EDITED TRANSCRIPT Eros STX Global Corporation – Business Update Call

NOVEMBER 04, 2020 / 9:30PM GMT, Eros STX Global Corporation – Business Update Call

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EDITED TRANSCRIPT

Eros STX Global Corporation – Business Update Call EVENT DATE/TIME: NOVEMBER 04, 2020 / 9:30PM GMT

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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 forwardlooking 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.

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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.

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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 coPresident, 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.

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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?

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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. We develop, we produce, we market, we distribute content across film, scripted and non-scripted television and short-form mobile and digital platforms. We work directly with globally branded stars in the creation of the content that is designed with that star's primary fan base in mind. We produce the content with budgets that take into account today's marketplace. It doesn't do you or us any good to think about appropriate budgets for content today and look at comps that are 5, 6, 7 years old. The world has changed. So, the models that we use in evaluating the appropriate budgets for our content are based on today and the marketplace today.

But similarly, we also look at, given the world today and how it has evolved and how consumers are

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consuming entertainment, we make sure that we are producing at budgets where even if we decide to take content onto a PVOD or streaming platform, we can still make really good margins and really good profit on that content.

We have an innovative approach that we developed to hyper target our audiences, particularly for feature films. And what that means is that we are spending a fraction of what legacy major studios are spending to promote comparable films and still achieving real success.

We have a network of international distribution partners who are paying minimum guarantees for distribution rights in our films and in their key territories throughout the world, and that means that 50% or more of the budgets on average of each of the films that we produce is covered just by these guarantees, which are not cross-collateralized. So, what that means is when our films perform or overperform in certain territories, we get overages above and beyond the MGs that we receive. But that's true even if it underperformed in a different territory.

So, from the standpoint of capital efficiency, return on invested capital and risk mitigation, there are a few takeaways that are critical for you all to understand. On average, between the international minimum guarantees and our production and tax incentives, approximately 65% to 70% of the budget of our films is covered before we even start production. That's part of the discipline that we go through when we are evaluating whether we want to greenlight a film, making sure that we can achieve certain hurdles both for risk mitigation and capital efficiency.

Given our more efficient spend on both the production budgets and the marketing and distribution spend, we're able to achieve breakeven with lower box office numbers. You spend less, you need to generate less revenue to breakeven. And should we decide to take our content to streaming platforms or go PVOD, our threshold to get to profitability is obviously then far lower. That's great for us, that is great for our shareholders, and that happens to be great for the talent that we work with as well. Many of them end up in back-end profit participation conditions once we've achieved that breakeven market.

As Bob mentioned, we're also obviously now living through a time when the demand for premium content is skyrocketing. Partially, this is driven just generally by changes in consumer preferences and partially driven by the current pandemic. The lack of availability of U.S. theaters has massively increased the demand for our feature content on streaming platforms and has allowed us to do some truly incredible deals lately.

I would love to be able to give you guys some historic perspective on the recent film slate. So, Adam, maybe you can spend a few minutes and just talk to everybody about the last year of films and kind of what you're seeing as Chairman of The Motion Picture Group.

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Adam Fogelson, STX Films - Chairman

I'm happy to do it, and it is a pleasure to be able to speak to all of you.

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Last fall, before there were results for any of the films I'm about to talk about, we were able to sit with the management and the Board of the company and say that we believe we had reached a critical moment where we were going to be able to take full advantage of the groundwork we have laid in the development of the company and begin making only high-quality model films at scale that we're going to maximize opportunity and minimize risk. Since that time, and in spite of the fact that some of that time has been filled with a once-in-a-lifetime pandemic, I’m excited to report that the results have been as good or better than we could have possibly hoped for.

Last September, we released Hustlers to extraordinary success and critical acclaim. It was the second movie we made with Jennifer Lopez, and that is a theme that you're going to hear throughout the conversation we're having about films. When I talk about the groundwork having been laid, it's about having furthered the relationship and built the trust of the top global talent to want to make their best films that fit our model with this company.

We also made a significant profit on a movie called The Gentleman, our second film with Matthew McConaughey, and directed by Guy Ritchie. And we are going to be talking about films with Guy Ritchie in a few minutes as well. We made a nice solid profit on a low-budget horror film called Countdown and 2 other pre-pandemic films: The Boy II, a sequel to a successful horror film that we made a few years ago; and 21 Bridges, produced by and starring the late Chadwick Boseman coming off his turn in Black Panther, we were able to breakeven.

As the pandemic was approaching, we were faced with a challenge. We had a movie called My Spy that we had already begun to market for theatrical exhibition in the US. When we looked at the situation, we believe that there was an alternative path to minimize any risk to that film and possibly to maximize the opportunity to still create a franchise for the studio. We were able to make a deal, which has been announced, for Amazon to take that film. And it has been announced that there are advanced conversations underway about now creating a sequel to that film which should put My Spy into the solidly profitable category and a franchise going forward.

We also had a film called Secret Garden for a United States distribution. That film was produced by David Heyman, one of the most famous producers in Hollywood, who's worked on the Harry Potter films among others. We are doing additional big projects that have been announced with David Heyman. We were able to make a deal on Secret Garden with Hulu that got us back to a breakeven on that film.

On our upcoming slate, once we went from the transition to pandemic to being in a full pandemic environment, we had a Gerard Butler film called Greenland. That is the second Gerard Butler film we had, having been very profitable in our movie called Den of Thieves.

We created a unique distribution model for that film where we allowed the film to go significantly earlier than a studio normally might in the international territories where theatrical exhibition was possible. And that movie has achieved extraordinary success in the markets where that film was open. And to the point Noah made earlier, we are looking at significant overages from most of the international territories

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where that film has come out. But realizing that the United States was not likely to be in a position to maximize our profit opportunity through theatrical release, we also were able to structure a deal with HBO and HBO Max for them to take the rights to the film after we are able to fully monetize our position on a premium video-ondemand, video-on-demand, electronic sell-through and home entertainment platform.

The low case model for us going forward on that film shows Greenland to be solidly profitable, and the mid- to high case probabilities of that movie are significantly better than that. So, we're incredibly excited about how that movie is turning out and about the innovative model that we used. It's not a onesize-fits-all model. It is figuring out in each individual territory what's the best ways to maximize the return to us, to our shareholders and to the talent that's working with us.

We have a movie called Songbird produced by Michael Bay and starring KJ Apa and Sofia Carson who have an acute social following. That movie released the trailer last week. It's the most socially engaging trailer we have ever released to date. That film currently has both theatrical and streaming platforms vying for the most appropriate model that we'll be able to take advantage of, and again, the models we are looking at range anywhere from mildly to solidly profitable depending on which platform we choose to go down.

We are in post-production on a movie that will be titled shortly. We'll refer to it for today as the untitled Guantanamo Bay film. That movie is starring Jodie Foster, Shailene Woodley, who we're working with for a second time, Benedict Cumberbatch and Tahar Rahim, directed by Kevin Macdonald, the director of The Last King of Scotland. That movie has had extraordinary response in its screening so far, and we expect to release that in the first quarter of next year.

We're also in post-production on a movie called Gunpowder Milkshake starring Karen Gillan from Jumanji and Guardians of the Galaxy and Lena Headey from Game of Thrones and a number of others. That movie is in post-production. It is a sort of female companion to The Gentleman, and we should be releasing a trailer on that movie very shortly. And again, whether we are talking about theatrical by the time that movie comes out or a PVOD with a streaming service, we feel incredibly confident about our path to profitability.

The last movie currently in post-production is Horizon Line, starting Allison Williams from Get Out. We are also soon to be announcing the platform strategy on that film, but once again, that is a film that we expect to be in profit based on the strategy we have created.

Those are all the films that we have that are currently in post-production or finished and about to be released, and every single one of them has a positive financial framework around it.

We are also, in spite of COVID, now in production or about to go into production on a number of films. Queenpins, starring Kristen Bell, who we are working with, again, as she was the star of our Bad Moms