We’ve Moved… Please visit our new website

broadcast technology market research, Devoncroft, Devoncroft Partners | Posted by Joe Zaller
Mar 08 2018

All things change, and so must we… To commemorate our 10th anniversary, we’ve created a new website for Devoncroft Partners.

Please visit our new website here.


Needless to say, we’ll miss the “workman-like charm” of the legacy website that has served us so well for the past decade.  Indeed, we did some quick checking with Google Analytics, and discovered we’ve had more than a quarter of a million unique site visitors over the past few years.

We always knew that Devoncroft had a following, but when we actually looked it up, we were stunned by the sheer number of people we’ve managed to connect with over the past several years.

If you are one of the many thousands of subscribers to the Devoncroft blog, we’re working behind the scenes to migrate you to the new site.  However, if you want to make sure you don’t miss any updates, please visit our new site, and enter your email address on the homepage.

If you would like to participate in Devoncroft research projects, you can register your details here.

We’re excited about our new website, which better demonstrates our position in the market as the most influential market intelligence provider and thought leader in the media and broadcast technology sector (according to our clients, not us).

This “legacy” site will remain, active for the foreseeable future.  However, it will no longer be updated.

All new articles, blog posts, industry analysis, and other information will be published only on the new Devoncroft website.

Please click here if you are specifically interested in the Devoncroft Executive Summit at the 2018 NAB Show.


Thank you again for your support. Here’s to the next ten years!


The Devoncroft Team.


© Devoncroft Partners 2009- 2018


Avid Terminates CEO Louis Hernandez, Jr. for Misconduct, Rosica Appointed CEO

Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Feb 26 2018

The Board of Directors at Avid voted on February 25, 2018 “to terminate the employment of Louis Hernandez Jr., Chief Executive Officer, effective immediately, due to violations by Mr. Hernandez of the Company’s policies related to workplace conduct,” according to a filing with securities regulators.

As a result of this termination under his employment agreement, Mr. Hernandez is no longer the Company’s Chief Executive Officer. Hernandez has also resigned from his position on the Avid Board of Directors and Nancy Hawthorne has been elected Chairman of the Board.

Avid said the termination of Hernandez is “due to violations of Company policies related to workplace conduct.”

The company provided more detail, saying: “With the assistance of independent external legal counsel, a Special Committee comprising independent members of the Board of Directors conducted a thorough investigation into allegations of improper non-financially related workplace conduct by Mr. Hernandez. After reviewing the findings of the Special Committee’s investigation, the Board of Directors unanimously concluded that the findings warranted immediate termination of Mr. Hernandez’s employment.”

Jeff Rosica, who has been serving as the Company’s President, as the Company’s Chief Executive Officer, effective immediately

“I am honored and excited for this opportunity to lead Avid through this important moment in the Company’s history,” said Roscia. “The outlook for Avid is strong, and I look forward to working with the leadership team, the Board and our incredibly talented employees as we execute on our strategic priorities and continue our journey to be a best-in-class company and leader in our industry.”

Nancy Hawthorne, Chairman of the Avid Board of Directors, said, “Jeff’s deep experience as an industry expert coupled with his impressive knowledge of Avid’s business and strategy make him the natural choice to lead the Company.”




© Devoncroft Partners 2009- 2018




Grass Valley Paid $94.2M for Snell Advanced Media

Analysis, Annual Results, Broadcast Vendor M&A, Conference Sessions, SEC Filings | Posted by Joe Zaller
Feb 13 2018

Last week, Belden / Grass Valley announced it had closed the acquisition of Snell Advanced Media (SAM).

At that time, the company did not disclose the terms of the deal.

Today, Belden said in a filing with securities regulators that it paid $75.8 million plus the assumption of $18.4 million of debt for a company it acquired on February 8, 2018 (the same day it confirmed the SAM acquisition).

This equates to an enterprise value of $94.2 million.

Based on filings with the UK government, SAM’s parent company had revenue of £90.8 million ($123 million USD at 2016 average exchange rate) through December 31, 201, and increase of 20.3% from £75.4 million ($115.2 million USD at 2015 average exchange rate) for the 12 months ending December 31, 2015.

Based on its previous acquisitions in the broadcast industry, Belden typically pays around 8x EBITDA when it buys a company.  If that was the case in the SAM transaction, it would mean that SAM’s EBITDA over the trailing twelve months prior to the acquisition was $11.775 million. However, in its filing with UK regulators, SAM said it had EBITDA of -£1.6 million for the 12 months ending on December 31, 2016.  Performance for the full year 2017 is unknown.

Given SAM’s growth from 2015 to 2016, the company may have achieved positive EBITDA, but the full details won’t be known until Belden provides additional information about the transaction (which it said it will do closer to the 2018 NAB Show).  It’s also possible that the valuation was based on a multiple of SAM’s sales in 2017.


Attend the 2018 Devoncroft Executive Summit to hear more about Belden’s strategy

For those wondering about Belden’s plans for SAM, and whether it continues to look for M&A targets in the broadcast industry, join us on April 8, 2018 to find out.

That’s the date of the seventh annual “Devoncroft Executive Summit: The Business of Media Technology,” where Belden CEO John Stroup will be take part in a panel of broadcast technology supplier CEOs.

Registration for the 2018 Executive Summit is available here.


The relevant text from Belden’s filing has been pasted in below:

Note 28: Subsequent Events

On February 8, 2018, we acquired a company for a purchase price of $75.8 million, plus we assumed debt of $18.4 million. The acquisition includes a potential earn-out for which we have not yet estimated a fair value. This acquisition was funded with cash on hand.

We are in the preliminary phase of the purchase accounting process, including obtaining third party valuations of certain tangible and intangible assets acquired. As such, the purchase accounting process is incomplete and we cannot provide the required disclosures of the estimated fair value of the assets and liabilities acquired for this business combination.



Related Content:

2018 Devoncroft Executive Summit: The Business of Media Technology

Belden/Grass Valley Acquires Snell Advanced Media

Grass Valley Q4 2017 Revenue Impacted by Revenue Recognition, Predicts Growth for 2018

Broadcast Vendor M&A: Belden Completes Acquisition of Grass Valley, Will Invest $25 Million in Integration of Combined Business

More Broadcast Vendor M&A: Belden Buys Miranda for $350 Million in All-Cash Deal



© Devoncroft Partners 2009-2018.  All Rights Reserved.


Announcing the Devoncroft Media Technology Executive Summit – April 8, 2018 at the NAB Show

broadcast technology market research | Posted by Joe Zaller
Feb 12 2018

Whether you are a supplier, buyer, or investor in the media technology sector, you won’t want to miss the seventh annual “Devoncroft Executive Summit: The Business of Media Technology.”


This year’s conference will be held on Sunday April 8, 2018 from 1pm to 5pm in the Latour Ballroom at the Wynn Hotel in Las Vegas.

Now in its seventh year, this half day session will take place on Sunday April 8th from 1pm to 5pm in the Latour Ballroom at the Wynn Hotel.  Please note the new venue.


The Devoncroft Summit will feature executive panel discussions across the entire media value chain.  C-level executives from leading broadcasters, service providers, media technology vendors, and IT vendors will offer candid assessments of the business impact of market developments on their business models, operational practices, and strategic decision making.

In addition to a panel of broadcaster Chief Technology Officers (CTOs), we will also have a panel of broadcaster Chief Executive Officers (CEOs) for this year’s Summit. The audience will then have the opportunity to hear from both the technology and business decision-makers at high-profile broadcasters.

As a complement to the panel discussions and keynote presentations, we will review excerpts from the latest findings of Devoncroft’s Big Broadcast Survey, the industry’s definitive demand-side study of the broadcast and media sector.


Full details are available here.

More than 1,000 executives attended this standing-room only event at the NAB Show 2017. We hope to see you there.

Belden/Grass Valley Acquires Snell Advanced Media

Analysis, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results, Conference Sessions | Posted by Joe Zaller
Feb 08 2018

Belden announced it has closed the acquisition of Snell Advanced Media (S-A-M).

Terms of the deal were not disclosed.

The deal makes Grass Valley one of the largest media technology suppliers.

Clearly the company believes there is growth to be had in broadcast.  At the company’s December 2017 investor day, Belden CEO John Stroup said “I think that we have a lot more conviction around what’s happening in the broadcast industry than we did two years ago. And as you recall – or you may recall, our concentration within production, in particular around live, gives us a lot more confidence that we’re going to see growth in that end market than we did, say, in the last two to three years.”

Although at first glance there is substantial product overlap between Grass Valley and S-A-M, there are less similarities between each company’s geographic sales footprint, which will help Grass Valley expand into new customers. A Grass Valley spokesperson said that the deal would help the company extend its reach and provide in-region support to its global customer base.

Additionally, a number of each company’s respective product lines are complementary (in news for example), making the overall Grass Valley proposition more robust.

According to Belden management, S-A-M will be integrated into Grass Valley, and moving forward the S-A-M brand name will be retired, and “Grass Valley, a Belden Brand” will be used as the company name.

Tim Shoulders will be the president of the combined company, which will be headquartered in Montreal.

Belden executives cited multiple strategic reasons for the deal, including gaining market share, and an expanded geographic footprint.

“With this investment Belden again demonstrates our commitment to the broadcast industry. Adding SAM’s employees and products to the Grass Valley family extends Grass Valley’s global reach, makes us more agile and provides even more domain expertise to enhance Grass Valley’s industry-leading solutions in networking, news and live production and content delivery for broadcasters,” said Shoulders. Our customers face competition and uncertainty like never before. This transaction will help them navigate the technology options available to them with fewer concerns around interoperability and deployment complexity while providing them greater access to the innovators developing the solutions of tomorrow.”

Prior to doing this deal, Belden did substantial work to refinance its debt, which provided additional financial leverage for M&A.  Indeed, the company’s CFO often refers to the amount of “dry powder” that the company has available for M&A. At the company’s investor day, Stroup said “We [are] extremely pleased with the execution of our debt refinancing and repayment during the quarter. By issuing €450 million of senior subordinated notes at 3.375% and €300 million at 2.875%, the lowest long-term borrowing rates in the history of the company, we have further lowered our cost of capital and extended our maturities. In total, we expect these actions to be accretive to EPS by $0.47 on a full-year basis.


Reminiscent of Previous Industry Roll-ups

The S-A-M deal is Belden’s fifth acquisition in the media and broadcast technology sector.


In addition to these transactions, Belden acquired KVM switch vendor Thinklogical in May 2017 for $171.3 million in cash, and added it to the company’s Broadcast Solutions segment for reporting purposes.

Including Thinklogical, Belden has invested $779.4 million in the broadcast industry since 2009.  When the company discloses the price paid for S-A-M, the thoal amouint will be known.

This level of investment is reminiscent of previous industry “roll-ups.”

Between 2000 and 2009, Harris Corporation spent approximately $1 billion on the acquisitions of vendors including Louth, Encoda, and Leitch. In 2012, Harris Corporation divested its broadcast division in a deal valued at up to $225 million.

A decade earlier, Technicolor (then Thomson) spent even more to acquire a slew of media technology supplier including 5 businesses of the Philips Professional Broadcast group (Cameras, Film Imaging, Signal Processing, Media Networking and Control & Systems), Canopus, PRN, ParkerVision, Nexstream, Thales Broadcast & Multimedia, and (coincidentally) Grass Valley.

Starting in 2010, Technicolor divested these businesses in separate transactions:


So why does Belden think it will be different for them?

Speaking at the 2017 Devoncroft Media Technology Business Summit, Belden CEO John Stroup said “Of all the industries we’re in, [media and broadcast] is the industry where the economic capabilities of the vendors are the least developed, and that creates a lot of stress for us.

Belden CEO John Stroup at 2017 Devoncroft Media Technology Executive Summit

Belden CEO John Stroup at 2017 Devoncroft Media Technology Executive Summit

“We would obviously prefer that all vendors were making good economic investments, because [today] we’re all investing in everything, and that doesn’t lead to particularly good economic returns. I think we’re all searching for a level of scale, because I think this is a business that requires a lot of scale from a commercial point-of-view. To operate globally, you need to generate the amount of revenue that gives you the scale from an R&D point of view. So, what we’ve been trying to do with our team is teach them different ways to evaluate how much to be spending, where to be spending, and trying to put some rigor and framework around it so we’re not doing anything that’s reckless. Some vendors have gotten themselves into problems…. We’re trying to really careful of where we place our bets.”

With the S-A-M deal, Belden achieves greater scale.

Additionally, the company has previously telegraphed its plan to build a factory in India, in order to lower its cost of production (it is unknown at this time whether the production of Grass Valley or S-A-M products will move to this factory once it opens).


Greater Control of the IP Transition?

Belden executives often speak about how industry-wide transition to IP-based infrastructure provides potential growth opportunities for Grass Valley. During Belden’s Q4 2017 earnings call, Stroup said Q4 2017 was Grass Valley’s strongest-ever quarter for sales of IP-based systems, and predicted that IP shipments would accelerate in the future, thanks to the adoption of new standards and increasing custom confidence in IP-based solutions. “We think [the finalization of the SMPTE 2110 standard is] an important development and certainly going to be helpful moving into 2018. We had our strongest quarter ever in IT-based product revenues in the fourth quarter. It was over $5 million. And it was to 36 different customers. So, it’s clear that our customers are getting more confident, more comfortable with the technology. I think they view us as really one of the only solutions that meets the open standard. As we’ve talked about, we have some competitors that have done very well, but their systems and their solutions are far more closed than what we’re offering and what the standard dictates. So, I think that the Grass Valley business, from a product point of view, is very well positioned moving into 2018.”

Indeed, as one of the three founders of AIMS, Grass Valley is a key player in the industry-wide transition to IP-based operations. The acquisition of S-A-M puts Grass Valley in control of more potential IP-related infrastructure refresh projects.

Because the broadcast industry is dwarfed by the broader IT market, the IT “titans” (such as Arista, Cisco, Huawei, and Juniper) tend to use established broadcast suppliers as a route to market.  By acquiring S-A-M, Belden now owns two of the top “traditional broadcast vendors,” making it more likely that they will successfully capture market share as the industry transitions to IP-based operations.



The Belden M&A Strategy

It shouldn’t be a surprise that Belden made this acquisition, over the past decade, the company has grown substantially through strategic M&A.

As recently as December 2017, Indeed, Belden routinely touts it well-established approach of acquiring underperforming assets, and generating synergies and cost savings through what it calls “The Belden Business System.”

During its December 2017 analyst day, Stroup told analysts “we continue to actively pursue a number of attractive inorganic opportunities. We currently have $475 million available for inorganic opportunities. We estimate that approximately $1.7 billion will be available through 2020. This will come from organic activities and it would be at or below net leverage of 3 times.


“Over the last three years, approximately 75% of capital deployment has been allocated towards M&A. Going forward, we expect to allocate approximately 55% towards M&A.

“Our acquisition approach always begins with our strategic plan. Nothing enters our funnel of opportunities, nothing begins cultivation until we identify an opportunity as either allowing us to take advantage of an opportunity or to address a threat.


“The companies that we pursue are typically company leaders within their specific area, often niches. They have products that are complementary to ours and typically there are opportunities for significant costs or commercial synergies.

“Typical bolt-on for Belden would be a company with revenue growth that is similar to Belden’s end markets. Gross profit margins are typically greater than Belden. However, EBITDA margins are typically lower than the Belden average.


And by applying our Lean enterprise system, we have the opportunity to achieve EBITDA margins at or above Belden average, achieve ROIC of 13% to 15% by year three and purchase the company for a post-synergy multiple of approximately seven times EBITDA.”


Related Content:

Grass Valley Q4 2017 Revenue Impacted by Revenue Recognition, Predicts Growth for 2018

Broadcast Vendor M&A: Belden Completes Acquisition of Grass Valley, Will Invest $25 Million in Integration of Combined Business

More Broadcast Vendor M&A: Belden Buys Miranda for $350 Million in All-Cash Deal



© Devoncroft Partners 2009-2018.  All Rights Reserved.


Grass Valley Q4 2017 Revenue Impacted by Revenue Recognition, Predicts Growth for 2018

Annual Results, Broadcast technology vendor financials | Posted by Joe Zaller
Feb 06 2018

Belden announced that revenues in its Broadcast Solutions segment were $174.7m, down 16.3% versus the previous year, and down 9.8% compared to the previous quarter.


As per the table above from Belden’s investor presentation, the company’s Belden’s Broadcast Solutions segment includes broadcast stalwart Grass Valley, along with PPC, a provider of components used by cable MSO, and KVM switch provider ThinkLogical.


Q4 2017 Broadcast Revenues Impacted by Revenue Recognition Issues

The company attributed much of the year-over-year revenue shortfall to the negative impact of revenue recognition issues.

“Most of our businesses performed in line with our expectations during the fourth quarter, with the exception of an isolated situation in our Broadcast Solutions segment,” said Belden CEO John Stroup, shown below speaking at the 2017 Devoncroft Media Technology Business Summit.

Belden CEO John Stroup at 2017 Devoncroft Executive Summit

“We had expected to recognize revenue on $36 million of product that was shipped in 2017, but we were unable to do so as a result of technical U.S. GAAP revenue recognition requirements that our team identified during the year-end closing process. We now expect these 2017 shipments to be recognized as $36 million in revenue and $22 million in EBITDA in 2018.”

On the company’s earnings call, Belden Chief Financial Officer Henk Derksen provided additional detail on the accounting issues that prevented the company from recognizing $36 million of broadcast revenue in the quarter: “We expected to recognize revenue on $36 million of orders in our Broadcast segment that shipped prior to the end of 2017. However, we are unable to do so, as a result of technical U.S. GAAP revenue recognition requirements, said Derksen.

These revenue recognition issues appear to be related to the shipment of IP-based systems, which either include or are sold through third-parties. As the industry transitions to IP-based operations for production, playout, and delivery, more and more products (from all suppliers) are likely to involve some sort of third-party, many vendors may begin to face accounting challenges similar to those encountered by Grass Valley in Q4 2017.

Derksen provided additional detail on the revenue recognition shortfall, saying: “[IIP n] certain transactions, our broadcast IT business shipped products through third-party logistics providers, or 3PLs. On all of these shipments, legal title and the risk of loss transferred to the customers at the time of the shipment, and we were entitled to receive payment. However, we did not meet all of the technical delivery criteria for revenue recognition under U.S. GAAP. Clearly, we’re disappointed with this outcome. That said, we are pleased that we identified this matter as part of our year-end closing process. Ultimately, we view this issue as a delay and have increased our 2018 guidance accordingly to reflect an incremental $36 million in revenue and $22 million in EBITDA.”

According to Derksen, these revenues will be recognized over the first three quarter of 2018. “The $36 million that we couldn’t recognize in the fourth quarter and will recognize in 2018 will layer in $15 million in Q1, $15 million in Q2, and $6 million in the third quarter,” said Derksen. “We have to modify some of our terms and conditions with our customers. That will take a little bit of time. So I don’t want you to expect that all the $36 million to reverse completely in Q1.”


Shipments of IP-based Products Accelerate

Despite the accounting issues, the company appears increasingly confident about the transition to IP-based operations.

Stroup said Q4 2017 was Grass Valley’s strongest-ever quarter for sales of IP-based systems, and predicted that IP shipments would accelerate in the future, thanks to the adoption of new standards and increasing custom confidence in IP-based solutions. “We think [the finalization of the SMPTE 2110 standard is] an important development and certainly going to be helpful moving into 2018. We had our strongest quarter ever in IT-based product revenues in the fourth quarter. It was over $5 million. And it was to 36 different customers. So, it’s clear that our customers are getting more confident, more comfortable with the technology. I think they view us as really one of the only solutions that meets the open standard. As we’ve talked about, we have some competitors that have done very well, but their systems and their solutions are far more closed than what we’re offering and what the standard dictates. So, I think that the Grass Valley business, from a product point of view, is very well positioned moving into 2018.”



Positive Outlook for 2018

Belden provided an upbeat outlook for its broadcast business in 2018. Stroup told analysts “I would expect our Broadcast segment to be in that range [3% – 5% organic growth], maybe towards the higher end, because when we report our organic growth in 2018, we’re going to give it based on what our actual revenues were in 2017 versus our actual revenues in 2018. So obviously our Broadcast segment is going to have a lot of tailwind coming into 2018. So I would expect that all of our platforms are going to be somewhere around 3% to 5%. The Broadcast segment may be on the higher end, maybe 5%, maybe a little bit higher given the fact that they have that $36 million of revenue coming into the year.


Full Year 2017 Broadcast Results

For the full year 2017, revenues in the Broadcast Solutions segment was $725.1 million, down 5.8% from $769.6 million in 2016.



Related Content:

Press Release: Belden Reports Results for Fourth Quarter and Full Year 2017

Press Release: Belden Reports Solid Results for Third Quarter 2017



© Devoncroft Partners 2009-2018.  All Rights Reserved.

Vitec Group Updates Segment Reporting for Broadcast Division

Annual Results, broadcast technology market research, Broadcast technology vendor financials | Posted by Josh Stinehour
Feb 05 2018

The Vitec Group, which owns more than a dozen brands in the broadcast industry, released an update of its financial performance through the first half 2017 based on its new segment reporting. 

The change followed the Company’s divestiture of its services business Bexel to NEP.  The new structure offers visibility into the two product groups Vitec sells in the broadcast industry.

As of November 2017, The Vitec Group reports across the following three Divisions:

  • Imaging Solutions contains the assets formerly reported in the Photographic division, which is focused on the professional and consumer photographers.
  • Production Solutions groups Vitec’s more traditional broadcast products, including camera supports, robotic camera systems, prompters, mobile power, lighting, along with the remaining service activities of Camera Corps and The Camera Store.
  • Creative Solutions comprises The Vitec Group’s video transmission systems (Paralinx, Teradek), monitors (smallHD), and camera accessories (Wooden Camera, Offhollywood).

One of the stated goals of the reporting modification is to give greater focus to the fast-growing independent content creator market where the Creative Solutions division has a larger presence.

It is interesting to note nearly all of the assets in Creative Solutions were acquired over the past five years.

Broadcast Operating Segment Results

The restated 2016 and 1H 2017 results illustrate the relative revenue contribution and profitability profiles of the Production Solutions and Creative Solutions divisions.

For full year 2016, Production Solutions represented 72.5% of Broadcast sales or £121.6 million.  Creative Solutions had sales of £45.9 million or 27.5% of Broadcast revenue.

When including an allocation for corporative overhead the operating margin profile for Production Solutions was 10.9% during 2016 and 16.8% for Creative Solutions.

During the first half of 2017 (ending June 30) Production Solutions had sales of £55.7 million (64.3% of Broadcast) and Creative Solutions contributed £30.8 million of revenue (35.7% of Broadcast).

Operating margins (with corporate allocation) for 1H 2017 were 9.5% for Production Solutions and 17.2% for Creative Solutions.

Vitec Group did not provide comparable year-over-year period presentations of the Divisions.  However, even using a straight line estimate, it is reasonable to view the Production Solutions as an approximately flat business (year-over-year) in the first half of 2017, as the second half is usually the stronger portion of the year.  Creative Solutions, in contrast, is experiencing strong growth.  The magnitude of growth is difficult to estimate given the inorganic additions to the division with the closing of the acquisitions of Offhollywood and Wooden Camera.  As a reference point, the 2016 restatement lists £20.4 million of investing activities attributable to the Creative Solutions division.

While growing faster, the Creative Solutions division is also meaningfully more profitable with operating margins in the high teens.  Thus, consistent with The Vitec Group’s stated intentions, this reporting approach provides greater visibility into the higher growth, higher margin Creative Solutions division.

In addition, the restatement of 2016 financial results further highlights the merits of the divestiture of Bexel.  This is not a commentary on the quality of Bexel, but rather an observation about the fundamentally different characteristics of Bexel’s asset and capital intensive business, which contrasts with the remaining product businesses.  Consider that during 2016 – the fourth year in the four year industry cycle – Bexel had revenue of £47.7 million, an adjusted (before impairments and restructuring costs) operating loss of £1.4 million, and capital expenditures of £7.1 million.  (It is appropriate to point out Bexel generated operating cash when adjusting for non-cash items and including rental asset disposals).

Full year 2017 results are scheduled for release on February 22, 2018.

Impact of US Tax Change

In the same release, Vitec offered guidance on the impact of the new Tax Cuts and Jobs Act legislation passed in the United States.  The immediate impact to Vitec is a revaluation lower of its US deferred tax balance by £7.0 million.  This is because the lower US tax rate of 21% (versus 34%) means tax losses have less value in the future.



Related Content:

Vitec Announces Segment Reporting, US Tax and Adjusted Performance Measures



© Devoncroft Partners 2009-2018.  All Rights Reserved.



ATEME Grows 29% in 2017; Hints at Acquisitions

Annual Results, broadcast technology market research, Broadcast technology vendor financials, OTT Video | Posted by Josh Stinehour
Feb 02 2018

Video compression specialist ATEME announced 2017 revenue of €49.6 million (~$61.8M USD), an increase of 29.3% versus full year 2016.  At a constant exchange rate, year-over-year growth was even greater at 32.5%.  

On a quarterly basis, Q4 2017 had revenue of €16.4 million, a 38.3% increase over Q4 2016.

Management called attention to 2017 representing the sixth straight year of revenue growth.  Annual revenue increases averaged 23% per year during 2011-2015, and have accelerated since.  In a related observation (and given the growth stats, perhaps justified), ATEME has adopted the tag line, “the emerging leader of video delivery.”

In its press release, ATEME also highlighted a strong Q4 in the EMEA region and a multi-million software contract with a major US service provider.

Revenue by Geography:

ATEME benefited from growth in all regions during 2017.

  • Revenues for the EMEA region during the year were €18.6 million, a 14.1% increase 2016. As a percentage of total sales, EMEA was 38.4% of revenue during 2017, which compares to 43.5% during 2016.
  • The USA / Canada region contributed revenue of €15.7 million, a 31.4% rise over the year-earlier period. USA / Canada was 32.4% percent of total sales in the period versus 31.9% during 2016.
  • Latin America was responsible for €7.9 million of revenue during 2017, a substantial increase of 90.4% versus 2016. For 2017, Latin America accounted for 16.5% of total sales, compared to 11.2% during 2016.
  • Asia Pacific accounted for €6.1 million of revenue, an increase of 22.3% versus the full year 2016. The Asia Pacific region contributed 12.7% of total sales during 2017, versus 13.4% during 2016. This adds to growth of 80% in 2016.

The growth in the Latin America region was attributed to strong demand for digital terrestrial distribution solutions.


Business Outlook:

Commenting on the 2018 outlook, ATEME President Michel Artieres stated, “The outlook for 2018 remains positive and we aim to deliver further healthy growth in all regions. We will continue to focus on developing or acquiring new solutions aimed at expanding our addressable market beyond the video headend segment, downstream to the distribution network.”  The reference to ‘acquiring new solutions’ may suggest some upcoming corporate initiatives on the part of ATEME.


Related Content:

ATEME Full Year 2017 Results Press Release



© Devoncroft Partners 2009 – 2018. All Rights Reserved.



Media Service Provider Vubiquity Acquired by Amdocs

broadcast technology market research, Broadcast Vendor M&A, Conference Sessions, Media Services M&A, OTT Video | Posted by Josh Stinehour
Feb 01 2018

Multi-billion dollar, multi-national Amdocs has signed a definitive agreement to acquire media service provider Vubiquity.

The $224 million cash deal has been approved by both the Boards of Directors of Vubiquity and Amdocs, and is expected to close during the second quarter of FY2018.

Amdocs (NASDAQ: DOX) is a provider customer service software to communications and media customers such as OSS (operational support systems) and BSS (business support systems) systems.  This acquisition is a significant expansion into the media industry for Amdocs, who did not have a booth at this past IBC and does not have a booth at this upcoming NAB Show (at the time of this writing).

Amdocs had already started to move deeper into the media technology sector with its September 2016 acquisition of Vindicia, a provider of subscription and payment solutions.  Vindicia’s payment solutions support several digital offers such as the BBC & iTV Britbox service and NBA League Pass. Amdocs purchased Vindicia for $90M.

This acquisition is a much further move into the media supply chain.  Vubiquity is a managed service provider connecting content owners and publishers with video distributors – both traditional PayTV operators and OTT publishers.  In its collateral Vubiquity cites relationships with over 650 premium content producers (film studios, television networks, etc …) and over 1,000 global video distributors (PayTV operators, OTT publishers, etc …).

Vubiquity had raised a total of $237.2 million over four rounds of funding between 2007 and 2012.  Current private equity owners include Columbia Capital and The Carlyle Group, whom invested $100 million of new funding as part of the Company’s purchase of SeaChange’s On Demand Group in 2012.

A series of M&A transactions built Vubiquity, beginning with the 2009 merger of Avail Media and TVN Entertainment – subsequently “Avail-TVN.”  Avail-TVN rebranded as Vubiquity in early 2013.

Later in 2013, Darcy Antonellis, then Warner Bros. CTO, joined Vubiquity as CEO.  Darcy’s notable resume also includes two speaking appearances at Devoncroft’s annual Media Technology Business Summit (see photo on left).  At the closing of the transaction Darcy will join Amdcos as head of the Amdocs Media Division.

More recent deals for the DETE (Digital-End-to-End) service from the Warner Bros. Technical Operations and Juice Worldwide, a digital supply chain solution company, further expanded Vubiquity’s portfolio.

The press release announcing the transaction states the “impact of the acquisition on Amdocs’ diluted non-GAAP earnings per share is expected to be neutral in fiscal year 2018, and accretive thereafter.” Since this is a cash transaction, it is difficult to derive any meaningful view on deal multiples from that statement.  However, Amdocs offered greater detail during its earnings call with analysts.

Tamar Rapaport-Dagim, CFO Amdocs, indicated an expectation of Vubiquity to contribute “approximately $100 million in the first 12 months after closing.” Ms. Rapaport-Dagim continued, “Vubiquity, as you can understand from the message that we think it will be a neutral impact on EPS in fiscal 2018 it’s coming with a low margin to start with. And we believe we can build it up along the time quite quickly, given both the top-line synergies and the cost structure synergies we see in front as opportunities.”

Using expected revenue contribution as a proxy for annual revenue suggests a deal multiple of 2.2x sales.

The stated level of revenue contribution contrasts with several earlier public data points on Vubiquity’s annual sales.  At the time of its rebrand, Management gave public guidance of annual revenue in excess of $250 million. Also, the inc5000 lists Vubiquity’s annual revenue in 2013 at $296.8 million.  Some caution is appropriate in concluding revenue has meaningfully decreased since Vubiquity’s business model may have passed thru content licensing revenue.  Such mechanisms or accounting treatment could result in materially different statements on revenue, depending on the context of the statement.

All communications by Amdocs cited a view of convergence between communications and media & entertainment.  “Investing in the growth engines of tomorrow is a core discipline of Amdocs and we see considerable opportunity resulting from the increased convergence of communications with media and entertainment” stated Eli Gelman, CEO Amdocs.

Mr. Gelman provided further commentary on the rationale during Amdocs earnings call with analysts.

“…we see increasing convergence between traditional wireless and Pay TV distributors, content owners and large OTT players.  By acquiring Vubiquity, we believe Amdocs will be uniquely positioned to address the requirements of distributors, content owners and web players as the lines between each become increasingly blurred.

Second, media and entertainment companies like Disney, HBO and Time Warner are reaching out directly to the end users with a direct content-to-consumer business model or what is called D2C direct-to-consumer. This trend requires new systems to support an improved customer experience that we believe Amdocs is well-positioned to provide.”



Related Content:

Video Message From Vubiquity and Amdocs Management



© Devoncroft Partners 2009-2018.  All Rights Reserved.


Ericsson Sells Majority Stake in Media Solutions Business

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Josh Stinehour
Jan 31 2018

Ericsson announced two major developments with its media operations: (1) the sale of a majority interest of 51% in its Media Solutions Business to private equity firm One Equity Partners; (2) and its decision to maintain ownership of Ericsson’s former Broadcast and Media Services, which was renamed Red Bee Media in November 2017. 

The Media Solution Business comprises Ericsson’s compression and PayTV product portfolio built in part through the acquisitions of Tandberg Television (2007), Microsoft Mediaroom (2013), Fabrix (2014), Azuki Systems (2014), and Envivio (2015).  Full year revenue for the Media Solution Business is around 3 billion SEK or approximately $380 million USD.

Red Bee Media encompasses Ericsson’s managed services portfolio in the broadcast sector, which was built in part through the acquisitions of Technicolor’s Broadcast Services (2012), Red Bee Media (2013), and FYI Television (2016). Annual revenue for Red Bee Media is approximately 3.5 billion SEK or around $444 million USD.

These announcements came after a nearly nine month evaluation of strategic alternatives for the businesses.  The initial announcement was made shortly before the 2017 NAB Show in March of last year.

Challenging operating performance for these businesses was also initially disclosed in early 2017.  It continued.  Ericsson’s Q3 2017 financial results showed a segment operating margin of -77% for the year-to-date nine month period in the Other segment where the Media Solution and Red Bee Media businesses were reported.  Further financial information indicated Media Solution and Red Bee Media represented around 75% of the sales reported in the Other segment during the third quarter of 2017.  In the most recent announcement, Management stated substantially improvements had been made during 2017, especially in regards to margins.

During its conference call with analysts, Ericsson indicated adjusted operating income for Red Bee Media was approximately -38M USD for 2017, though “steering towards breakeven.”

While improved, the Media Solutions business operating losses remained “substantially higher” than Red Bee Media in 2017.

The majority sale to One Equity Partners is anticipated to close in the third quarter of 2018.  As outlined in the public statements, at the time of closing employees, contractors, and specified assets and liabilities will transfer to the new company.  Since Ericsson is retaining a 49% ownership position, the Company will continue to report its portion of profit and loss in its financial statements.  No financial terms of the transaction were provided.

The decision to retain Red Bee Media was reached after considering a variety of alternatives.  While Ericsson disclosed it receive bids for Red Bee Media, Management concluded these bids did not reflect the value of the business.  In fact, Management stated in its public remarks that “upside from continued development was deemed to be significant.”

Several factors associated with the transaction are worthy of emphasis.  These combined businesses represent around 3% of Ericsson’s annual revenue.  While not significant assets in the context of Ericsson, these are considerable product and service portfolios in the global media technology sector.

The press releases announcing the strategic initiatives admonish several statistics highlighting the significant footprint of these businesses, among these almost 4,000 combined employees and a tier1 list of media customers. The consideration of their customers was apparent in Ericsson’s decision making. In fact, Ericsson’s President and CEO Börje Ekholm made explicit reference to this in the press release, stating “We are confident that the direction we announce today will enable us to create the best long-term value, for both our customers and our shareholders.”



Related Content:

Ericsson Press Release on Media Solutions Divestiture

Ericsson Press Release on Red Bee Media



© Devoncroft Partners 2009-2018.  All Rights Reserved.



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