Grass Valley Grows Double Digits; Ships 20th IP System in Q2

Posted by Josh Stinehour
Jul 19 2016

Belden announced second quarter 2016 results.  Belden’s largest division in terms of revenue is its Broadcast Solutions division (32% of overall revenue in the quarter).  The division includes the operations of Grass Valley along with Belden’s broadband connectivity businesses.  GrassValley_Logo

Broadcast Solutions revenue for Q2 2016 was $193.5 million, an increase of 10.6% versus the year earlier quarter, and an increase of 13.0% against the preceding quarter, Q1 2016.

Currency translation for Q2 resulted in an unfavorable impact of $1.1 million dollars.  Belden’s acquisition of m2fx in January 2016 contributed $2.1 million to the Broadcast Solutions division in the second quarter.  m2fx is a manufacturer of optical fiber protection tubes and was integrated into Belden’s broadband connectivity business, which is included in the reporting segmentation for Broadcast Solutions.

Grass Valley generated 12% year-over-year growth versus the second quarter of 2015.  On a regional basis, international growth at Grass Valley was 16%, while the United States region grew at 6% during quarter.

Management attributed the double digit performance to a stable US dollar, technology spend associated with the 2016 Summer Olympics in Brazil, and a rise in US advertising expenditures.

Improved year-over-year performance for Grass Valley was anticipated by Belden’s management.  During the Q1 2016 earnings call, Belden’s CEO John Stroup reiterated the softness in Grass Valley’s revenue numbers began in Q2 2015, making the Q1 2016 announcement the last difficult year-over-year comparison for the division.

During this quarter’s earnings call with analysts, Mr. Stroup made several comments on the recent financial results at Grass Valley.  “…the Grass Valley results were very strong and I think that some of that has to do with the Olympics. But I think more of it has to do with the fact that a year ago, we had a number of customers outside of the US that were struggling with exchange rates moving around, our International business was up 16% in Grass Valley in the quarter. And then I’d say the other thing is that as customers are beginning to get more confident in the transition of technology into IP, I think we’re also seeing that improve as well” said Stroup.

EBITDA (Earnings before interest depreciation and amortization) for Broadcast Solutions in the quarter was $29.5 million, a 29% increase versus Q2 2015, and a 27% decrease against Q1 2016.

The EBITDA margin for Q2 2016 was 15.2%, which compares to a 13.1% EBITDA margin in Q2 2015, and a 13.6% EBITDA margin in Q1 2016.  The primary reason for the profitability improvement was revenue growth and improved productivity, though in part offset by a less favorable product mix.

For the second quarter, Belden recognized a $1.3 million charge in its Broadcast Solution division for severance, restructuring, and acquisition integration costs.  This compares to restructuring charges for the division of $3.2 million during Q2 2015 and $4.3 million during Q1 2016.

In the Company’s prepared remarks, management highlighted further momentum with IP based solutions.  Adding to the 11 IP system shipments by Belden in Q4 2015 and Q1 2016, Belden shipped a further nine IP systems during the second quarter of 2016.

Responding to an analyst question Mr. Stroup added further context on the positive developments with Grass Valley’s IP solution portfolio.

“…It’s still a relatively small percentage of our revenue, and for most of our customers this is going to be sort of their first installation, their proof of concept. So I feel like we’re building momentum. I think that the real breakthrough for us was that a year ago in the market there was a lot of confusion with our customers about which way to go, because there were vendors that were sort of battling standards. And I think that partially due to our leadership and collaboration with other vendors in the industry, I think we now have a very good solution that meets customers’ needs and an open standard that they can rely upon and interoperability.”

Later in the call with analysts. Mr. Stroup announced a significant integration of Belden’s recent acquisition of security solution provider Tripwire with Grass Valley’s broadcast solutions.

“… we did have a substantial development in the quarter where we have in fact integrated the Tripwire technology into our iTX Playout system, which is an important part of the Grass Valley product portfolio. This is a software based Playout system that is used by the world’s leading broadcasters and we now have integrated the Tripwire software in to that system.

We made that available this quarter. I think we announced it at NAB…I think it’s an important development and it’s just one of the many ways that our Grass Valley business is differentiating itself from others. We are the only one in the industry that has done anything like that. And I think it’s an important development.”

 

Related Content:

Press Release: Q2 2016 Results:

Presentation: Q2 2016 Results:

Prepared management remarks: Q2 2016 earnings call with analyst

 

 

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