evening depending on where you're calling from. I hope you're all doing well and staying healthy. I want to thank you for taking the time to join us today. While we provided a few updates in writing, we know that you've all been very eager to get additional information and to hear from us directly. As we mentioned before, we will endeavor to always be transparent with you, while also being thorough and deliberate. We want to make sure that our strategy is sound, our expectations realistic, our goals achievable, and our path is one that drives towards substantial shareholder value. Accordingly, we've been very deliberate during this merger integration period, and it has taken us time, and frankly, more time than we expected due in large part to COVID to complete our financial and regulatory filings. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. 2 NOVEMBER 04, 2020 / 9:30PM GMT, Eros STX Global Corporation – Business Update Call I do want to take a second to specifically call out our entire finance team in both the U.S. and India for a truly spectacular job in getting a monumental amount of work done and without the ability to get together in the same room or even on the same continent. With that said, the primary purpose of today's call is to walk through four topics. Number one, I will reiterate the rationale behind this merger and our strategic vision for the company. Number two, Noah Fogelson, the company's co-President; and Adam Fogelson, Chairman of STX Films, will provide an overview of the U.S.-based film and TV groups. Number three, Rishika Lulla Singh, the company's co- President, will share updates on the Eros Now digital OTT and streaming business, the jewel in our crown-. Number four, our CFO, Andy Warren, will explain our six near-term strategic imperatives to drive shareholder value and provide some additional context on the recently filed transition 20-F and 6-K with financial guidance. I will come back later and give an update on how we plan to unlock value in our amazing business. And then after that, we'll have time for your questions. So, let's get into it. Why did we bring STX and Eros together? What's our vision for the company? The media and entertainment industry is simultaneously experiencing massive consolidation and a revolution in terms of how consumers enjoy entertainment content. All of this is happening amidst the global pandemic that has radically accelerated each of these trends. When my co-Chairman Kishore Lulla and I first started discussing this transaction, it was clear we believe both companies would achieve far more together than either could on a stand-alone basis. We realized the combination would create a company that can drive long-term growth in diversified markets and provide a more consistent and stable revenue profile. Additionally, the new company with its adaptable and scalable multichannel distribution model will allow the company to capitalize on the growth potential of the largest and fastest-growing entertainment markets in the world, namely India, China and the U.S. Lastly, the combined company would also have a stronger capital structure and synergy opportunities, both of which will enable investments for growth. Eros has been a global leader in motion pictures production, co-production and distribution of Indian language content for many years, and was one of the very first movers in the OTT digital space in India with Eros Now. Over the past few years, Eros Now has done a fantastic job of growing its paid subscribers and registered users. But as we've seen all over the world, the key to any successful digital streaming platform is compelling and engaging new content. Yes, we absolutely need the backbone of scaled content library to keep customers constantly engaged with the platform, but it is the compelling new content that really changes the game in terms of the number of subscribers and what those subscribers are willing to pay each month. That was true when HBO went from just carrying library films from other studios to owning and controlling Sopranos. More recently, it was true when Netflix went from just carrying old movies and TV shows from third-party studios to producing and distributing House of Cards. It's that one must-watch show that can massively transform the platform. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us ©2020 Refinitiv. All rights reserved. Republication or redistribution of Refinitiv content, including by framing or similar means, is prohibited without the prior written consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. 3 NOVEMBER 04, 2020 / 9:30PM GMT, Eros STX Global Corporation – Business Update Call So, I believe for legacy Eros, combining with STX means not only the ability to accelerate the deployment of Eros Now prime service, which features English language content alongside Indian language, but also the ability to own and control the film and TV content featured on the service. And for legacy STX, we believe India is the next major global battleground in the same way we viewed China 5 years ago, although the Indian market has different challenges and opportunities. If someone said to you five years ago, “would you like to partner up with Tencent Video or a Youku or Tudou?”, you would jump at that opportunity with the benefit of hindsight. That's how we view the opportunity today, and it's already impacting how we structure our film and television projects, so we can drive content to the Eros Now platform that, in turn, will fuel growth for Eros Now. That is our strategic vision for the combined Eros STX. We are even more excited today about the combined company than we were when the merger closed. And while the current operating environment remains challenging and uncertain due to COVID, I'm immensely proud of how our company has adapted and innovated in the face of this challenge. For example, COVID forced us to adapt our box office-centric distribution model for STX Films, and we realized that STX star-driven films thrive both commercially and profitably, no matter the distribution model. Noah Fogelson, Co-President of Eros STX, will elaborate on this point. Noah, do you want to take over? ───────────────────────────────────────────────────────────────────────────────────── Noah Fogelson, Eros STX Global Corporation - Co-President Awesome. Thanks, Bob. Thank you all very much. It's a pleasure to talk with you today. Just to echo what Bob said, I hope everybody is doing well and staying healthy and relatively sane, but it's a privilege to talk to you today, and I appreciate you making time for us. I want to spend a few minutes and just talk about the STX content business, both historically and walk you up through present day because I think it's super important for everyone to have a clear understanding of what we do, how we have historically done it and how that translates into business opportunities for us going forward. So, the original STX business was defined as a content production and distribution engine working with the biggest stars and storytellers in the world, but we do it in a highly disciplined model at a fraction of the SG&A, at a fraction of the production and distribution expenses, that you would normally see from traditional legacy studios.