Music Broadcast Limited (RADIOCITY) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Music Broadcast Limited Q1 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashit Kukian, CEO from Music Broadcast Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and a very warm welcome to the Q1 FY '25 Earnings Conference Call of Music Broadcast Limited. Joining me on the call is Mr. Rajiv Shah from our IR team and our Investor Relations partner, Strategic Growth Advisors. I'm excited to share the company's financial results for Q1 FY '25. These achievements reflect the dedication and hard work of our team and highlight our steadfast commitment to promising growth and innovation in the dynamic media and entertainment industry. In the first quarter of FY '25, we experienced a significant enhancement in our financial performance. Revenues grew by 12% year-on-year, our EBITDA surged by 25% year-on-year, while our EBITDA margin stands at 27%, a notable increase of 260 basis points. This achievement highlights our unwavering commitment to improving operational efficiencies and effectively implementing cost management strategies. We are dedicated to maintaining this momentum and further optimizing our processes to enhance profitability. Our digital business continues to be our core focus, having achieved an increase of 45% year-on-year growth with contribution of 10% to our revenue. We are adapting to the shifting media landscape by emphasizing digital channels for content creation, distribution and engagement. Our dedication to investing in technology keeps us at the cutting edge of innovation and enables us to provide seamless experiences across all platforms. During this quarter, we have rolled out a series of strategic initiatives to solidify our position in the radio industry. This quarter, we have maintained our market share of 19% according to the [ volume ] data. Our comprehensive omnichannel framework has enabled us to leverage the extensive reach of our network, ensuring we provide the highest value for our clients. Radio City's launch of RC Studio on JioTV, not only expands our reach, but also provides advertisers with limitless opportunities to engage with the nationwide audience. By leveraging JioTV's vast viewer base, Radio City is positioned to connect with listeners across the country. Furthermore, a recent debut of SMINCO.in, our social media influencer conference, effectively bridges the gap between brands and influencers. This platform offers integrated solutions that serve both the parties seamlessly. These initiatives highlight our commitment to innovation and underscores the pivotal role of our digital business in our overall strategy. We are delighted to see that Radio City continues to be the top choice for advertisers with 40% of the industry's client base opting for our platform. Furthermore, 32% of our newly acquired clients in the radio sector have chosen radio for the advertising needs. This trend underscores the strength of our brand and the success of our marketing strategy in providing exceptional value to our clients. As we look to the future, we are dedicated to the promising growth and delivering value to our stakeholders. By remaining agile, innovative and customer-focused, we are well equipped to seize emerging opportunities and tackle challenges in the ever-evolving media landscape. We extend our gratitude to our team for their dedication and hard work, and we are confident in our capacity to achieve ongoing success. Now, let me take you through the financial highlights for Q1 FY '25. Revenue grew by 12% year-on-year, reaching to INR 59.6 crores. EBITDA grew by 25% year-on-year, reaching to INR 15.9 crores, with EBITDA margins expanded by 260 bps year-on-year to 27%. Adjusted profit after tax, which is adjusted for interest on NCRPS to the tune of INR 2.1 crores stood at INR 4.7 crores, showcasing an impressive growth of 175% year-on-year. Our cash reserves stood at INR 338 crores as of June 30, 2024. Our liquidity position remained strong. And as stated previously, this liquidity allows us the flexibility to take advantage of present and prospective future opportunities. With this, I request the moderator to open up the floor for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Sadanand from Stellar AMC.

Am I audible? Because I'm outside, am I audible clearly?

You're audible. There's a lot of disturbance. So you'll have to -- we'll try and figure out.

I will try. In case it does not, then I'll join the queue again.

Sorry to interrupt, sir. Can you please use your handset.

Ashit, congratulations for good numbers.

Thank you so much.

Now, can you please deconstruct how did you achieve 12% growth across various verticals, whether it's volume, value, digital? And your EBITDA growth of 25%, what are the major contribution to that?

See, I mean from a cost perspective, I think you would have by now noticed that we are very prudent about cost increase year-on-year or quarter-on-quarter. As far as the revenue is concerned, it's a mix of our business, which is the core business of radio and our non-core business of ability through the on ground plus digital plus our increased social media presence. So the combination of all this has allowed us to have a growth, which is possibly a little disproportionate from the rest of the industry because we have kind of built building blocks, which is taking care of the fact that even if, for example, radio would have not grown as much as it should have, from a revenue perspective, we've offshoot it with our digital growth, which has been phenomenal over the last quarter and also our growth on what we call the created business. The business which is beyond the organic business, that is what is helping us to show these kind of results.

Great. Was there a value/yield growth for you in the last quarter?

There has been an 8% yield growth for us. But I don't think at this point in time, we should get carried away because that is largely because political ads, while the ratio has not been really much, it comes at a fairly high premium. But yes, there has been a marginal growth, and that is where the yield comes in. But a large part of your revenue is still the volume revenue that has contributed to the overall growth.

In one of your slides, you mentioned the market share. If I club all 3 players, it comes to close to 50% of the industry, is it correct?

Yes, it is correct.

And that kind of concentration, the industry doesn't allow the pricing power or actually to increase the yield?

It is, because when you look at the total, if I put an average of 10 or 11 players in the larger market and a 5, 6 players in the smaller market, the inventory play for the rest of the players is still not at the saturation point. And unfortunately, that is the dilemma. When people who are cash [ trap ], they would possibly do a little bit of compromise. And hence, the challenge is that you can't really -- unless and until you have an entire saturation of your market, price increase is always a challenge.

Okay. I will have one question now, then I will join the queue. What is the average inventory utilization currently?

71%.

[Operator Instructions] The next question is from the line of Riya from Aequitas Investment.

Congratulation on a good set of numbers. I want to know how much of the -- we are seeing that -- in government, we have seen a 35% increase. So what would be because of revision of price and what would be election-led growth in this?

No, I don't know [ where ] this 35% growth from a value -- value perspective you're seeing from the government.

Yes, yes.

Yes. So that's basically political that we are talking about. From the base that we have got, we have got close to about INR 7 crores of political advertising that has come in, which has come at a higher price.

Okay. And apart from this, there was a revision of government also in terms of advertisement.

So that marginal increase on the -- but that -- central government DAVP ads gets limited when political advertising happens. So what happens is, whenever there is political advertising, the central ministries don't advertise during that time. I mean even the state ministries don't advertise because the political advertising is in play. So yes, I mean, that effect of DAVP, which has started over the last 2 quarters, this being the third quarter, will average out as we go forward because then you have the rest of the year that the play out has already happened.

Got it. So going forward, is it fair to assume like government will not grow at a similar rate, volume growth?

Absolutely not. But having said that, there is still -- the fact is that with the stable government, the regular ministries ads, which they do talking about the various achievements that they have done will be part of the growth, which is there. And beyond that, there is state elections that will be there in each of the states -- few of the states, which will contribute to an increased share of revenues from those state governments.

Got it. And in terms of value, what percentage growth do we see because of the new rules, which have come up?

Sorry, sorry, I couldn't get you.

Because of new tariff plans, which have come up, what will be the incremental...

Average over the period will be around 10% to 12%, but that will end at the end of next quarter because then that growth has already been played out in the last 2 quarters of the year, right? The increased DAVP rate. So after that, there is no -- you will be having the same rate as far as the government's DAVP rates are concerned, unless and until the next DAVP increase happens.

Got it. Got it. And in terms of digital, we are seeing you introduced a new app for the influencers, et cetera. What kind of investments have we done until date?

So the investments in this has been marginal from a platform perspective because what we have done is all the other things, which is the whole management of the influencers, the rest of the things, the analytics, which comes from the -- is managed by internal resources only. So you could at least say there is an investment of approximately INR 1 crore from a platform perspective.

Sorry, how much?

INR 1 crore.

[Operator Instructions] The next question is from the line of Aakash Sharma, an Individual Investor.

Okay. So my question is that what are the effective rates, if we compare to the pre-COVID levels?

8% increase, I told -- pre-COVID level you're saying, it will still be about 90% of pre-COVID levels.

Yes, yes. Okay. And give the split of FCT and then non-FCT revenue?

So the split of FCT and non-FCT?

Yes, yes.

Non-FCT contribution, if I keep digital away, is approximately close to about 25%.

[Operator Instructions] The next question is from the line of [ Yug Modi ] from AP Capital.

First of all, congratulations for great set of numbers. Sir, can you share something on industry, how it is growing and how digital is shaping the industry as a whole?

See, the volume growth for the industry, as seen and in available data, is about 2%. We work on an increased [indiscernible]. That's the core business that we're talking about. So I would want to believe the industry's revenue growth is around 5% to 6%. And that's -- and an average I'm talking about. There are listed results, which is already out. I'm sure you are aware of some of the listed companies which have declared their results. So that's the industry growth, I would say.

[Operator Instructions] The next question is from the line of Sadanand from Stellar AMC.

Ashit, I want to have a clarity of one of the statement that you made in Slide #5.

What is it?

Clarity on the Slide #5 statement where you mentioned 1,700 clients added out 3.8 in quarter 1. Is that correct?

That's right. Yes. That's right.

So do you mean to say that almost 40%, 44% of new client addition has happened in a quarter 1 for the industry?

No, the new client addition numbers are -- this is a total client that has been added. The new clients, which is added is 1.7 as well as for the industry, it is 3,800 clients.

Yes, 1.7 is what? 1.7k, you mentioned.

1,700 clients in this quarter, Radio City has added new into our fold.

Okay. In percentage term, how much it comes?

40%, around 40%.

So not you celebrate that? You were saying 40% of new clients got added.

Yes.

Is it not trend-changing?

See, the average of the industry is like 50% to 60%. Generally, if you look at radio as a business, you will have a typical 40%, 45% churn happening every year, year-on-year. From a radio perspective, from our previous year's base. And that's an average that is there. So all players will have to add on new, so it will range anywhere between 30% to 40% depending on the efficiencies of each player, of the newer advertisers have come on to floor from 1 year to another year.

Understood. It's in line with the trend. Can you just help me understand in SMINCO that you added in the last quarter, how does this work? If I'm a client, how does it work? You added influencer marketing into that. Can you just explain me how does it work?

I will. So SMINCO's influential marketing platform, which is an aggregation of influencers. So if you know -- we have been using our RJs as influencers in providing solutions to clients for the last so many years. But as the world of social media increases and the relevance of influencers has increased, it was -- implement that you had to kind of give solutions to clients beyond what you have as an opportunity from your RJs. So that's why we launched this tech platform, it's an AI tech platform, which currently has an aggregation of 40,000-odd influencers in the nano, micro and macro influencers according to their reach. So a brand can come on to the site, which is a SMINCO influencer platform, say that they are looking out for influencers in this, this category or this, this reach. And then we will kind of provide the client with a set of client -- sorry, influencers, which the client can then shortlist. And then beyond that, what we typically do is create this whole story telling with the influencer because the influencer has a set of followers who blindly follow the influencer because of what they are following the influencer. So it's a reach plus engagement-led solutions that brand look up to. So it is a multiple level of influencers, a particular brand, may use to reach out their target set of audiences. So it is something the world is moving towards, social media marketing, if you see, not just in India but globally, is almost taking away 50% to 55% of the current spend that is happening from a digital social media investment is concerned. And that is only growing. So it's typically to answer your question. This platform will give you the choice of influencers, the kind of content those influencers are creating and what is the engagement rate of each of those influencers. And depending on that, data that we are giving the clients will say, I want to use X, Y, Z. We then get those influencers on board and create this whole storytelling, which then gets distributed across various social media platform beyond what we are already doing on radio and [indiscernible].

Okay. How many of your current client pool you expect to adopt to this for annual this fiscal, end of this year?

A difficult question to answer, but if I have to look at the behavioral aspect of advertisers in India today, and with the base that we have got, I would want to believe at least 3 out of 10 advertising solutions will have influencers as part of the solution that we are offering, some may be internal, some maybe external.

One last question, then I'll join the queue. Do you expect your quarterly number should be reflected in your full year number also, in terms of revenue growth, PAT growth and the margin?

That's the attempt, and we would want to keep it that way, and we'll make all efforts to move towards that.

Now despite some of the cyclicality of the business, this should be better, right?

Yes. I mean, you look at it, it should be better, but you never know how the industry shapes up because we are far more dependent on the environment around us because radio being radio, a lot of things are dependent on the environment around you. And that is not just for us. I think that is a typical challenge with media per se or any media business per se. We are hoping that things continue to be as normal as at least, if I may use that word, and then expect our first to give the results.

Yes. I just want to go back again on the quarterly numbers. Your yield growth is not much. Volume growth is early teen. So what has led to the sharp increase in margins? Can you just help me? What are the cost levers that helped you?

It's basically, like I said, most of our digital play has come from resources which are in house. And hence, we have really not added a cost of people beyond an x level of expertise on a particular subject that we will require. And we are using our resources optimally to get the kind of bottom line that we are looking at. And as you know, the radio being a fixed cost business, that is also which we have always been saying that after the critical threshold of revenue, a lot of what we do goes directly into the bottom line. And lastly, our margins in our digital businesses has also been a delta while the base may be small, but these are the factors which adds up to the overall efficiency of the business.

What is the extent of SMINCO business today is a part of a digital business, which you have said that almost 10%?

No, no, not SMINCO alone. Our digital foray is for multiple things that we're doing. Our digital business includes our content distribution and third-party platform and its monetization. It includes influencers and the monetization of influence. It includes the content that we put on channels like YouTube and so on and so forth, it's a multiplicity of things that we are doing. And as of now, that all put together what we call a core digital is accounting to 10% of our business. A large part of that is also the content integration that we do and the distribution of that, that we do on social media platforms, with or without influencers. Like, for example, we very recently did a client activity for Citroën, which was basically gathering cheer for India with Dhoni being the brand ambassador. And we did a 3-week activities, I think, generated about 1.3 million cheer for India for the World Cup T20, which was largely a combination of on-ground and social media, which gives you the additional value, which otherwise wouldn't have been there with us.

[Operator Instructions] The next question is from the line of Rakhi Sharma from Ace Investment.

I just want to congratulate you, first of all, related to see the performance. I have a couple of questions. I just wanted to know what were the advertisement rates during the quarter? And the second is just a follow-up on the same because I wanted to know if the ad rates have come back to the pre-COVID level, if you're seeing any recovery? Just to get a sense over there.

So like we said, there is an 8% increase that we have seen over the last year first quarter, and that, like I said, is a combination of political and a few other clients that we have got. But otherwise, the large part of the revenue is still volume-driven for the quarter, and at least for the next quarter also, while there will be a volume-driven revenue. Like I said, our inventory utilization still is at 71%. So that is headroom for revenue growth through volume, at least for the next 2 quarters.

Sure. And the next -- the follow-up on the same was ad rates have come to the pre-COVID level?

No, I said it's about 90% of pre-COVID levels.

The next question is from the line of Payal Shah from Billion Securities.

First of all, congratulations on the good set of numbers. I have two questions. First, can you discuss SMINCO in detail, like what is the potential you can see from this business as a whole? And what are your plans for this going forward?

See the potential is, right now -- I mean, the potential is how we go about executing the entire plan. But -- I can give you the current business opportunity. If you look at FICCI says that currently, in the next 2 years, our influencer marketing-led advertising business is worth INR 3,300-odd crores or INR 3,600-odd crores, which in my mind will be equivalent to what the radio business is. So to answer your question, it's an opportunity play that we have got. How much of that we'll be able to get as part of our share is something which only time will tell. Our effort is going to build our capabilities in delivering influencer-led marketing to brands, which we have already started, and we are building on that. So you could look at it from a perspective that from a 0 base, that is an opportunity play, and the better we do, the more income -- revenue garner. And as we already said, our digital business is a delta to our profit, it will only add up to our bottom line.

That's quite helpful. My next question is on -- if you can share how JioTV partnership played out for this quarter and how we are seeing it going forward?

See, JioTV partnership is too early from a monetization perspective. Right now, there's a seating in of the content and reach that is happening. In fact, in the JioTV, we are right now at RC Studio, which is the 24-hour channel that is there on JioTV, JioTV Plus and JioTV App, plus JioTV Bharat Phone, which potentially gives us a reach of about 450 million. I'm happy to kind of share that we will possibly one of the few channels within JioTV, which will be [ unlock ] to operators beyond JioTV. So today, non-JioTV mobile operators or people who are having handsets which is non-JioTV will also be able to download RC Studio as a preferred app, which has been especially taken care for, for just RC Studio and a few others because we see an increased reach and monetization ability. But to answer your question, early days, because it will need to be in have to get brands recognize the reach, engagement and then the revenues will start growing in. But we are very closely working with the JioTV team to ensure that quickly, we'll get into the monetization bandwagon.

[Operator Instructions] The next question is from the line of Ketan Athavale from RoboCapital.

I wanted to know the revenue and margin guidance. And secondly...

Sorry. Can you be a little louder, please? I'm sorry, we couldn't hear you.

I wanted to know the revenue and margin guidance. And secondly, do we have any updates on notice?

What was the second question?

Any update on notice policy?

No, that still is going on. [ Those trial that a ] recommendation is still being put to the MIB and the MIB is consolidating things to take an overall decision. Otherwise, on the first question, we really don't have any much guidance on that.

[Operator Instructions] Next question is from the line of Rajvi Shah from [indiscernible] Securities.

Firstly, I would like to congratulate you for the good set of numbers. I have two questions. Like the first is our EBITDA grew by 25% year-on-year. So this growth is organic or is due do operating leverage?

It is a combination of operating leverage and what I have always been saying because the threshold level of increased revenue, us being a fixed cost business. Like I said, once that threshold level of numbers are across a lot of what we do from a top line perspective goes directly into the bottom line. So it's a combination of increased revenue from overall base and an efficient management of our costs.

And is this sustainable going forward? .

Yes, I would want to believe, unless the revenue figure stands for whatever the industry numbers are. Our costs will play out because that is something which we see is going to be maybe in -- maybe the last quarter if there's any investments which are digital-led, those kind of incremental cost. But otherwise, you can average out these costs as the cost that will be for the rest of the quarters.

Okay. I just had one more question. Like also, we have achieved the margins of 27%. What should we expect in our future for margins?

See, I mean, I've always been saying that in the current scenario and the way radio is positioned, if we reach an efficiency of 30%, I would believe that's a nice spot to be in, given the nuances of the business. At a peak, we have done numbers much, much higher, but that was a different era, if I may say so. So at a 30% margin, I think you would say it's a healthy business given the complexities of the businesses that we are managing. And that is what I would want to aim at.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Ashit Kukian for closing comments.

Thank you. We sincerely value your active participation in today's earnings call. Recognizing the evolving media consumption habits of the Indian audience, influenced by the newest range of content options, present an opportunity for the radio industry to integrate digital platforms while upholding radio as its primary business function. Our continued focus is on propelling the digital landscape forward by utilizing resources and relationships to provide maximum value to our customers. The presentations, earnings release and results are all available on the corporate website and stock exchanges. If you have any further inquiries, please get in touch with any one of us or with Strategic Growth Advisors, our Investor Relations partner. Thank you.

On behalf of Music Broadcast Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.