Tips Music Limited (TIPSMUSIC) Earnings Call Transcript

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.