Tips Music Limited (TIPSMUSIC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q1 FY '23 Earnings Conference Call of Tips Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Faraz Ahmed from Orient Capital, Investor Relations partner. Thank you, and over to you, Mr. Ahmed.

Thank you, and welcome to the Q1 FY '23 Earnings Conference Call of Tips Industries Limited. Today on this call, we have Mr. Kumar Taurani, Chairman and Managing Director; along with Mr. Girish Taurani, Executive Director; Mr. Sunil Chellani, CFO; and Mr. Avtar Singh Jeswani, Vice President, Accounts and Finance. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations as of today, and actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. A detailed safe harbor statement is given on Page 2 of the company's investor presentation, which has been uploaded on the stock exchange and company's website as well. With this, I hand over the call to Mr. Kumar Taurani for his opening remarks. Over to you, sir.

Thank you, Faraz. Good evening, friends, everyone. Good evening, and welcome to the Q1 FY '23 earnings call of Tips Industries. We have had a busy quarter. This quarter, we released 185 new songs, which is the highest in any quarter so far. These 185 new releases includes 142 non-film songs and 43 film songs. Our YouTube channel has over 70.47 million subscribers/followers and our views for Q1 FY '23 are about 20.8 billion. As per the latest data during April and May 2022, views on Facebook and Instagram are 22 billion, Moj, ShareChat clocked 5.2 billion views and YouTube Shorts reported 3.6 billion views. This is the result of our focus and impetus on digital channels. That has ensured our music business continues to grow from year to year as we continue to work towards our vision of becoming the top third music company in India. Now let me hand over the call to Mr. Sunil Chellani our CFO, to share the financial highlights of the quarter. Yes, Mr. Chellani.

Thank you, sir. Good evening, everyone, and warm welcome to our Q1 FY '23 earnings call. As you know at Tips, we have a taken a decision to charge off the content cost to P&L account in the year in which it is incurred and not to capitalize it. Let me take you through the financial highlights now. Our revenue from operations for Q1 FY '23 stood at INR 34.2 crores as compared to INR 28.1 crores for Q1 FY '22, the growth of 22%. Operating EBITDA stood at INR 22.4 crores for Q1 FY '23 versus INR 20.3 crores in Q1 FY '22. A Y-to-Y growth of 10% and operating EBITDA margin was at 66% for this quarter. On a Q-to-Q basis also our operating EBITDA has increased by 10%. Profit after tax for Q1 FY '23 stood at INR 17.2 crores versus INR 15.6 crores in Q1 FY '22, which is profit margin of 50%. The profit has gone up by 10% on Y-to-Y and Q-to-Q basis. With this I open the floor for discussion. Thank you, everyone.

[Operator Instructions] The first question is from the line of Akshay Sam from Sam Capital.

I just had a few questions. Like in this quarter we released 185 songs compared to 73 last quarter but why have the other expenses not shot up? Why has it come down compared to Q4, other expenses which includes content acquisition cost which is INR 10.2 crores this quarter compared to INR 12.2 crores in Q4, can you explain that?

Maybe this quarter, we have a lot of regional stuff and there is a few songs we get -- we have a channel called Volume. On that channel, we get our content free. So whoever want to sing my song and recreate it, they make audio, video, everything on their own and they give it to me. So that will be the difference. So that is the only reason, I feel.

Do you expect it to up next quarter because of PS1 release we must have paid a lot.

Yes, this quarter will be huge, I feel.

The second question is, I mean, generally, when we acquire content from a movie, how much advance do we pay or one-shot payment is done before the release itself?

Basically, I think it's 4, 5 installments. You can say 20%, 25% on signing, and then on the audio release, then on the music release -- sorry, audio/video both music release. And then finally I think 50%, you can say on each song or a video release. And then after last installment we pay after the producer fulfills all our delivery material. So we pay them at that time.

[Operator Instructions] The next question is from the line of Rakesh Wadhwani from Monarch Networth Capital Ltd.

I have one question like we have given guidance like we will be buying the music rights of 3, 4 in the movies in this FY '23 and the regional movies. We have given the guidance in the last con call. Just I want to know what will be the approximate content cost for the full FY '23 and FY '24? Because we make all the content charges at a one year as expenses, so just want to know what will be the content charges amount rough figure for '23-'24?

I can't actually give you the exact figure, but it will be huge. We have a good budget this year. We have budgeted a big number this year. And we have -- you must be this PS1, PS2 also we have acquired actually, that will release in the last quarter or maybe next year first quarter. It's not yet fixed. So it's a big number but I think within the budget, I can assure you.

Sir, I don’'t want the fixed number, I just want a ballpark number like it will be, any guidance you can give it is possible. That will be great.

May be approximately double than last year.

The next question is from the line of Ankush Agrawal from Surge Capital.

[Foreign Language]

See Tips shares a good relationship within the industry. [Foreign Language] and the film industry also want to encourage new people. When we connected with them [Foreign Language] So he also became serious and we closed the deal. [Foreign Language] Trust me we don’'t ever go in a bidding game. [Foreign Language] I am not interested [Foreign Language].

[Foreign Language] —Some of the news articles are quoting that we have paid— INR 25 crores, which is a huge amount for a company like ours given the size. [Foreign Language]

[Foreign Language] I play a totality game, I don’'t play individual game. [Foreign Language] It’s a two-movie deal, it’s not a one movie deal. Also, this deal is in five languages. It’s not only Tamil or -- it’s five languages and it has around 60 songs. We are getting 60 songs total. [Foreign Language] I can see that it's happening. I think I will maintain that. I will maintain that. [Foreign Language] We have a good response. [Foreign Language] I feel it’s a good thing. [Foreign Language] I think people will understand this and take us seriously.

Last question, couple of quarters back [Foreign Language] We have fixed deal but recently Facebook has started sharing the advertisement revenues, they have come to a non-fixed model in the US. [Foreign Language]

[Foreign Language] Now they have to take this what -- kind of a sharing model, they have to decide worldwide. [Foreign Language] we should get that.

At the moment [Foreign Language], right?

[Foreign Language], they are doing very, very well. [Foreign Language] that is very huge, very huge.

[Operator Instructions] The next question is from the line of Vishal Bagadia from Roha Asset Managers.

Congratulations on a busy quarter. [Foreign Language], it has grown from 16.4 billion to 20.8 billion and almost 25% jump in the viewership in the quarter. [Foreign Language], why don't we see any growth over there?

Girish, you can take this? [Foreign Language]

Sorry, could you repeat that once again?

Yes. What I'm trying to say is as we have discussed earlier, almost 60% of our top line comes from YouTube, correct? And on YouTube, viewership, if you compare it with Q4 against Q1 FY '23, it has grown by almost 25%. So why don't we see a top line growth against that?

So I think this is primarily because YouTube has -- the CPMs have gotten down a little bit this quarter, which is why we have seen that. But I think even though compared to others we are doing very well from what we find out in the industry, we are doing well. And we've somewhat kept in line with the previous quarter. Obviously the previous quarter is usually -- because March ending -- basically what happens is that the big FMCG companies have left over budget that they sort of -- they try to extend it by 31st of March. So typically, we see a hike in the last month. And then from there, it becomes normal. But I think there's a certain -- in the market, there was a certain precautionary like there's recession that rumor was going around. But -- so it's not slowed down as much, but it's good for us. We sustained our -- it's comparatively the same.

So in Q2, we can expect it to remain in line with Q1 and Q3 maybe being the festive season is going up again, the revenues coming in from YouTube?

See these things are very unpredictable because there are many global elements at play as well. But what indication that we've seen over the last few years is, yes, Q2 is normally better because September also Navratri season comes and festive actually from Ganapati onwards actually season start to pick up in India. So Q2 is typically better than Q1.

Basically, is 50%, 60%. And plus quarter 1 and quarter 4, basically they are slow quarters. Q2 is better, third is superb. That happens in YouTube.

Next question is from the line of Vishal Agarwal from Leo Capital.

Sir, you said that you feel that 25% to 30% growth over the next 3, 4 years is easily achievable. And I'm assuming this is for revenues. How do you forecast the margins to be over the next 2, 3 years like you add more library and more songs, will there be pressure on the margins in the short term?

I feel even I will manage margins as well. Margins will be a little less, not 30%, but maybe 15%, but even margins will go up because we are buying more and more content so that hit little bit will be there because we are writing off the same year. So that will be the challenge, but we have done this from the beginning, so we will continue doing that. And we will maintain that 15% our top line should also be year-on-year more.

So you are saying that revenues are -- they will grow by 25%, 30% and margins will grow by 15%, 20% year-on-year?

Yes, I feel so, yes.

And of this revenue growth of 25%, 30%, sir, how much will come from the existing catalog which is there? What rate will that grow at versus how much will come from the new acquisition -- new content acquisition that you will do?

See, that will be, again, I feel, new releases will contribute to 25%, it should and catalog will be 5%, 10% more on a year-on-year basis. But you please understand this new releases when we take a new releases the partners we are dealing with, they really take us seriously. They also give us priority on our catalog. So our catalog also move better. So -- but still we have to see because as you know, we are a catalog company, we have started investing since last year. Last year we had 3, 4 Punjabi movie releases, but not big ones. Punjabi, big ones, but overall market percentage, they are small thing. But this year onwards, we are having major releases, big releases. So also I feel this new releases game, we have to understand more whether we are recovering our money in 3, 4 years or it's taking a little more time and how much it will becoming contribution -- towards revenue split, how it will be, how much new releases, how much catalog. So we will come to know -- within next 3, 4 quarters, we'll tell you more and more.

But existing catalog what rates are the revenues from that growing at, 5%, 7%?

Actually, it's more than that, it's more than that because when I'm taking a new release, sometimes people -- like I'm doing a deal with some party maybe that party is offering me a deal of INR 10 crores, say example. But if I say I have so many new releases, that deal will happen for INR 18 crores. But when I count a real number, how many -- how much I have sold in new releases, how much I have sold in catalog, maybe it will vary. Maybe if I have a good songs, hit songs, maybe it will achieve INR 8 crores on new releases and INR 10 crores on catalog. But maybe if I don't have -- you can understand the pay -- stream rate per stream, sometimes -- it will vary. If I am taking out right deal or a lump sum or a MG deal so that can happen. So it's too early to say anything how it will split.

New releases give you the ability to negotiate a joint deal, but it has to see how much revenue comes from which bucket. But without new releases?

Sorry?

It is easier to negotiate. Without that, it is tougher to negotiate price hikes and all.

Absolutely. Absolutely. That really gives us a big thing, new releases.

Got it. And from a revenue contribution perspective, how much of it comes from YouTube, how much comes from streaming platform, can you share a broad-brush breakup?

Yes. Actually, you can say around 75% to 78% comes from total digital pie and 25% to 28% you can say without YouTube and 50% is YouTube.

50% YouTube, 25% to 28% is other digital which can be say Amazon music, Apple music or whatever other platforms.

Yes.

And 22% will be traditional?

Yes.

And within this -- and YouTube I am assuming largely the ad revenues, right?

Yes.

Got it. And this 25% to 28%, the other digital, which are the main sources of our revenue there? Who would be our largest partner there?

In 22 you're saying?

In the 25% to 28%, the other digital.

I think we have a company ”Resso” that TikTok company and then we have given our international distribution to Warner, so they also do quite good business on Apple, Spotify and all that.

Understand. Got it. And sir, given that half of the revenue is YouTube and YouTube, I am assuming is not a negotiated deal, right? Or is the ad rate in YouTube also negotiated with Google or that is more like whatever comes come, you cannot really negotiate anything?

No, we had a big fight with YouTube for 5 years. We negotiated with them for 5 years and I think around 2020 we closed the deal. So, we fight with everyone and it’s not easy that okay whatever you give we take, no, we negotiate on each and every line of the contract, on margins all that.

Understand, understand. Sir, how is that deal with YouTube structured, is it like a percentage of the ad revenue that they get or its on a per play you get this much?

It's an industry pool, they create an industry pool and from that industry pool they distribute money to each label.

[Operator Instructions] The next question is from the line of Yash Bajaj from Lucky Investment Managers.

Sir, one small clarification. On your presentation, Page #14, the pie which you have given, I think 47% of the pie, this thing is not mentioned, the segment. Can you tell me what segment is that? I'm assuming that YouTube, but I just wanted to clarify that one.

CheIlani, you have that presentation?

Yes, just I'm going through it.

Yes, Page #14. I will go ahead?

This is an ad-supported revenue from the digital.

Yes, 47%, that is YouTube only, right?

Mainly from YouTube, yes, you are right. Mainly from YouTube, ad-supported revenue.

Okay. And sir, I had a question actually in terms of the generation. Now suppose you take a generation, like I'm a 25, 26-year-old person, and I'm part of a generation and there is another generation suppose my parents. So what difference do you see in terms of the change in behavior in terms of consumption of music and the importance of music in our lives, considering a person of -- who's probably a 45- to 55-, 60-year-old bracket and someone who's a 25, 30, 35 age bracket. What's the music behavior or taste of music?

See, Tips is an appropriate player for these 2 generations because when your parents were young, they listened to my music and you've grown up on my music. So somewhere behind your brain, you have -- you know my music. So that's a very ideal situation and you are enjoying that music even today. And whenever I'm repackaging my song, recreating that song, making new fresh video, you are liking it more. And your parents are still enjoying my old, Nadeem-Shravan, all that 90s music. So I think it's a bit time -- it's a very huge advantage to companies like us. So really, it's working for us. And plus one more thing good music sales across the -- any age bracket. So you will also -- if I'm making a good music, Atif Aslam, you will also like, your parents also like. So touch wood, we know this.

Let me just rephrase it. Do you think that the stickiness in terms of the consumer has reduced with age?

No, I don't think so. If you like some few songs, so you will listen those songs again and again, maybe for 1, 2 months or 15 days, you will listen to some particular new song. But again, you will get quickly bored and you will go back to those catalogs.

Okay. Got it. And my last question is, sir, in terms of piracy or I would say, the other YouTube channels which use your music. So, if I hear any of your music, any one of your song on YouTube, so obviously, your this thing comes first, Tips options comes first. But what do you do about or what does YouTube do about in terms of removing those pirated material?

See, YouTube gives us authority and we have that tool with us. We can strike it down immediately or we can claim monies on even that as well. So we claim money. We don't strike it down. So we make monies on that also.

We don't lose out on?

No, no, no.

Okay. So in terms of piracy or someone else using your music, the problem has been solved?

95% problem has been solved.

Better than before.

Yes, too much, big time better.

Okay. And one last question, sir. In terms of, I remember the previous con call, you had said that performance is 60% of the potential it could generate. So because of COVID and all people couldn't go out. So how is performance doing right now?

It's doing well. We had a big deal with the party and he's fulfilling. Everything is online. No problem at all.

[Operator Instructions] The next question is from the line of from Basava from Mouli Assets LLC.

I have a question regarding South music. South music, I hear some article Raju Harwani is a Head for the South. Could you please give more details about that one?

Raju Harwani is colleague at South, Hyderabad. So we have -- we are opening an office in Hyderabad for South market. So he help us in acquisition or any other work we have in South. So, he is our colleague there.

Okay. So he is the owner of the Supreme recording and just like Tips in 90s and early 2000. So, do you own the corresponding catalog also in Telugu?

Sorry?

I mean he used to have the Supreme music?

Yes, he used to have a music company label, I think, which he sold in 2008 or 2009 to some other company and then he was doing some other business. So recently, he connected with me. And so we joined hands to enter ourselves in South India market, Telugu, Tamil, Malayalam and Kannada. So he is helping us to establish Tips there.

Okay. So I mean we don't have any catalog of the Supreme?

No, no, no.

Okay. I just wanted to get the clarification. And I mean, regarding the -- I have -- I mean could you please -- I mean Tips Telugu or Tips Malayalam, Tips Kannada, YouTube channels are very new, but Tips Telugu is kind of old. But still that is in a private mode, we are not able to see the subscribers and we are able to see the Tips Tamil. Is there any reason for that one?

It is new, you only said its new. We have miniscule subscribers, let it grow, then we'll show you.

Yes. Tips Telugu is better than the Tips Tamil but Tips Tamil we have the subscriber information. So I wanted to confirm.

See, Telugu, we have released a few films. But Tamil, we have a very big films. PS1 is original -#1 language is Tamil. So maybe because of that, we have a better, what you say, subscriber base. But we are doing really good. We are very happy entering South market.

Yes, yes. Even I'm closely monitoring just the views, those things and really good thing that you did the PS1 and subscribers from July 8 to till today, the subscribers increased 40% and views increased around 180%.

Yes.

[Operator Instructions] The next question is from the line of from Saket Mehrotra from Tusk Investments.

Sorry, I joined the call a little late. Sir, my first question is on -- is there any clarity on the time lines for the listing of the films business?

I think it will happen any day. I think within the next 10, 15 days, it will -- it should happen. But I think let me -- I have, Bijal, my company secretary on the call as well. I think she can tell us about this. Bijal you are there?

No, she is not on the line.

[Foreign Language]

Yes. We got this approval from BSE and NSE. Now only few formalities are left otherwise we have regular approval from both.

[Foreign Language]

We expect it should happen in 10 to 15 days, max.

Okay. And sir, second question is on [Foreign Language] digital versus non-digital almost let's say [Foreign Language]?

[Foreign Language]

Next question is from the line of Akshay Sam from SAM Capital.

Just one clarification. I mean the YouTube views you have on your slide, does that include YouTube Shorts or is it just mainstream YouTube?

Girish, I think YouTube Shorts are different. I also told you some time back YouTube Shorts are different but presentation ...

[Foreign Language] doesn't include shorts?

No, shorts are separate.

Because shorts obviously the ad rates and all will be less compared to the mainstream?

Yes, shorts deals are outright not a profit sharing.

[Foreign Language]

Not included, yes.

The next question is from the line of Ankush Agrawal from Surge Capital.

Tauraniji, just clarification. [Foreign Language]

[Foreign Language]

[Foreign Language]

Yes, correct.

The next question is from the line of Vishal Agarwal from Leo Capital.

Sir, you mentioned about new content acquisition. How much did we spend on new content in last financial year? And how much are we looking to spend this year?

I can't tell you the figures, but actually, you can see the annual report, I think we have mentioned in that. So if you can see that, you will get the figure. And this year also, we are trying we should double it at least.

Understood. Do you have a number in mind of what you are looking to do in the next 2, 3 years in annual spend and whether it will be Bollywood or it will be South Indian stuff or Punjabi stuff. Do you have a strategy in mind?

Yes, yes. I have a strategy in mind. It's a big number. We will invest. And I'm not rejecting anything particular. Wherever I get a good opportunity, big opportunity, good music and proper price, so I will acquire that.

But you expect the spend to be 2x of last year?

Yes.

[Operator Instructions] The next question is from the line of Rakesh Wadhwani from Monarch Networth Capital.

Sir, just want to know what is the revenue difference or CRPM difference between YouTube and other platforms like Spotify. What is like, we hear that Spotify if the music is played you get around INR 0.10 whereas in YouTube, we get less than INR 0.05. Just want to know what is the rought difference between both the platforms?

YouTube is like monster, it is a very, very huge player and their business model is different and Spotify business model is different. So every company has their own models. And accordingly, we all work, all music companies, it's not just Tips only. It's all music companies worldwide. So that is a system we have -- we follow.

Sir, any plans do you have in your mind you want to increase the share of other OTT platform like revenue from Spotify or Apple Music, do you have anything in mind how do you want to increase?

Absolutely. I have -- I told you again and again, our vision is, now we are -- I think 2 years back, we were priority wise player #6, but now I think we are now overall #5 and we have to achieve #3. So we are aiming for that next 1 year, 1.5 years. So, let's see.

The next question is from the line of Pratik Shah from Better Investment Solutions.

Sir, my question is that your views on the YouTube has grown or when I compare it year-on-year, it's grown at 60%. But why I'm targeting, while I am seeing the revenue is growing at 25%. So can you please explain the reason why our views has grown at that much percentage, but our revenue has grown at 22%.

On YouTube, you are talking?

Yes. On YouTube, yes, yes.

So see, YouTube, when you go to YouTube, you can listen to music or you can listen to anything or see anything. But sometimes there is no ads. So that you go free. So we can't get any money for that. So that is a difference basically.

Okay. And my next question is, sir, why like our industry is growing in the range of 25% to 30%, then why we are also targeting for the 25% to 30%? And why we are not targeting more than 30% revenue year-on-year?

See, last year, I told you I'll do 25%, 30%, but we did 50%, around 49%. So I'm not saying if there is a chance, absolutely, we are there to grow more. And we will keep on telling you in next quarter this year as far as today is concerned, I feel I'm doing 30%. I look the budget or a revenue budget or I see that. But wait for another quarter, I will tell you what I can see more or what's happening. So there is still -- some deals are pending, so we don't know where that will go.

The line for the participant dropped. I now hand the conference to the management for closing comments.

Thank you, everyone, for joining us. I hope we have been able to answer all your queries. In case you require any further details, you may please contact us or Faraz Ahmed at Orient Capital, our Investor Relations partners. Thank you so much. Thank you. Bye.

Thank you very much. On behalf of Tips Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.