ErosSTX Provides Update on Guidance, Strategic Priorities and Other Matters; Hosting Conference Call to Discuss

Key Highlights:

• Hosting a conference call and webcast on November 4, 2020 at 4:30pm EST to discuss our recent SEC filings, updated forward-looking financial guidance and near-term strategic priorities.

• ErosSTX expects for fiscal 2022 (ending March 31, 2022) revenue of approximately $800 million, and a high single-digit EBITDA margin¹ .

• ErosSTX expects for fiscal 2023 (ending March 31, 2023) revenue growth of at least 20% year-over-year to over $1.0 billion, and that over 50% of fiscal 2023 revenue will be derived from digital content distribution and platforms. ErosSTX expects fiscal 2023 operating cash flow will be approximately $100 million, as incremental margins and cash conversion will meaningfully increase as revenue increases.

DOUGLAS, Isle of Man & BURBANK, Calif.–(BUSINESS WIRE)–$ESGC #Erosstx–Management is focused on six strategic imperatives to drive shareholder value: (1) Enhance balance sheet and operating cash flow, (2) Streamline ESGC corporate structure, (3) Fully monetize Eros Now streaming platform, (4) Drive growth in total company revenue, net income and EBITDA¹, (5) Form strategic partnerships, and (6) Enhance investor communications.

Eros STX Global Corporation (NYSE: ESGC) (“ErosSTX”), a global entertainment company, recently filed a transition 20-F report containing a qualitative discussion of the legacy business of STX Entertainment (“STX”), as well as legacy STX historical financial statements in US GAAP. Additionally, the company filed a form 6-K with the SEC including more information on such STX financial information presented in the transition Form 20-F and providing forward-looking guidance. Lastly, the company is providing an update on its strategic priorities imperatives and financial reporting calendar.

Legacy STX Historical Financials Filed in Transition Form 20-F

The company filed a transition Form 20-F last week with the SEC that contains a qualitative discussion of legacy STX financial results, in addition to the legacy Eros International Plc (“Eros”) financial results that were first disclosed in Eros’ Form 20-F filed on July 30, 2020. The transition 20-F also includes legacy STX audited US GAAP financial statements for the 6-month period ending March 31, 2020 and comparable period ending March 31, 2019 (un-audited), as well as legacy STX audited US GAAP financial statements for the 12-month period ending September 30, 2019, with two comparable prior annual periods.

STX focuses on co-production, acquisition and distribution of a diverse portfolio of films each year. Most films in the STX slate meet the following criteria: (1) a production budget of $5-$50 million, (2) one or more stars in signature roles, (3) a theatrical release in the US with a substantially concurrent global release through the company’s global distribution network, or a theatrical/PVOD/streaming strategy when appropriate, and (4) a financing structure designed to mitigate the company’s equity risk exposure through a combination of tax incentives and international license agreements to minimize production costs. STX seeks to structure its international license agreements so that each film will recover no less than the minimum guaranteed license fees under such agreements. Tax incentives, where available, mitigate the overall net production cost required to complete such films. Consequently, this financing strategy seeks to minimize the downside, while retaining a significant interest in the revenue that the films may generate. STX also employs slate and co-financing on a film-by-film basis to mitigate downside risk. Additionally, STX develops and produces or co-produces scripted and unscripted TV programming that is licensed to various TV and streaming platforms. STX actively seeks opportunities to develop TV content that is complementary to content on its other platforms. STX uses a unique capital-efficient model for managing external environment risks, such as COVId-19 impact on its theatrical business. Additionally, the film marketing strategy of STX uses first-party data for audience targeting in an attempt to maximize the effectiveness of dollars spent, and targets box office performance that is similar to peer films but with less marketing expense than peer films.

The STX historical financial statements included in the transition Form 20-F show that in fiscal 2017-19 legacy STX had a net loss and EBITDA¹ loss and operating cash flow, reflecting its investment in content production and its growing content library. Under US GAAP, STX is required to expense in the income statement marketing and distribution costs upon release but amortize production expenses to match the first cycle revenue window for each film. Accordingly, like other film studios that report in US GAAP, STX booked greater expenses relative to projected future revenue as it was ramping its production and distribution. As the content library scales, ErosSTX expects the net loss, EBITDA¹ and operating cash flow of the STX business to improve.

To this point, the most recently audited results published in the transition Form 20-F for the 6-months ending March 31, 2020 show a narrowing of the net loss and EBITDA¹ loss year-on-year and positive operating cash flow. Net loss improved from $42.6 million in the 6-months ending March 31, 2019 to $26.1 million in the 6-months ending March 31, 2020 and EBITDA¹ improved from negative $29.5 million in the 6-months ending March 31, 2019 to negative $14.3 million in the 6-months ending March 31, 2020. Operating cash flow improved from negative $133.9 million in the 6-months ending March 31, 2019 to positive $10.3 million in the 6-months ending March 31, 2020. ErosSTX believes the STX business is now at a financial inflection point of realizing the sustainable benefits of a well-established film library, while continuing to invest in long-lived content ownership and revenue growth.

Six Strategic Imperatives to Drive Shareholder Value

Co-Chairman and CEO, Robert Simonds, commented on the company’s near-term priorities and the current operating environment:

“We are outlining for shareholders the six strategic imperatives that guide our management of the company; these priorities serve as our beacon and we believe will drive shareholder value. We are confident that we will show progress on these items in the coming quarters, and we expect shareholders to evaluate the company based on our progress. While the current operating environment remains challenging and uncertain due to the COVID-19 pandemic, I am very proud of the company’s response. With STX films, such as My Spy, Horizon Line and Greenland, we quickly adapted our U.S. distribution model from theatrical to a combination of premium video-on-demand and streaming, and with what we believe are ROIs that are comparable to or higher than our original greenlight budget. In the case of Greenland, we still released the film in international theatres and the film debuted at #1 in 22 countries. This approach demonstrates that the STX star-driven films have the opportunity to thrive no matter the distribution model. At Eros Now, our global Indian-language streaming OTT platform, paid subscriber growth continues to set records, with fiscal 2Q21 showing the fastest quarterly growth since inception. Additionally, we are now using the full weight of our Eros production capabilities to deliver fresh content to Eros Now, which we believe will drive future subscriber growth. All of this gives me great confidence in the company’s future, irrespective of the pandemic and the recovery in global box office demand.”

The ErosSTX management team is focused on six strategic priorities to drive shareholder value:

1. Enhance balance sheet and operating cash flow: The company intends to recapitalize its global debt structure, extending debt maturities and simplifying the capital structure. The company seeks to improve its cash conversion and visibility by implementing improved financial and operational controls.
2. Streamline the ESGC corporate structure: To enhance ESGC shareholder value, the company will evaluate its corporate structure, including a review of the Eros International Media Limited (EIML) listing on the Indian Stock Exchanges, BSE and NSE.
3. Fully monetize Eros Now streaming platform: The company intends to drive revenue, earnings and EBITDA growth by (1) accelerating long-term subscriber growth, (2) driving higher average revenue per user by enhancing direct-to-consumer global reach and launching higher pricing tiers with the introduction of English language content to the platform, and (3) launching advertising monetization. In support of these objectives, the company will increase its investment in content and marketing in fiscal 2022 to drive higher cash flow returns in fiscal 2023/24. The company will continue to invest aggressively in what it believes is superior and differentiated content across all its platforms and target markets.
4. Drive growth in total Company revenue, earnings and EBITDA¹: As described in the form 6-K filed last week with the SEC, the company is clarifying its previously issued guidance as follows:
   
   The company expects for fiscal 2022 (ending March 31, 2022) revenue of approximately $800 million, which is consistent with the previous forecast of $1.0 billion in calendar 2022, and a high single-digit EBITDA margin¹ for fiscal 2022, which is consistent with the long-term outlook of 20% to 25% EBITDA margin¹.
   
   The company expects fiscal 2023 (ending March 31, 2023) revenue growth of at least 20% compared to fiscal 2022 to over $1.0 billion, and that over 50% of fiscal 2023 revenue will be derived from digital content distribution and platforms. This growth is expected to be driven by expanding the company’s digital businesses through Eros Now subscriber and revenue per subscriber growth and increasing distribution and licensing of ErosSTX film and television content to global digital platforms, including Amazon, Apple, Netflix and Walmart. The company expects fiscal 2023 operating cash flow will be approximately $100 million, as incremental margins and cash conversion are expected to meaningfully increase as revenue increases.
   
   Additionally, the company affirms its expectation, provided at the time of the closing of the merger transaction, for $50 million in cash merger synergies by the end of fiscal 2022 on a run-rate basis.
5. Strategic Partnerships: The company will seek to establish new, as well as deepen existing, commercial relationships with global leaders such as Amazon, Apple, Microsoft, HBO and Netflix, among others, which we believe will enable our business to be nimble and responsive to a rapidly evolving and dynamic global business environment.
6. Enhance Investor Communications: The company intends to improve its disclosure of key performance indicators, improve connectivity with buy-side investors and expand sell-side analyst coverage.
   
   The company is modifying its earnings reporting schedule. The company expects to report full financial results every six months (interims and full-year), and for the first and third fiscal quarters intends to issue an update on key financial and operational metrics. The company is not obligated to report quarterly financial results because it is a foreign private issuer under the Securities Act of 1933.
   
   The company believes this modification to its reporting calendar is more consistent with its long-term approach to managing the company, while still providing shareholders with timely information about the company’s performance.

Below is a list of the fiscal 2021 financial reports and the expected reporting time frame:

• FY21 Interim Results (6-months ending September 30, 2020): January 2021
• FY21 Third Quarter Trading Update(3-months ending December 31, 2020): March 2021
• FY21 Preliminary Results(12-months ending March 30, 2021): June 2021

The company will not issue a trading update for the first quarter of fiscal 2021 given where we are in the calendar and given the priority is to complete the required regulatory and financial filings associated with the merger.

Hosting Investor Call on November 4, 2020 at 4:30pm ET

The company is hosting a conference call and webcast for investors on November 4, 2020 at 4:30pm ET to discuss the company’s recent SEC filings, its updated forward-looking financial guidance and its near-term strategic priorities. The call will be available as a live webcast, which can be accessed at ErosSTX’s investor relations website in the Events section. A replay of the webcast recording will be available until 7 days after the initial webcast. Dial-in information will be available on the day of the webcast also on ErosSTX’s investor relations website in the Events section.

Eros STX Global Corporation:

Eros STX Global Corporation, (“ErosSTX”) (NYSE: ESGC) is a global entertainment company that acquires, co-produces and distributes films, digital content & music across multiple formats such as theatrical, television and OTT digital media streaming to consumers around the world. Eros International Plc changed its name to Eros STX Global Corporation pursuant to the July 2020 merger with STX Entertainment, merging two international media and entertainment groups. The combination of one of the largest Indian OTT players and premier studio with one of Hollywood’s fastest-growing independent media companies has created an entertainment powerhouse with a presence in over 150 countries. ErosSTX delivers star-driven premium feature film and episodic content across a multitude of platforms at the intersection of the world’s most dynamic and fastest-growing global markets, including US, India, Middle East, Asia and China. The company also owns the rapidly growing OTT platform Eros Now which has rights to over 12,000 films across Hindi and regional languages and had 205.8 million registered users and 33.8 million paying subscribers as of June 30th, 2020. For further information, please visit ErosSTX.com.

Non-GAAP Measures

To supplement our consolidated financial statements, which are presented in accordance with GAAP, we also use EBITDA and EBITDA margin, which are not required by, or presented in accordance with, GAAP. We believe that EBITDA and EBITDA margin facilitate comparisons of operating performance from period to period, and net debt facilitates a comparison of financial position and leverage, and in each case, company to company, by eliminating potential impacts of items that our management does not consider to be indicative of our operating performance or financial position, as applicable. We believe EBITDA and EBITDA margin provide useful information to investors and others in understanding and evaluating our consolidated results of operations and financial position in the same manner as they help our management. However, our presentation of EBITDA and EBITDA margin may not be comparable to similarly titled measures presented by other companies. The use of these non-GAAP measures has limitations as an analytical tool, and you should not consider them in isolation from, or as substitute for analysis of, our results of operations or financial position as reported under GAAP. We define EBITDA as net loss, excluding income tax provision, interest expense, interest income, and depreciation and amortization. We define EBITDA margin as EBITDA divided by revenue.

We provide estimates regarding certain forecasted financial information in this release that are presented on a non-GAAP basis. We cannot reconcile these non-GAAP projections to the most directly comparable GAAP measure without unreasonable efforts because of the unpredictable nature of certain significant items and the resulting difficulty in quantifying the amounts thereof that are necessary to estimate net loss. Specifically, operating expenses are impacted by the completion of our closing process for the relevant fiscal periods and we cannot predict the impact of discrete events on these amounts. Material changes to any one of the exclusions could have a potentially significant impact on our US GAAP results.

Cautionary Statement Regarding Forward-Looking Statements

Information provided in this press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Exchange Act, and such statements are subject to the safe harbors created thereby. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “approximately,” “anticipate,” “believe,” “estimate,” “continue,” “could,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “will” and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources, tax assessment orders and future capital expenditures. All such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including, without limitation: our ability to successfully and cost-effectively source film content; our ability to achieve the desired growth rate of Eros Now, our digital over-the-top (“OTT”) entertainment service; our ability to maintain or raise sufficient capital; delays, cost overruns, cancellation or abandonment of the completion or release of our films; our ability to predict the popularity of our films, or changing consumer tastes; our ability to maintain existing rights, and to acquire new rights, to film content; our ability to successfully defend any future class action lawsuits to which we are a party in the U.S.; anonymous letters to regulators or business associates or anonymous allegations on social media regarding our business practices, accounting practices and/or officers and directors; our dependence on the Indian box office success of our Hindi and high budget Tamil and Telugu films; our ability to recoup the full amount of box office revenues to which we are entitled due to underreporting of box office receipts by theater operators; our dependence on our relationships with theater operators and other industry participants to exploit our film content; our ability to mitigate risks relating to distribution and collection in international markets; fluctuation in the value of the Indian rupee against foreign currencies; our ability to compete in the Indian film industry; our ability to compete with other forms of entertainment; our ability to combat piracy and to protect our intellectual property; our ability to maintain an effective system of internal control over financial reporting; contingent liabilities that may materialize, our exposure to liabilities on account of unfavorable judgments/decisions in relation to legal proceedings involving us or our subsidiaries and certain of our directors and officers; our ability to successfully respond to technological changes; regulatory changes in the Indian film industry and our ability to respond to them; our ability to satisfy debt obligations, fund working capital and pay dividends; the monetary and fiscal policies of India and other countries around the world, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices; our ability to address the risks associated with acquisition opportunities; risks that the ongoing novel coronavirus pandemic and its spread, and related public health measures in the U.S., India and elsewhere, may have material adverse effects on our business, financial position, results of operations and/or cash flows; challenges, disruptions and costs of closing the merger and related transactions (the “Merger”), integrating the Eros and STX businesses and achieving anticipated synergies, and the risk that such synergies will take longer to realize than expected or may not be realized in whole or in part; the amount of any costs, fees, expenses, impairments and charges related to the Merger and related transactions; uncertainty as to the effects of the consummation of the Merger and related transactions on the market price of the Eros A Ordinary Shares and/or our financial performance; and uncertainty as to the long-term value of the combined company’s ordinary shares.

The forward-looking statements contained in this press release are based on historical performance and management’s current plans, estimates and expectations in light of information currently available and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. Should one or more of these risks or uncertainties materialize or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this communication speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable securities laws.

¹ EBITDA and EBITDA margin are financial measures calculated other than in accordance with US GAAP. The Company believes that these measures provides useful information to investors and others in understanding and evaluating its consolidated results of operations and financial position, as applicable, in the same manner as they help our management. However, the Company’s presentation of these measures may not be comparable to similarly titled measures presented by other companies. The use of these non-GAAP measures has limitations as an analytical tool, and they should not be considered in isolation from, or as substitute for analysis of, results of operations or financial condition as reported under GAAP. For more information on these non-GAAP measures, including how we calculate these measures and a reconciliation to the most directly comparable US GAAP measure, please refer to the reconciliation at the end of this release and in the Company’s recently filed Form 20-F.

Contacts

Investor Contact:
Drew Borst

EVP, Investor Relations & Business Development

Eros STX Global Corporation

drew@erosstx.com