Archive for the ‘Broadcast technology vendor financials’ Category

Collaborative Market Sizing Initiative Reveals Structural Shift in Broadcast and Media Technology Industry

Analysis, broadcast industry technology trends, Broadcast technology vendor financials, market research | Posted by Joe Zaller
Aug 18 2015

Evolving end-user business models alter industry economics, drive significant changes in technology buying patterns, product and supplier choice, and outsourcing

 

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Gloucestershire, UK and Coronado, CA —  Spending on products and services in the $48 billion broadcast and media technology industry shifted dramatically between 2012 and 2014, according to the newly released Global Market Valuation and Strategy Report (GMVR), published by IABM DC LLC, a joint venture between IABM and Devoncroft Partners.

Considered by many to be the definitive source for broadcast and media technology market sizing, and now in its tenth year, the GMVR draws on actual and future projected revenue and product shipment data supplied to IABM DC by technology vendors and service providers under a framework of strict confidentiality. In aggregate, the 2015 GMVR data model covers approximately 3,000 technology vendors and service providers.

2015 GMVR data provides clear evidence of an industry-wide change in buying strategies by media technology end-users such as content creators, broadcasters, pay TV operators, and service providers.

After experiencing a 4% CAGR (compounded annual growth rate) between 2009 and 2012, the market total for broadcast and media technology products and services slowed considerably between 2012 and 2014, achieving a CAGR of 1.3%.

 

Structural Shift in Broadcast and Media Technology Industry

 

 

Significantly, revenue from products (both hardware and software) declined by 0.5% between 2012 and 2014, while revenue from services increased by 2.9%.  During 2014, services accounted for approximately $26 billion, or 54% of total spending by broadcast and media technology end-users.

“The commercial models of many broadcasters and media companies have changed dramatically,” said Joe Zaller, founder and president of Devoncroft Partners.  “The combination new digital and on-line delivery platforms, the shift to a file-based workflows, the increasing need for digital monetization, and the promise of commercial-off-the-shelf (COTS) IT hardware managed by software-defined networking have been catalysts for an industry-wide rethinking of both what technology is required to support future business goals, and whether it will be purchased or outsourced. We believe these factors will continue to alter the structure of the industry through the end of our forecast period (2018).

These factors, and their impact on the market are explored in more detail throughout the 2015 GMVR.

Peter White, chief executive, IABM says: “Although aggregate industry growth has changed, this is undoubtedly a dynamic time for our industry.  Revenue in some product categories has shown a degree of decline, however other parts of the market are growing quickly. The changing media landscape affecting the demand side of the industry is having repercussions on the supply side as well, requiring a re-thinking of many business models. During this period of “metamorphosis” there has been a slowdown of investment by end users as they seek a clearer vision of the business model and product roadmap going forward. Despite this hiatus confidence remains high in the broadcast and digital media technology market, particularly with the emergence of the many new innovations and opportunities that we anticipate will have a positive impact on growth.”

A must-read document for all broadcast industry strategists, the 450-page 2015 GMVR provides market sizing data for approximately 150 product categories, across nine market segments. It includes extensive written commentary about the drivers affecting the market, and an analysis of how changing markets and technologies may shape the future composition of the broadcast and media technology industry. The data tables that accompany the written report provide and regional splits and forecasts to 2018 at the segment and sub-segment levels.

For more information, please visit the IABM DC website.

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About IABM DC

IABM DC provides sought-after market intelligence on broadcast and digital media technology market sizing data to suppliers and purchasers of media technology worldwide. IABM DC is a joint venture between broadcast and digital media trade association IABM and Devoncroft Partners, an organisation that specialises in broadcast and digital media market research, strategic consulting and analysis.

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Broadcast Vendor M&A: ARRIS Buys Pace for $2.1 Billion

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Apr 22 2015

In the latest round of media technology consolidation ARRIS announced  it will acquire Pace for $2.1 billion in stock and cash.

ARRIS is financing the deal with just $55 million in cash.  The remaining $2.05 billion comes from a new incremental $800m credit facility underwritten by Bank of America Merrill Lynch, and $1.455 billion worth of newly issued ARRIS shares.

The transaction will result in the formation of “New ARRIS,” which is expected to be listed on the NASDAQ stock exchange under the ticker ARRIS.

Full details of the transaction are available in the Agreement and Plan of Merger file with the SEC.

In a presentation to investors, ARRIS provided the following graphical description of the post-closing structure of New ARRIS:

ARRIS Acquires Pace -- New Arris Post-Closing Structure

 

The deal comes just over two years since ARRIS paid $2.2 billion to acquire the Motorola Home business from Google and catapulted itself to global leader status in the process.

According to the company, the deal “significantly enhances ARRIS international presence, provides large scale entry into satellite segment, [and a] broader product portfolio in equipment, software and services.”

In a letter to employees, ARRIS chairman & CEO said the acquisition of Pace “opens the door for ARRIS’s next phase of growth – through a broader geographic and customer footprint, newly combined complementary product offerings, and enhanced scale. It will provide us with a large-scale entry into the satellite segment. By adding Pace’s innovation and talent, we can further broaden our product portfolio in equipment, software, and services. We will also benefit from Pace’s strong presence in Latin America – one of our industry’s highest growth regions – opening up new global opportunities.”

ARRIS described the Pace product portfolio in the chart below:

ARRIS Acquires Pace -- Pace Product Portfolio

 

The acquisition of Pace gives ARRIS a stronger position in the set-top box business, at the same time as Cisco is being urged by investors to exit from its set-top box unit.  For the first six months if its 2015 fiscal year, revenue in Cisco’s “Service Provider Video” business, which includes STBs decreased by more than 15% versus the same period last year.

“This transaction is another example of ARRIS’s ongoing strategy of investing in the right opportunities to position our company for growth. Adding Pace’s talent, products and diverse customer base will provide ARRIS with a large scale entry into the satellite segment, broaden our portfolio and expand our global presence. We expect this merger will enable ARRIS to increase its speed of innovation. We believe this is a tremendous opportunity for ARRIS and our customers, employees, shareholders and partners around the world as we collaborate to invent the future,” said  Stanzione.

“Pace plc is a great company with a strong track record of pioneering innovation and excellent customer service. Through a combination of organic development and acquisitions, Pace has grown to be a leading technology solutions provider to the PayTV and Broadband industries serving cable, satellite and telco customers across the globe. Over the last three years, Mike Pulli and the wider Pace team have successfully executed against our strategic plan to develop Pace into a more distinctive, profitable and cash generative company, creating significant value for shareholders.

“The Pace Directors believe that ARRIS’s offer recognises this value and also gives our shareholders the opportunity to share in the future success of the combined group. While we believe that Pace is strongly positioned to continue to execute its strategy in the medium and long term, we believe that the combination of the complementary ARRIS and Pace businesses will create a platform for future growth above and beyond our standalone potential. We believe this is a great fit for both companies, our employees, customers and trading partners,” said Allan Leighton, Chairman of Pace.

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Related Content:

Press Release: ARRIS to Acquire Pace plc for $2.1 Billion in Stock and Cash

ARRIS-PACE AGREEMENT AND PLAN OF MERGER

Investor Presentation — ARRIS TO ACQUIRE PACE PLC

ARRIS Employee Letter

Arris-Pace Merger Credit Agreement

Reuters: Arris to buy British set-top box maker Pace in $2.1 billion deal

Reuters — Analysis: Some Cisco investors urge an exit from set-top box unit

Press Release: ARRIS Acquires Motorola Home: Creates Premier Video Delivery and Broadband Technology Company

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Industry Thought Leaders to Discuss “Shifting Media Economics: Impact on Strategy, Finance, and Technology” at 2015 NAB Show

Analysis, broadcast industry technology trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor M&A, Conference Sessions, Online Video, OTT Video | Posted by Joe Zaller
Apr 09 2015

Whether you are a supplier, buyer, or investor in the media technology sector, you won’t want to miss the fourth annual NAB Show event co-produced by Devoncroft Partners and the organizers of the NAB Show.

 

NAB Devoncroft 2015 Shifting Media Economics Session Announcement

 

Now part of the NAB 2015 Media Finance and Investor Conference, “Shifting Media Economics: Impact on Strategy, Finance, and Technology,” will be held on Sunday April 12, 2015 in room N235 of the Las Vegas Convention Center.

Designed to be a thought-provoking kickoff to the 2015 NAB Show, this half-day conference examines the “the business of the media business” from the perspective of all levels of the media value chain. It includes panel discussions featuring C-level executives from leading broadcasters, service providers, technology vendors, and private equity investors. Each group will offer a candid assessment of how their respective business models, operational practices, and strategic decision making have been impacted by the dramatic shift in media industry economics.

The keynote, “The Future of TV. One Man’s Opinion.” will be delivered by Bob Bowman, President, Business & Media of Major League Baseball (MLB), who oversees MLB Advanced Media (MLBAM) and MLB Network.

MLBAM has been involved with several recent high-profile streaming events including WrestleMania 31, the opening day of Major League Baseball, the NCAA March Madness basketball tournament, and the recent launch of HBO Now.  Bowman is scheduled to take the stage just one hour before the highly anticipated season 5 premiere of “Game of Thrones” becomes available via HBO Now.

The conference will also include presentations of the latest market research on industry trends and financial performance.  This includes preliminary excerpts from the Devoncroft Big Broadcast Survey, the industry’s definitive demand-side study of the broadcast and digital media industry; and the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

In advance of the NAB Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector. This report is available to download here (registration required).

This conference is intended for senior executives from technology vendors, end-users, and investment firms in the media technology sector. It provides an excellent opportunity to network with industry executives and the financial community ahead of NAB show commitments.

Approximately 400 executives attended this standing-room only event in 2014. We hope to see you there on Sunday April 12, 2015.

Please note that because this event is part the 2015 NAB Show Media, Finance and Investor Conference, registration is required.

 

An overview of the conference is included below.  Full details are available on the NAB Show website.

 

Shifting Media Economics: Impact on Strategy, Finance, and Technology

 

1:40pm – Welcome and Introductions

Presenter:

  • Peter White, CEO IABM

 

 

1:50pm – Review of Market Developments

Josh Stinehour of Devoncroft will take the podium for his annual (enthusiastic) presentation on developments in the media technology sector.  If you have any final announcements you would like Josh to consider for his presentation, let him know.

Presenter:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

 

2:15pm – The Broadcast & Media Technology Industry in 2015

Devoncroft founder Joe Zaller will present a data-driven overview of the forces bringing dynamic change to the media technology sector in 2015. This will include preliminary results of the 2015 Big Broadcast Survey, the industry’s most comprehensive demand-side study, and observations from the 2015 IABM DC Global Market Valuation Report, the industry’s definitive supply-side market sizing report.

Presenter:

  • Joe Zaller, President Devoncroft Partners

 

 

2:40pm – Business Strategy Perspectives from Industry Executives

CEOs from four of the media and broadcast industry’s largest technology suppliers will debate the most important commercial issues facing the industry, and discuss their strategies to position their companies for success in a rapidly evolving marketplace.  The panelists will also offer opinions on how changes in the business environment are impacting vendors and customers.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Patrick Harshman: President and Chief Executive Officer, Harmonic, Inc.
  • John Stroup: President, Chief Executive Officer, Belden, Inc.
  • Tim Thorsteinson: Chief Executive Officer, Quantel and Snell
  • Charlie Vogt: Chief Executive Officer, Imagine Communications

 

 

3:20pm – The Broadcast Buyer Perspective on Industry Trends

Senior technology executives from four leading broadcasters will offer informed perspectives on the most significant industry trends affecting technology budgets and the technology purchase decision.  The audience will benefit from an emphasis on the business implications of technology decisions to broadcasters.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Ken Brady: SVP Media Technology and Operations, Turner Broadcasting Systems
  • Richard Friedel: EVP & General Manager, Fox NE&O
  • Fred Mattocks: GM Media Operations & Technology, Canadian Broadcasting Corporation
  • Bob Ross: SVP East Coast Operations, CBS Broadcasting, Inc.

 

 

4:00pm – The Service Provider Perspective on Industry Trends

A panel of executives from leading media service providers will discuss views on both technology developments and deployment considerations for media organizations.  Discussion topics will include solutions for multi-platform content delivery, the economics of outsourcing, how service providers can leverage their scale to deliver increased performance and agility, and how next-generation data center architecture may impact the media ecosystem.

Moderator:

  • Joe Zaller, President Devoncroft Partners

 

Panelists:

  • Darcy Antonellis: Chief Executive Officer, Vubiquity
  • Anil Jain: SVP & GM Media Group, Brightcove, Inc.
  • Steve Plunkett: Chief Technology Officer, Ericsson Broadcast & Media Services

 

  

4:30pm – The Institutional Investor Perspective on Industry Trends

A panel of leading investment professionals in the media and entertainment sector will offer the audience the institutional investor’s perspective on the industry. The discussion will include the panelists’ intelligence-gathering plans for the NAB Show, views on the trends that are driving investment dollars in the sector, and a review of the characteristics influencing the evaluation of an investment opportunity in the media technology industry.

Moderator:

  • Joshua Stinehour, Principal Analyst Devoncroft Partners

 

Panelists:

  • Chris Kanaley: Vice President, Parallax Capital
  • Nick Lukens: Vice President, Vector Capital
  • Bryce Winkle: Vice President, The Gores Group

 

5:00pm – Keynote: The Future of TV. One Man’s Opinion.


Presenter:

  • Bob Bowman, CEO MLB Advanced Media

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Strong Sales in Americas Drives Orad Revenue 27 Percent Higher in 2014

Annual Results, Broadcast technology vendor financials, Quarterly Results | Posted by Joe Zaller
Mar 10 2015

orad_Logo

Graphics and media asset management (MAM) provider Orad reported that its revenue for the fourth quarter of 2014 was $10.6m, an increase of 21.7% versus the same period a year ago, and up 1% versus the previous quarter.

Product revenue in Q4 2014 was $8.2m, or 78% of total revenue, an increase of 53.4% versus the 4th quarter of last year when product sales were $5.4m, or 61.9% of total revenue.

Service revenue in Q4 2014 was $2.3m, or 22% of total revenue, a decline of 29.7% versus the 4th quarter of last year when service revenues were $3.3m, or 38.1% of total revenue.

Net income for the quarter was $1.1m versus a net profit of $200,000 during the same period a year ago, and a net profit of $800,000 last quarter.

Gross margins for the quarter were 69.9%, versus 68.6% last year, and 71.1% last quarter.

Operating income for the quarter was $900,000, versus an operating loss of $1.5m during the second quarter of 2013, and operating income of $800,000 last quarter.

Cash, cash equivalents and restricted cash at the end of  December 2014 were $10.4m, compared to $9.1m at the end of September 2014, and compared to $5.7m at the end of December 2013.

 

Full Year 2014 Results

For the full year 2014, Orad’s revenue was $40.5m, up 27.3% versus 2013.

Revenue from Europe was $19.2m, up 38.2% versus 2013.  Europe accounted for 47.3% of total 2014 revenue.  In 2013, revenue from Europe was $13.86m, or 43.6% of total revenue.

Revenue from Asia was $6.5m, a decline of 5.7% versus 2013.  Asia accounted for 16% of total 2014 revenue.  In 2013, revenue from Asia was $6.9m, or 21.6% of total revenue.

Revenue from the Americas was $14.3m, an increase of 44.5% versus 2013. The Americas accounted for 35.3% of total 2014 revenue.  In 2013, revenue from the Americas was $9.9m, or 31.1% of total revenue.

Product sales for year were $31.3m, an increase of 31.5% versus 2013.  Product sales accounted for 77.2% of total revenue in 2014, up from 74.8% in 2013.

Service revenue for 2014 was $9.2m, up 14.9% versus 2013. Service revenue accounted for 22.8% of total revenue in 2014, compared to 25,2% in 2013.

Operating income for 2014 was $4.36m, compared to a loss of $1.6m in 2013.

Net income for 2014 was $3.4m, compared to a net loss of $1.9m in 2013.

Gross Margins for 2014 were 69.7% up from 66.6% in 2013.

Operating expenses for the year were up across the board.

R&D expenses for 2014 were $6.1m, up 3.5% versus 2013. R&D expenses accounted for 15.1% of total revenue in 2014, compared to 18.6% of total revenue in 2013

Sales & marketing expenses for 2014 were $13.8m, up 4.5% versus 2013. Sales & marketing &D expenses accounted for 34.2% of total revenue in 2014, compared to 41.6% of total revenue in 2013

G&A expenses for 2014 were $3.9m, up 9.7% versus 2013. G&A &D expenses accounted for 9.7% of total revenue in 2014, compared to 11.4% of total revenue in 2013

“We are pleased to announce that 2014 has been our most successful year in many aspects,” said Orad CEO Avi Sharir. “Profits have continued to increase, reaching the highest level in the company’s history. Our operating income for 2014 was 10.8% from revenues, far better than our outlook of 8%-10%. We have succeeded in meeting these impressive results thanks to our strong increase in revenues resulting from our wide range of products and solutions, our extensive geographic presence and as a result of our increased efficiency. Our strategy to offer customers comprehensive solutions was very successful with several very significant sales. Orad’s solutions’ offering brings added value to the customer by simplifying his workflow, while offering a one stop shop for the entire solution. Our servers took the forefront this year, penetrating new markets. We are seeing increased interest from existing and new customers, and given the size of the potential market, we are aiming to increase our market share. Our strategy to strengthen our presence in the North American market in 2014 proved successful, doubling our bookings compared to 2013.

 

Outlook:

“I am confident that Orad will continue in 2015 in the same direction as we continue to invest in cutting edge new technologies and increase our presence in existing and new markets,” said Sharir.

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Related Links:

Press Release: Orad Reports Financial Results for the Fourth Quarter and for the for the Full Year of 2014

Orad’s Revenue Jumps 40.7 Percent in Q2 2014

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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ChyronHego Taken Private by PE Firm, Delisted from NASDAQ

Annual Results, Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results, SEC Filings | Posted by Joe Zaller
Mar 09 2015

ChyronHego LogoVector Capital has completed the previously announced $120m deal to acquire ChyronHego and take it private.

Under the terms of the deal, ChyronHego stockholders will receive $2.82 per share in cash, and ChyronHego common stock has ceased trading on the NASDAQ Stock Exchange.

According the definitive proxy statement, the purchase of ChyronHego will be funded by a combination of equity and debt financing.

Equity financing will be provided by Vector Capital and its affiliates, who have committed to pay approximately $49.3m towards the acquisition, and related expenses.

Debt financing is being provided by Silicon Valley Bank (SVB) and Apollo Investment Corporation (Apollo) in the form of a $50m senior secured five-year term loan, which is expected have interest of “either (i) the Eurodollar Base Rate plus 5.625% (subject to a 1.0% floor with respect to the Eurodollar Base Rate), or (ii) at the Adjusted Base Rate (defined as the highest of (w) 2.75% of (x) the Wall Street Journal Prime Rate and (y) the Federal Funds Rate plus 0.50%) plus 3.875%.”

Separately, SVB and Apollo have also providing a $7m senior secured revolving credit facility that has the same terms as the senior five-year term loan. ChyronHego will use the revolving credit facility for working capital and capital expenditures and other general corporate purposes.

In its last quarter as a public company (Q3 2014), ChyronHego posted a net loss of $2.6m on revenue of $14m.

During the first nine months of 2014, ChryronHego posted a net loss of $2.8m on revenue of $43.3m.

For the trailing twelve months (TTM) ended September 30, 2014, ChyronHego had revenue of $58m, comprised of $27.2m of product revenue and $30.8m of service revenue.

In a securities filing, ChyronHego said it ended 2014 with approximately $5.4m in cash and equivalents; and projected that its revenue for the full year 2014 would be $59m.

“We are delighted to be working with Vector Capital,” said Johan Apel, President and Chief Executive at ChyronHego. “As a private company, ChyronHego will be ideally positioned to reinforce the company’s leadership in news, sports and live production solutions. The Vector team has a strong track record of success in acquiring and operating innovative technology companies, and our partnership with them will enable us to reach new levels of scale, technological capabilities and customer service.”

David Fishman, Managing Director at Vector Capital, who will join ChyronHego’s Board of Directors, said: “We believe that as a private company with Vector’s financial support ChyronHego will be well positioned to capitalize on the significant opportunities in broadcast graphics creation, play-out and real time data visualization. Over time, we are confident the company will be well positioned to capitalize on the exciting trends in the sports, news and live television markets.”

“We welcome ChyronHego to the Vector family,” said Nick Lukens, Vice President at Vector. “We are very excited to roll up our sleeves and get to work with the talented team at ChyronHego. Through our partnership with management, we are committed to strengthening and expanding ChyronHego’s market leading product and service capabilities.”

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Related Content:

Press Release: Vector Capital Completes Acquisition of ChyronHego

Certificate of Merger

ChyronHego Makes Revealing Disclosures About “Going-Private” Transaction

Broadcast Vendor M&A: ChyronHego to be Taken Private by Vector Capital in $114 Million Deal

ChyronHego 8-K: Additional Disclosures Regarding Vector Transactions

ChyronHego: Definitive Proxy Statement on Vector Take-Private Transaction

ChyronHego Investor Presentation March 2014

ChyronHego Investor FAQ and Introduction to Vector Capital

Agreement and Plan of Merger: ChyronHego Corporation, Vector CH Holdings (Cayman), L.P., And CH Merger Sub, Inc.

ChyronHego SEC Filing: Entry into a Material Definitive Agreement with Vector Capital

ChyronHego One Year Stock Price Chart

Broadcast Vendor M&A: Vizrt to be Taken Private in $374 Million All-Cash Deal

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Thorsteinson Replaces Cross as CEO of Quantel and Snell

Analysis, Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results | Posted by Joe Zaller
Mar 04 2015

Quantel and Snell announced that Tim Thorsteinson has replaced Ray Cross as CEO, effective immediately.news_Tim_Thorsteinson

According to the company, Thorsteinson “is the ideal individual to lead the next stage in the development of the combined Quantel and Snell.”

Cross, who had been CEO of both Quantel and Snell since March 2014, when it was announced that Quantel had acquired fellow UK-based broadcast technology vendor Snell, a deal that had been long-rumored in the industry, since the two companies already had a common parent, Lloyds Development Capital (LDC), the investment arm of Lloyds Bank.

Previously, Cross had been CEO of Quantel since December 2005.

At the time of the Quantel-Snell deal, the company said in a statement that the combined entity had revenue of more than $170 million and office in 16 locations around the globe, making it one of the larger vendors in the broadcast industry.  The company has not provided an update on its performance since that time.

It will be interesting to see what moves Thorsteinson, a longstanding broadcast industry executive, will make as CEO of Snell and Quantel, companies he has competed against in previous roles.

Thorsteinson is a well-known figure in the broadcast industry having headed-up several of the industry’s largest technology vendors over the past 15 years.

In January 2013, Thorsteinson was named CEO of Grass Valley, replacing Alain Andreoli, who had been appointed by private equity firm Francisco Partners following their 2010 acquisition of Grass Valley from Technicolor.

Just over a year later, Thorsteinson oversaw the $220m sale of Grass Valley to Belden Corporation, who combined it with Miranda, keeping the Grass Valley moniker for the enlarged entity.

Interestingly, Thorsteinson was also involved in the sale of Miranda to Belden.  In April 2012, he appointed a director of Miranda Technologies during the time that activist investor JEC Capital was agitating for a sale of that business.  Three months after Thorsteinson became a director of the company, Belden Corporation acquired Miranda for an enterprise value of $356m.

Thorsteinson was the President of Harris Corporation’s Broadcast Communications Division from 2006-2010.  He was appointed to this role following the $460m purchase by Harris of Leitch Technology Corporation, where Thorsteinson had been CEO since November 2003.

Prior to Leitch, Thorsteinson was CEO of Grass Valley Group, and oversaw the December 2001 sale of Grass Valley Group to Thomson Multimedia for $172m.

“We are delighted to have Tim Thorsteinson join Quantel to continue the company’s transformation. Tim has a proven track record of value creation, and his knowledge and experience are a great fit to grow the combined Quantel and Snell business into a major force in the rapidly changing broadcast industry,” said Chris Hurley, Managing Director Lloyds Development Capital and Quantel Board Director. “I would also like to thank Ray for all his hard work and achievements at Quantel over the past 10 years.”

“I’m very excited to be joining Quantel,” said Thorsteinson. “It is one of the larger independent businesses in our industry, with world class products and a rich history of innovation. I want to build on that tradition to create an organization 100% focused on helping our customers prosper in the media technology world.”

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Related Content:

Press Release: Tim Thorsteinson becomes Quantel CEO

Broadcast Vendor M&A: Quantel Acquires Snell

Press Release: Quantel acquires Snell to create new force in media technology

Quantel – Snell FAQ

Belden Makes it Official – Combination of Grass Valley and Miranda to be Called Grass Valley

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

Broadcast Vendor M&A: Belden Buys Grass Valley for $220 Million

Belden Closes Deal to Acquire Miranda

Thorsteinson Appointed to Miranda’s Board of Directors in Otherwise Uneventful AGM

Miranda Nominates Tim Thorsteinson as Director

Activist Shareholder Drama Continues at Miranda Technologies

Technicolor Receives a Binding Offer from Francisco Partners for Grass Valley Broadcast Business

Press Release: Tim Thorsteinson Named President of Harris Corporation’s Broadcast Communications Division

Press Release: Harris Corporation Completes Acquisition of Leitch Technology

WSJ Article: Thomson Multimedia to Buy Grass Valley for $172 Million

Broadcast Vendor M&A: Belden Buys Grass Valley for $220 Million

Belden’s Acquisition of Miranda to Close on or Before July 27, 2012

TVNewsCheck Article (9-29-2011): Tech One-on-One With Simon Derry — Snell Aims To Master the U.S. Market

Advent Venture and LDC close £72m broadcasting merger

Advent Venture Partners and LDC Complete Their Portfolios Merger – March 9, 2009

Video: Pro-Bel and Snell & Wilcox CEOs Discuss Merger (2009)

Press Release (11-6-2003): Chyron Sells Pro-Bel to LDC

Broadcast Magazine (2002): Snell Secures £22m from Advent

Press Release (2002) Advent Venture Partners invests GBP13m in Snell & Wilcox

Variety Article (7-14-2000): Carlton sells tech arm Quantel to LDC for £51 million 

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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ChyronHego Makes Revealing Disclosures About “Going-Private” Transaction

Analysis, Annual Results, Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Feb 27 2015

ChyronHego_Logo

In November 2014 broadcast graphics specialist ChyronHego entered into a definitive agreement to be taken private by Vector Capital in an all-cash deal that valued ChyronHego at an equity value of approximately $114m, or $2.82 per share.

Shortly thereafter, six lawsuits challenging the proposed acquisition of the company were filed in the Supreme Court of the State of New York, which were subsequently consolidated into a single case.

The consolidated case alleges that the company’s directors “breached their fiduciary obligations in connection with their approval of the Merger Agreement by entering into a transaction that is coercive and constitutes an unfair and inequitable subversion of shareholders’ rights, and that the entity defendants aided and abetted those breaches.”

ChyronHego and Vector Capital recently entered into a memorandum of understanding (MOU) with respect to a proposed settlement of case, and agreed to provide more information relating to the proposed deal to take ChyronHego private.

According to a recent filing with securities regulators, ChyronHego has now disclosed additional information regarding the proposed deal, including the following:

  • Beginning in November 2013, ChyronHego’s board authorized ChyronHego’s President and Chief Executive Officer Johan Apel to explore ChyronHego’s strategic alternatives

 

  • ChyronHego and Vector Capital entered into a confidentiality agreement in February 2014

 

  • Discussions on the potential of ChryonHego’s management rolling over equity as part of the transaction did not occur with certain other interested parties.

 

  • During a Special Committee (consisting of Independent ChyronHego Directors) meeting in July 2014, the Company’s bankers were informed “Mr. Apel was not happy being the Chief Executive Officer of a publicly traded company.”

 

  • During the “go-shop period,” ChyronHego executives met with two interested parties, neither of which decided to make an offer

 

  • Additional information was provided on the valuation metrics used in the Company’s analysis of the purchase price offered by Vector.

 

 

Excerpts from ChyronHego Definitive Proxy Statement

The broader proxy statement is a lengthy read covering the historical events leading to the proposed transaction, ChyronHego’s rationale for entering the transaction, and additional information on the perspective of the board and management.

Several excerpts are worth highlighting:

  • Since November 2014, ChyronHego’s investment bankers contacted 85 potential buyers: 20 strategic buyers and 65 private equity buyers. Only nine potential buyers entered into confidentiality agreements to review more detailed materials.  None submitted bids for ChyronHego

 

  • In considering the merger, ChyronHego’s board noted the “significant increase in competition in competition in the broadcast graphics creation, playout and real-time data visualization industry over the past two years, which had led in some instances to pricing pressure and discounting on ChyronHego’s products and services, and consistent competition for clients and customers with other companies, such as Vizrt, that were increasingly well-capitalized.”

 

  • The board had concerns on ChyronHego’s access to capital as a small, public company. “Members of the Board believed, based on their experience with the capital markets, that issuers with small market capitalizations and insignificant levels of coverage by investment analysts generally have a more difficult time raising meaningful amounts capital on terms that are not punitively dilutive to their shareholders.”

 

  • ChyronHego provided the following financial projections to Vector Capital:

 

ChyronHego Projections to Vector

 

  • Financing for the transaction will include a rollover of existing management shares in an aggregate value of $23.3 million, an equity contribution by Vector Capital of $49.3 million, a $50 million senior secured loan, and an up to $7 million of senior secured revolving credit loan.

 

 

Thoughts on Transaction

Taken together the disclosures outline a lengthy and thorough process run by ChyronHego’s board and management to seek a buyer or other strategic alternative for the company.

On the question of valuation, the market has spoken.  As a reference, the transaction values ChyronHego at 19.2X LTM (last twelve months) EBITDA and 1.8x LTM revenue. A review of the public disclosures referenced above offers sensible statements by the board and management on concerns of access to greater resources, competitive positioning, and disadvantages of remaining public.

However, shareholder frustration is understandable given the proposed take-private price per share is lower than the 52-week high stock price.

Moreover, the company had previously communicated growth levels and market sizing estimates inconsistent with observable data points in the broadcast technology sector.

For example, the chart below is from ChyronHego’s March 2014 investor presentation, which was still on the company’s website at the time of writing, implies that company believes its addressable market is more than $1 billion.

 

ChyronHego TAM Estimate from 3-14 Investor Presentation

 

On ChyronHego’s Q2 2014 earnings call, CEO Johan Apel confirmed management’s view that the total addressable market was approximately $1 billion, comprised of $250m of broadcast graphics products, and $750m of services. This reiterated estimates made by previous management about the company’s addressable market on its Q2 2008, Q4 2011, and Q2 2012 earnings calls.

However, it is reasonable to conclude ChyronHego was in the process of communicating updated expectations of growth and market sizing.  To their credit, management had already reversed ground and communicated the need to seek other approaches to generate increased in shareholder value.  This led to a series of M&A transactions responsible for substantial all of ChyronHego’s recent growth.

Shareholders will vote on the proposed take-private deal at a special meeting of the company, which is scheduled to be held on March 6, 2015.

In the third quarter of 2014, ChyronHego posted a net loss of $2.6m on revenue of $14m. During the first nine months of 2014, ChryronHego posted a net loss of $2.8m on revenue of $43.3m.  For the trailing twelve months (TTM) ended September 30, 2014, ChyronHego had revenue of $58m, comprised of $27.2m of product revenue and $30.8m of service revenue

Assuming the transaction closes, it will be interesting to track developments of ChyronHego with its new owners Vector Capital.

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Related Content:

Broadcast Vendor M&A: ChyronHego to be Taken Private by Vector Capital in $114 Million Deal

ChyronHego 8-K: Additional Disclosures Regarding Vector Transactions

ChyronHego: Definitive Proxy Statement on Vector Take-Private Transaction

ChyronHego Investor Presentation March 2014

ChyronHego Investor FAQ and Introduction to Vector Capital

Agreement and Plan of Merger: ChyronHego Corporation, Vector CH Holdings (Cayman), L.P., And CH Merger Sub, Inc.

ChyronHego SEC Filing: Entry into a Material Definitive Agreement with Vector Capital

ChyronHego One Year Stock Price Chart

Broadcast Vendor M&A: Vizrt to be Taken Private in $374 Million All-Cash Deal

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Autodesk FY 2015 Media & Entertainment Revenue Declines 13.9 Percent

Analysis, Annual Results, Broadcast technology vendor financials, Quarterly Results, SEC Filings | Posted by Joe Zaller
Feb 27 2015

autodesk_header_logo_140x23

Autodesk reported that its Q4 FY 2015 revenue from its Media and Entertainment (M&E) business segment was $43m, an increase of 5% compared to the same period last year, and flat with the previous quarter.

M&E gross margins for the fourth quarter were 79.1% ($34m), down from 81% during the same period a year ago, and up from 74.4% last quarter

 

Full Year M&E Revenue Declines 13.9 Percent

Media & Entertainment revenue for the full FY 2015 was $167m, down 13.9% versus the full FY 2013.

M&E gross margins for the full year 2015 were 76%, down from 81% in both 2013 and 2012.

 

Decline in M&E Revenue Continues

As shown below, the latest year-on-year decline in M&E revenue continues the trend that began more than five years ago.

Autodesk M&E Revenue 2008-15

 

Between fiscal 2008 and fiscal 2015, the company’s M&E business has a CAGR of -6%.  During this same time, M&E sales as a percentage of total Autodesk revenue has declined from 12% to 6%.

This is perhaps not surprising, given that company has been talking for some time about the anticipated decline in M&E revenue.  Last year, Autodesk CEO Carl Bass said the company expects its M&E revenue to decline over time as Autodesk incorporates greater functionality into its design suites.

 

Autodesk M&E: A Tale of Two Product Lines

Another reason for the ongoing decline is likely the changing mix of products sold by Autodesk into the M&E sector, including the sale of hardware versus software.

Autodesk breaks out products sold media and entertainment customers into two separate categories:

  • Animation (including design visualization): includes products, such as Autodesk Maya, Autodesk 3ds Max, and the Autodesk Entertainment Creation Suites. These products provide tools for digital sculpting, modeling, animation, effects, rendering and compositing, for design visualization, visual effects and games production.

 

  • Creative Finishing: include Autodesk Flame, Autodesk Smoke, Autodesk Lustre, and Autodesk Flare. These products provide editing, finishing and visual effects design and color grading.

 

In a filing with securities regulators last year, the company said that for the year ended January 31, 2014, revenue from Creative Finishing products declined by 17% due to “a general decrease in M&E industry end-market demand.”  In the same filing, the company said that Animation products had declined 7% during the fiscal year ended January 31, 2014.

On last night’s Q4 and full year fiscal 2015 earnings call, the company did not discuss its M&E product in either the prepared remarks or the Q&A session with equity analysts.

Indeed, the company has not discussed M&E on an earnings call since August 2014, when an analyst from JP Morgan asked Autodesk CEO Carl Bass: “How should we think about where the media and entertainment revenue line goes from here, is it something that actually could start to fade away?”

Bass replied: “No. I think, as we always try to distinguish, media and entertainment they are two different parts of the business. There is the creative finishing. Creative finishing has been diminishing, some of it is just nature of the market and some of it has to do with the hardware component in there which we no longer sell. And then there’s the other part which is the software part of the business. The software part of the business is good and healthy and we like all the dynamics in that part of the business. What we see in the other part less happy with it. That’s been going on for the last half dozen years in the creative finishing part.”

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Related Content:

Press Release: Autodesk Reports Strong Fourth Quarter Results

Previous Year: Autodesk Media & Entertainment Revenue Down 16% in Q4 FY 2013, Down 10% for Full Fiscal Year

2012: Autodesk Media & Entertainment Revenue Rises Nine Percent in Fiscal 2012

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Vitec Group Broadcast Revenue Up 6.3 Percent in 2014; Changes Reporting Structure to Focus on Core Businesses

Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results | Posted by Joe Zaller
Feb 26 2015

The Vitec Group, which owns more than a dozen brands in the broadcast industry as well as technical services company Bexel, announced that its total for the full year 2014 was £309.6m, a decline of 1.8% versus 2013.

Operating profit was £38.8m, a decline of 1.8% versus last year.  On a constant currency basis, however revenue increased 3.3% and operating profit increased 7.4%.

 

Changes to Financial Reporting Structure Reflects Focus on Core Businesses

Vitec has about a dozen brands that serve various parts of the broadcast industry, including Anton/Bauer, Autocue, Autoscript, Bexel, Camera Corps, The Camera Store, Litepanels, OConnor, Petrol Bags, Sachtler, Teradek, SmallHD, Vinten and Vinten Radamec.

During 2014, Vitec divested its IMT wireless communications and microwave business, which included the IMT, Nucomm, and RF Central brands.

Historically, Vitec reported its broadcast-centric activities through its Videocom and Services divisions, but following the sale of IMT, the company has changed its financial reporting structure, starting with the release of its full year 2014 results. Vitec now reports its broadcast revenue through its newly named “Broadcast Division,” which it further breaks out as “Broadcast Equipment” and “Broadcast Services.”

According to the company this new reporting structure more appropriately describes its core operating businesses. “Following our exit from the loss-making IMT business we are focused on our core Broadcast and Photographic markets supplemented with selective value-adding acquisitions,” said Vitec CEO Stephen Bird.

 

Vitec Broadcast Division

As shown in the chart below, Vitec’s Broadcast Division had revenue of £171.1m in 2014, an increase of 6.3% versus 2013 (up 11.9% on constant currency basis).


Vitec Broadcast Division Revenue FY 2014

 

 

2014 Broadcast Division Operating profit for 2014 was £21.1m, an increase of 9.3% versus 2013’s results (16.6% on constant currency basis).  Operating profit for 2014 would have been negatively impacted by £1.8m had IMT’s results been included.

“Our Broadcast Division performed well in a variable market including a strong performance from Teradek, acquired in the second half of 2013,” said Bird. “We also benefited in 2014 from contracts to support the Sochi Winter Olympics and the FIFA World Cup. Our premium product and service offering was further strengthened through the acquisitions of Autocue, the specialty camera assets of SIS, and more recently SmallHD.”

 

 

Broadcast Equipment

The Broadcast Equipment business (excluding IMT) had 2014 revenues of £131.9m, an increase of 1.6% (7.0% on constant currency) versus 2013.

Vitec Broadcast Wquipment and Broadcast Services Revenue FY 2014

 

Vitec made three acquisitions during 2014, which are now reported in the Broadcast Equipment business:

  • The specialty camera assets of SIS Outside Broadcasts Limited (integrated into Vitec’s Camera Corps business)

 

  • Autocue, a well-known provider of teleprompters (now combined with Vitec’s Autoscript business)

 

  • SmallHD, a provider of high definition on-camera field monitors

 

The combination of currency fluctuations, and the inorganic contributions from these acquisitions accounted for all the growth in the Broadcast Equipment business.  On an organic constant currency basis, Broadcast Equipment revenue in 2014 was declined by 2.2% versus the previous year.

Broadcast Equipment operating profit was £18.8m in 2014, an increase of 5.0% (12.3% on a constant currency basis) over 2013.

Operating margin for Broadcast Equipment was 14.3% a slight improvement from the 2013 margin of 13.8%.

The company said that a lower level of investment by studios in larger camera supports had impacted its business, but that this was offset by smaller camera support products performing in line with expectations.

The Anton-Bauer battery business had lower revenue, but is expected to benefit from new ranges of products launched in 2014.

Although Vitec did not specifically break out the performance of Teradek, it did disclose that “contingent consideration of £4.2 million ($7.0 million) was accrued during the year to be paid to the previous owners of Teradek in 2015 in relation to the business’s performance in 2014 and is subject to final agreement. The business has delivered strong growth in the year and has performed ahead of our pre-acquisition expectations.”

Vitec offered Broadcast Division results excluding the performance of the IMT business.  IMT had recorded an operating loss of £1.3m in 2014 on revenue of £7.9 million.  IMT had breakeven results in 2013 on revenue of £14.0m.

 

Broadcast Services

The Broadcast Services generated revenue of £39.2m in 2014, an increase of 26.0% (32.9% on a constant currency basis) versus 2013.  2014 operating profit for Broadcast Services was £2.4m, equating to an operating margin of 6.1%.  This compares favorably to the operating profit of £1.5m in 2013 (4.8% operating margin).

Management attributed the strong performance of the Broadcast Services segment to major events in 2014 including the Sochi Winter Olympics and the FIFA World Cup, along with a rise in the underlying rentals business for other major events. The company also cited participation in a number of improvements in the infrastructure of NFL stadiums including player positioning systems.

It is interesting to review the capital expenditure requirements of the Broadcast Services business.

Broadcast Services spent £12.7m on rental assets in 2014.  This constitutes the majority Vitec’s capital expenditures as a company, which totaled £17.5 million excluding capitalization of software development costs.  Broadcast Services capital expenditures are partially financed by proceeds from the sale of certain rental assets.  These sales amounted to £5m in 2014.  Thus, total net capital expenditures were £6.7m for Broadcast Services.  This £6.7m cash outflow is in the context of a £3.8m operating cash inflow generated by the segment.

There is additional strategic rationale in Broadcast Services, which was noted in the Company’s release. Management stated the Broadcast Services business “enables Vitec to closely monitor changes in technology and to showcase our products.”

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Related Content:

Press Release: The Vitec Group plc, 2014 Full Year Results

Vitec Group 1H 2014 Results: Videocom Down 1%, Bexel up 39.9%

Broadcast Vendor M&A: Vitec Group Buys SmallHD for up to $30 Million in Cash

Vitec Group Announces Intention to Divest IMT Wireless Communications and Microwave Business

Broadcast Vendor M&A: Vitec Buys Teradek for $15 Million

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Vizrt Posts 16% Revenue Growth in 2014, Provides Update on Pending $374 Million “Going Private” Deal

Broadcast technology vendor financials, Broadcast Vendor M&A, Quarterly Results | Posted by Joe Zaller
Feb 26 2015

Broadcast graphics MAM specialist Vizrt reported strong results for the fourth quarter and full year 2014.

The company also provided an update on the pending $374 million all-cash deal with Nordic Capital to take the company private.

For the fourth quarter of 2014 revenue was $36.2 million, an increase of 9% versus the fourth quarter in 2013, and an increase of 2.8% versus the preceding quarter, Q3 2014.

Gross margins for Q4 2014 were 71%, which compares favorably to the 69% margins recorded during Q4 2013 and is consistent with the 71% gross margins from the preceding quarter.

Operating expenses for the quarter were $17.9 million.  This represents a 9% increase when compared to the fourth quarter of 2013 and is flat versus the preceding quarter.

  • R&D expenses in the quarter were $5.5m (15.1% of revenue), down 1% versus the same period ago, and down 4% versus the previous quarter

 

  • Sales and marketing expenses in the quarter were $8.5m (23.6% of revenue), up 7% against the year earlier period and down 5% versus the Q3 2014

 

  • General and administrative expenses in the quarter were $3.8m (10.7% of revenue), up 31% versus the same period a year ago, and up 18% versus the preceding quarter

 

EBITDA was $7.8 million for the quarter, up 357% from $1.7 million during the fourth quarter of 2013, and up 9% from $7.2 million in the previous quarter.  The EBITDA margin for the quarter was 22% versus an EBITDA margin of 5% during the comparable quarter last year and 21% during the third quarter of 2014.

Net profit for the quarter was $4.5 million, compared to a net loss of $3.4 million last year, and down slightly versus last quarter’s net profit of $5.2 million.

 

Product line results for the Quarter:

  • Broadcast Graphics (BG) accounted for $30.8 million during the quarter (85% of total revenue versus 86.7% last quarter), an increase of 6% versus the same period ago, and an increase of 1% versus the previous quarter. The BG order backlog was $35.6 million, comparable to the size observed at the same time last year, and down 3.6% versus the previous quarter.

 

  • Media Asset Management (MAM) revenue in the quarter was $5.66 million (18% of total revenue versus 16% last quarter), up 5% versus the same period a year ago, and up 35% versus last quarter.   The MAM order backlog was $14.6 million, up 37% versus last year, and up 5% versus last quarter

 

Geographic Performance for the Quarter:

  • Revenue from EMEA was $17.1 million (47.2% of total revenue versus 47.5% last quarter), up 25% versus the same period last year and up 2% versus last quarter

 

  • Americas revenue was $8.9 million (24.8% of total revenue versus 27.6% last quarter), down 14% versus last year, and down 13% versus last quarter.

 

  • APAC revenue was $10.1 million (27.9% of total revenue versus 23.2% last quarter), up 9% versus last year, and up 3% versus last quarter

 

Results for full year 2014:

The full year results were headlined by growth of 31% in EBITDA and 80% in cash flow from operations.

Vizrt’s 2014 revenue was $141.5 million, an increase of 16% versus the $122.4 million recorded during 2013.

Net profit for the 2014 was $15.5 million ($0.23 per share), which is considerably higher than the $3.6 million ($0.06 per share) net profit from 2013.  The attributed its improved profitability to a change in product mix, consistent financial prudence, and the acquisition of Mosart MediaLabs

Gross margins for 2014 were 70%, which was a slight improvement from the 68% margins from 2013.    EBITDA was $27.7m (20% operating margin) for the full year 2014, a significant year-over-year increase from the $15.5 million (13% operating margin) recorded during 2013.

Operating expenses for 2014 were $71.1 million, a 14% increase over the operating expense level of 2013.

  • R&D expenses for the full year were $22.5 million (31.6% of revenue), an increase of 18% versus 2013

 

  • Sales and marketing expenses for 2014 were $35.2 million (49.6% of revenue), up 9% against the sales and marketing expense from 2013

 

  • General and administrative expenses were $13.3 million (18.8% of revenue), up 23% versus the 2013 calendar year

 

The geographic breakdown of 2014 sales consisted of 26% from Americas, 48% from EMEA, and 26% from APAC.

Vizrt ended 2014 with 584 employees compared to 542 at the end of Q4 2013. 24 employees were added following the Mosart acquisition in Q1 2014.

 

 

Update on Pending Acquisition by Nordic Capital

Company management provided an update on its previously announced acquisition by Nordic Capital.  Final closing of the transaction remains subject to certain conditions including the decision of Israeli tax authorities regarding a tax withholding ruling. Vizrt believes the process will come to a positive conclusion in the next several weeks.  The acquisition was first announced on November 10, 2014 and approved by a majority of shareholders on December 18, 2014.

 

 

 

Business Outlook:

Martin Burkhalter, Vizrt’s CEO, stated: “Our strong performance continued in Q4, despite the fact that we did not see the discretional spending towards the year-end that we normally have witnessed in previous years. Our strong performance is also reflected in our solid backlog going forward. I am particular pleased with the improvement of MAM results and the MAM backlog which increased by 37% compared to the same time last year.”

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Related Content:

Press Release: Vizrt Reports Q4 and 2014 Results

Broadcast Vendor M&A: Vizrt to be Taken Private in $374 Million All-Cash Deal

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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