Archive for the ‘Broadcaster Financial Results’ Category

Vislink Revenue Declines 15% in 1H 2016; Forecasts Breach of Debt Covenants

Analysis, Broadcaster Financial Results, Quarterly Results | Posted by Josh Stinehour
Oct 05 2016

UK-based Vislink plc, which owns broadcast industry brands Advent, Link, MRC Gigawave, and Pebble Beach, announced results for the first half of 2016.  1H 2016 revenue was £22.6 million, a decline of 15% versus the first half of 2015.  vislink

Vislink was anticipating challenging results for the first half of 2016 having published a negative trading update on July 6, 2016.  The trading update warned sales in Vislink’s Communication System (“VCS”) business were below management expectations.  In addition, the July update indicated the further restructuring of VCS would necessitate a non-cash write-off of £6 – £9 million and additional annual cost reductions of £1 – £2 million.  This adds to last year’s restructuring of the division when headcount was decreased 26% and a £2.5 million charge was incurred.

The underperformance of VCS caused Vislink to consume its entire banking facility and will subsequently force Vislink to breach its debt covenants.  Once Vislink is officially out of compliance with its financing arrangements, the Company’s bankers may call for repayment of existing loans – which Vislink does not have the cash to repay.  While this represents a material uncertainty for the Company, Management did indicate it is engaged in constructive discussions with its bankers.

In order to improve cash generation, Vislink’s management is canceling the Company’s dividend until debt drop below EBITDA, canceling its equity incentive program for senior management, and will “continue to examine the appropriateness of the Board and Group structure.”

The announcement has resulted in a greater than 50% decline in Vislink’s stock price decline from close on September 29, 2016.  Measured against Vislink’s 52 week stock price, the decline is greater than 75%.

Net loss for the first half of 2016 was £32.2 million or 26.9p per share, compared to a net loss of £0.9 million or 0.4p per share in the year-earlier period.

1H 2016 operating loss was £32.0 million versus an operating loss of £0.8 million during 1H 2015.  Operating losses included non-cash write downs of £23.3 million for goodwill and acquired intangibles as well as a write-down of £6.3 million of inventory and capitalized development costs.

A majority of Vislink’s goodwill write-down was associated with the Broadcast division (excluding Pebble Beach).  The entire £20.6 million of goodwill for Vislink’s Broadcast division was written down.

Given the magnitude of the non-cash items it is informative to review operating cash flow for the period.  During the first six months of 2016 operating cash usage was £1.2 million, compared to generation of £0.8 million during the first half of 2016.

The results for the first half benefited from a positive £2.2 million foreign currency translation based on a weaker GBP.

Broadcast Performance:

Vislink’s broadcast revenue for the first half of 2016 was £20.6 million, a 7.6% decrease versus broadcast revenue in 1H 2015.  The decline was primarily related to an 18.5% year-over-year drop in the revenue of Vislink’s Communication Systems (“VCS”) business.

Management attributed the decline in VCS to a combination of a general pause in spending ahead of the adoption of next-generation technologies and a reduction in spend from broadcasters driven by a diversion of budgets from infrastructure to investing in content.

Pebble Beach revenue for 1H 2016 was £5.4 million, a slight decrease of 1.4% when compared to the first half of 2015.  In the commentary accompanying the earnings release, the Company highlighted a 53.3% growth in Pebble Beach’s order book to £5.4 million during the 1H 2016 (1H 2015: £3.5 million).

Revenue by Region:

  • Revenue from the UK & Europe region was £7.6 million during the first half of the year, an increase of 20.1% over the first half of 2015. The UK & Europe represented 33.6% of total revenue for the first six months of the year, versus 23.7% in the same period of 2015.
  • Revenues from the Americas were £7.9 million, a 27.4% decrease against 1H 2015. On a percentage basis, Americas was 35% of total revenue for the first half of 2016, down from 40.6% in 1H 2015.
  • First half 2016 revenue from the Middle East and Africa (MEA) was £3.2 million, down 3.2% versus 1H 2015. The MEA region represented 14.2% of revenue in 1H 2016, up from 12.4% during the first half of 2015.
  • APAC revenue in 1H 2016 was £1.9 million, up 4.1% versus the comparable 2015 period. APAC revenue was 8.4% of total revenue in 1H 2016, up from 7.1% in 1H 2015.

Operating Expenses by Function:

  • R&D expenses recognized in 1H 2016 were £3.6 million, a 29.5% increase over 1H 2015. As a percentage of revenue, R&D expense was 16.1%, a substantial increase from the 10.6% in 1H 2015.  During the first half, Vislink wrote down £0.8 million of capitalized R&D investment.  Management did not identify the associated products or technologies associated with the write down.
  • Sales and marketing (S&M) expenses were £4.6 million, a slight rise of 1.4% against 1H 2015 S&M expense level. On a percentage basis S&M was 20.2%, an increase over the 17.0% of revenue from 1H 2015.
  • Administrative expenses were £2.9 million, a decrease of 28% versus the first half of 2015.

Cash and Debt Levels:

Vislink had a cash balance of £3.1 on June 30, 2016, down from £3.2 at the end of 2015.  During the same time period, the Company’s debt balance increased to £12.0 million from £9.0 at the end of 2015.  These developments have increased Vislink’s net debt to £8.8 million.  This compares to net debt levels of £5.7 million at 2015 year end and £1.2 million at the end of the first half of 2015.

In the release Management indicted debt has increased further since the end of the June and Vislink is now using its entire Revolving Credit Facility of £15.0 million.

Business Outlook:

Vislink’s order book at June 30, 2016 was £11.4 million, an increase of 60.5% over the same date last year.

In their prepared remarks Management discussed the organic growth of Pebble Beach, its pipeline of software bolt-on acquisitions, and its continued focus growing Vislink’s software business.  The below slide is taken from the Vislink’s presentation on the first half results.

 

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“We continue to see significant underlying organic growth in our software business with a strong order intake which has carried through into H2.  The long term prospects for Pebble Beach Systems continue to improve as we augment our core enterprise software solutions with cloud enabled software applications. We also have a pipeline of partners and software bolt-on acquisitions which will further enhance the Group strategy of building a high margin, cash generative software business” said John Hawkins Executive Chairman of Vislink.

 

 

Related Content:

Press Release on Vislink 1H 2016 Results

Management Presentation on Vislink 1H 2016 Results

Trading Update on Vislink 1H 2016 Preliminary Results

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Evertz Announces Record Backlog and Shipments along with C$13.5 million IP Order

Analysis, Broadcaster Financial Results, Quarterly Results | Posted by Josh Stinehour
Sep 19 2016

Evertz announced revenue for the first quarter of its 2017 fiscal year, which ended on July 31, 2016.  Revenue for the quarter was C$87.0 million, up 2.5% versus the same period a year ago, and down 9.7% versus the previous quarter. evertz-logo

The strengthening US dollar contributed a foreign exchange gain of C$6.6 million during the quarter.

Net earnings for the quarter were C$18.6 million (C$0.25 earnings per share), flat versus the first fiscal quarter of 2016, and an increase of 129.6% versus the preceding quarter. The company generated C$19.9 million cash from operations in the quarter.  This compares to cash used by operations of C$7.8 million during the same period last year and cash from operations of C$10.1 million during the previous quarter.

Revenue results for the quarter were below the consensus estimates of equity analysts of C$95.1 million, while earnings results were above the consensus estimates of analysts of C$0.24 per share.

During management’s exchange with analysts, EVP Brian Campbell attributed the lower level of revenue in the quarter to the typical lumpiness of orders along with the stretching of certain orders into future quarters.

The Company said its shipments during August 2016 were C$31 million, and that its purchase order backlog at the end of the quarter was in excess of C$70 million.   The combined shipments and backlog of C$101 million is a record level for Evertz.

The top ten customers in the quarter accounted for 30% of revenue and no customer accounted for an excess of 6% of revenue. Evertz had 104 individual customers each representing over $200,000 of revenue.

Gross margins in the quarter were 57.3%, down slightly from 56.4% last year and also down from 57.1% last quarter.  For the quarter operating margins were 28.5%, compared to 29.9% during the same period last year and 23.9% in the FQ4 2016.

Evertz ended the quarter with C$125.4 million of cash and cash equivalents up slightly from C$123.1 million at the end of last quarter.

Revenue by Geography:

  • Revenue in the US/Canada region was C$52.1 million, an increase of 4.2% versus the same period a year ago, and flat versus the previous quarter. US/Canada sales were 59.9% of total revenue during the quarter, up from 58.9% of revenue during the same period a year ago, and a substantial increase versus the 53% contribution during the preceding quarter.
  • International revenue was C$34.9 million, flat versus the previous year’s result and a decrease of 22.6% when compared to the previous quarter. International sales were 40.1% of total revenue, down from 41.1% last year and 47.0% last quarter.

Operating Expenditures by Function:

  • R&D expenses (before tax credits) in the second quarter were C$17.5 million, an increase of 7.4% versus the same period last year, and an increase of 1.2% versus the previous quarter. R&D expenses were 20.1% of revenue in the quarter, higher on a percentage basis than the 19.2% last year and the 17.9% last quarter.
  • Selling and administrative expenses for the quarter were C$14.9 million, a slight increase of 0.7% versus last year, and a decrease of 8.0% versus the preceding quarter. Selling and administrative expenses represented approximately 17.1% of revenue in the quarter versus 19.2% of revenue during the same period last year, and 17.9% of revenue in the previous quarter.

Management Commentary on Results:

Consistent with earlier quarters, Evertz EVP Brian Campbell attributed the overall performance and combined shipment and order backlog “to the ongoing transition to HD, channel proliferation, the increasing global demand for high-quality video anywhere anytime”.  Also consistent with previous quarters, Mr. Campbell added emphasis on “the growing adoption of Evertz’s IP-based software-defined networking solutions.”

While Evertz declined to provide an update on the number of SDVN deployments (over 50 SDVN installments as of the 2016 NAB Show), the Company did issue a press release on the receipt of a C$13.5 million purchase order for a “state-of-the-art” IP facility for a US customer.  The purchase order includes multiple EXE hyperscale and IPX modular switch cores, IP media gateways, and compression and control solutions.

In responding to a question by Thanos Moschopoulos of BMO Capital Markets on the interest level of cloud for Evertz customers, Mr. Campbell provided commentary on cloud adoption in the media sector.  “It’s very much early days, but it is meaningful” stated Mr. Campbell.  “And Evertz is well down the path in virtualizing the important components for customers to meet to their needs, whether that’s in a public cloud or in a private cloud or hybrid” continued Mr. Campbell.

 

 

Related Content:

Press release on Evertz FY Q1 2017 Results

MD&A on Evertz FY Q1 2017 Results

Financial Statements for Evertz FY Q1 2017

Press Release on “State-of-the-Art” IP Facility Order

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Vitec Group has Positive Start to 2016; Set to Benefit from Weaker GBP

Analysis, broadcast technology market research, Broadcaster Financial Results | Posted by Josh Stinehour
Jul 01 2016

The Vitec Group, which owns more than a dozen brands in the broadcast industry as well as technical services company Bexel, released a trading statement on its first half 2016 performance.  Vitec Group Logo

Vitec’s year-to-date performance in 2016 has been in line with the Board’s expectations (Vitec does not provide specific forecast guidance).  The Company’s expectations for 2016 remain unchanged.  First half 2016 results are scheduled for release on August 4, 2016.

The trading update reiterated management’s expectations to benefit from the Rio 2016 Olympics and ongoing restructuring activities.  During the 2015 calendar year, one-off costs associated with the continued restructuring were approximately £10 million.  The restructuring costs were predominantly attributable to streamlining activities in the Broadcast Division.

In addition, the press release referenced the opportunity to benefit from a weaker GBP versus the US Dollar and Euro.

The press release states that full year expectations remain unchanged based on exchange rates as of June 23, 2016.  This was the date of the “Brexit” referendum in the UK.  Since the results of the referendum the GBP has declined more than 10% versus the US Dollar and approximately 9% versus the Euro.

In terms of revenue profile, Vitec generated only 10% of 2015 revenue from the UK.  47% of 2015 revenue was from North America and 20% from Continental Europe.  Because of this revenue profile, Vitec’s revenue results for 2016 should benefit from a weaker GBP currency.

 

Related Content:

Vitec press release on trading update

Vitec 2015 Financial Results

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Media Technology Revenues Decline 4.3% in 2015 as Industry-Wide Structural Shift Continues

Analysis, broadcast industry technology trends, broadcast technology market research, Broadcaster Financial Results, market research, technology trends | Posted by Joe Zaller
Feb 24 2016

IABM DC releases 2016 Global Market Valuation and Strategy Report

The total market for media technology products and services declined 4.3% to $49.3bn in 2015, according to the newly released 2016 Global Market Valuation and Strategy Report (GMVR), published by IABM DC, a joint venture between IABM and Devoncroft Partners.

IABM DC Logo and GMVR Cover Image

A number of factors contributed to the year-on-year decline in media technology spending. These include significant currency fluctuations, ongoing consolidation among media organizations, the strategic move from CAPEX to OPEX as end-users evolve their business models, and for the first time in six years, negative growth in services as well as products.

Revenues in 2015 from Products¹ declined 4.4% to $22.01bn – 44.6% of total industry revenue.

2015 Services² revenues declined 4.2% to $27.31bn – 55.4% of total industry revenue.

While Product revenues have been in decline since 2012, this is the first year when Services revenues have also decreased since the inception of the GMVR.

For the four year period from 2012-2015, the compounded annual growth rate (CAGR) for the total industry was -1.0%. During the same period, the CAGR for media technology products and services was -2.4% and +0.1%, respectively.

Foreign exchange rate fluctuations had a significant impact in 2015. In Brazil and Russia, steep currency declines effectively doubled the prices for some media technology products thus deterring investment. Other currencies including the Canadian Dollar, Euro and Japanese Yen also declined versus the US Dollar, changing the competitive dynamic for many players. While many media technology suppliers have both revenues and costs in multiple currencies and are able to mitigate swings in foreign exchange to some extent, the same is not true for managed service providers that operate in a single territory. Much of the decline in Europe reported for the services segment results directly from the weakening of the Euro against the US Dollar in the period.

Other notable drivers for the decline in overall revenues range from the end of government-backed analog switch-off programs in many countries, to the ongoing consolidation of major media companies, to a pronounced shift in technology procurement strategies among end-users, including broadcasters, pay TV operators and media service providers.

These factors, and their impact on the market, are explored in more detail throughout the 2016 GMVR. Now in its seventh edition, the Global Market Valuation and Strategy report is an essential tool for all broadcast industry strategists. The 2016 edition provides market sizing data for approximately 150 product categories across nine market segments. Data tables provide regional splits for product and service revenues, as well as forecasts to 2019 at segment and sub-segment levels. The data tables are accompanied by extensive written commentary (available in Q1 2016), that discusses 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.

Joe Zaller, founder and president of Devoncroft Partners, said, “The commercial models of many broadcasters and media companies have changed dramatically over the past few years. The combination of new digital and on-line delivery platforms, the shift to file-based workflows, the increasing drive for digital monetization, and the promise of COTS IT hardware managed by software defined networks have all 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 – 2019.”

Peter White, IABM CEO, said, “Although aggregate industry growth declined overall in 2015, the broadcast and media technology market is still undoubtedly a dynamic and exciting place to be. There was a significant impact on revenues overall from extensive weakening of most currencies against the US Dollar in the year, which particularly impacted services revenues in EMEA where there is a concentration of services suppliers. In addition, although revenues in the majority of product categories experienced a degree of decline, some segments of the market are growing strongly. The Global Market Valuation and Strategy Report illuminates this, and will make compelling reading for those companies that are looking to maximize business opportunities.

“The changing media landscape of the demand side of the industry is clearly affecting the supply side, and many organizations throughout the broadcast and media ecosystem have had to reinvent themselves. Despite a continuing downward trend so far in 2016, confidence still remains in the sector and spend on research and development is continuing at impressively high levels. We are experiencing a wave of innovation and change both from existing suppliers and from new entrants in the market which is fueling cautious optimism for 2016 and beyond; our industry clearly believes that it can win through and is backing itself to do so.”

¹Products include hardware, software and associated maintenance and support revenues.

²Services include systems integration, consultancy, post-production, services to live production, managed services, playout, CDN, Infrastructure as a Service, OTT/OVP platforms, and terrestrial and satellite transmission infrastructure.

 

About the Global Market Valuation and Strategy Report (GMVR)

Considered by many to be the definitive source for broadcast and media technology market sizing and trend analysis, the GMVR draws on actual and future projected revenue and product shipment data supplied by media technology vendors and service providers under a framework of strict confidentiality. In aggregate, the 2016 GMVR data model includes approximately 3,000 technology vendors and service providers.

The 2016 Global Market Valuation and Strategy Report is available to purchase from IABM or Devoncroft Partners.

 

About IABM DC LLC

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 vendor trade association IABM and Devoncroft Partners, an organization the specializes in broadcast and digital media market research, strategic consulting and analysis.

 

 

Related Content:

IABM DC — Digital Media Market Intelligence

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

The IABM and Devoncroft Partners Announce Market Research Joint Venture

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Broadcast Vendor M&A: Ericsson to Acquire Envivio in $125 Million All-Cash Deal

Analysis, Broadcast Vendor M&A, Broadcaster Financial Results, OTT Video | Posted by Joe Zaller
Sep 10 2015

Ericsson_Logo
Ericsson announced it has agreed to acquire Envivio for $4.10 per share, or approximately $125m.

The deal values Envivio, which had revenue and $41.5m for the year ended January 31, 2015, at more than more than double its closing price of $1.90 in yesterday’s trading.

The board of directors of Envivio has unanimously agreed to recommend that Envivio’s stockholders Envivio_Logotender their shares to Ericsson in the tender offer, and a group that collectively owns approximately 34 percent of Envivio’s outstanding common stock, have also expressed support for the deal.

Envivio provides software-based video encoding/transcoding, processing, packaging and ad insertion for broadcasters and pay TV operators.

Ericsson says the deal will “greatly enhance Ericsson’s software video encoding capabilities and its virtualized encoding concept, which enables abstraction of video processing functions from architectural and functional boundaries, enabling the flexibility to use both hardware and software based video compression, as well as any deployment architecture.”  Ericsson also said the deal extend its “leadership position in TV and media as a global end-to-end solution provider, strengthen [its] video compression position with combination of software and hardware encoding, [and] bring deep competence in software-defined and cloud-enabled architectures for video processing, enhancing Ericsson’s virtualized encoding approach.”

Ericsson’s acquisition of Envivio comes just a week after Amazon Web Services announced that it will be acquiring multi-screen technology provider Elemental Technologies.

Last year (at NAB 2014), Ericsson and Elemental jointly announced that Elemental’s video processing software had been “fully integrated into the Ericsson Virtualized Encoding solution.”  At that time, Dr. Giles Wilson, Head of TV Compression for Ericsson, said: “By expanding Ericsson Virtualized Encoding to also support Elemental software encoding, we are enabling TV service providers to efficiently address the growing complexity of multi-screen TV service delivery within a single solution. As providers strive to address consumer demand for TV Anywhere, we are focused on helping them make the right choices with their multi-screen video processing deployments.”

The combination of Elemental and Ericsson technologies were marketed by Ericsson as the SVP 4000 product family, which according to Ericsson’s website is “a server-based encoder [that] uses standard off-the-shelf GPUs to complement its powerful CPUs and hence provide the best encoding performance on a server-based platform.  In this regard it sits alongside the AVP 4000 system encoder, which offers the best encoding performance on a hardware-based platform.”

With Elemental now part of Amazon AWS, Ericsson moved quickly to find a new partner for multi-screen and virtualized encoding, and found a good one in Envivio.

Indeed, the Ericsson’s announcement of the Envivio acquisition specifically mentions that Envivio’s “pure software video processing is available on Intel-based appliances or IT blade servers.”

Interestingly, while the acquisition of Envivio gives Ericsson a good partner for multi-screen delivery, some of Envivio’s technology may overlap with Fabrix Systems, which Ericsson acquired in September 2014 for $95m. At the time of the Fabrix acquisition, Ericsson said Fabrix provides “cloud based scale out storage and computing platform focused on providing a simple, tightly integrated solution optimized for media storage, processing and delivery applications such as cloud DVR and video-on-demand (VOD) expansion.”

Time will tell whether Ericsson believes the technologies acquired from Envivio and Fabrix are complementary or overlapping.

Per Borgklint, Senior Vice President and Head of Business Unit Support Solutions at Ericsson, says: “Our consumer research clearly shows that viewers are demanding TV on their terms on any device, and expecting experiences that continually evolve. We are committed to offering our customers a clear path towards fully agile cloud agnostic platforms that delight TV consumers. I look forward to welcoming the market leader in pure software-defined video encoding, processing, and packaging into Ericsson. The combination will strengthen our encoding position with both custom silicon and pure software encoding, delivering performance and flexibility.”

 

Ericsson’s acquisition of Envivio is the latest in a series of deals related to online video and transcoding. As broadcasters and media companies scramble to deploy multi-screen services, transcoding is seen by many as a key technology.  As a result, transcoding has also attracted its fair share of financing and M&A activity.  Here’s a quick run-down of some of the recent transcoding deals and related-financial news:

 

 

 

 

 

  • In April 2014, Imagine Communications acquired Digital Rapids for an undisclosed amount

 

  • In April 2014, Dalet acquired Amberfin for an undisclosed amount

 

  • In January 2013, Amazon unveiled its “Amazon Elastic Transcoder.” Based on the company’s Amazon Web Services (AWS) cloud computing platform, the Elastic Transcoder the service provides “a highly scalable, easy to use and a cost-effective way for developers and businesses to transcode video files from their source format into versions that will playback on devices like smartphones, tablets and PCs.”

 

  • In August 2012 Brightcove bought Zencoder, a 2-year old start-up with $2m in revenue for $30m, and subsequently launched a cloud based transcoding service at IBC 2012

 

 

 

 

 

 

 

 

 

 

  • RGB Networks bought transcoding vendor Ripcode in 2010

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Related Content:

Press Release: Ericsson announces agreement to acquire Envivio

Amazon Web Services to Acquire Elemental Technologies for a Reported $500 Million 

Press Release: Elemental Announces Full Integration with Virtualized Encoding Solution

Ericsson Virtualized Encoding (EVE)

Ericsson SVP 4000 Product Family

Press Release: Cloud video transformation accelerated through Ericsson acquisition of Fabrix Systems

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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New Devoncroft Report Available for Download: IBC 2015 – Observations & Analysis of the Media Technology Industry

Analysis, broadcast industry technology trends, broadcast industry trends, broadcast technology market research, Broadcast technology vendor financials, Broadcast Vendor Brand Research, Broadcast Vendor M&A, Broadcaster Financial Results, market research, Quarterly Results, technology trends, Top Broadcast Vendor Brands | Posted by Joe Zaller
Sep 04 2015

In preparation for the 2015 IBC Show, Devoncroft Partners has published an analysis of the trends and strategic drivers in the broadcast and media technology sector.

This 90-page report is free. Registration is required.

A link to download this report can be found at the bottom of this page.

 

Included in the analysis are excerpts from:

 

  • The 2015 Big Broadcast Survey (BBS), the largest and most comprehensive study of technology trends, buyer behavior, and vendor brands in the broadcast and media technology sector

 

Devoncroft IBC 2015 Media Technology Analysis

 

The report covers and provides commentary on a the following media technology trends and drivers:

 

Yes, media delivery and consumption has changed… BUT:

  • Importance of industry-specific context when reviewing data points
  • Digital delivery is a cause, not the effect
  • For media technology industry, impact extends far beyond the obvious

 

 

Media business models in transition:

  • So far, media companies have benefited from OTT
  • But if cord cutting accelerates, does OTT enhance or erode profit?
  • Investor concerns have led to value erosion at both commercial and public broadcasters

 

 

Evolution of media business models driving transition of spending priorities:

  • Value to media companies of linear versus digital consumers
    • – New technologies required to monetize digital content
  • Reflected in changing investment patterns
  • Reflected in in-house technology development at media companies
  • Reflected in M&A – Ad Tech / Software
  • Reflected in new service offerings from media companies

 

 

Structural shift in technology spend:

  • Comparison of media technology CAGR 2009-2014
  • Value shift in favor of service revenue
  • Research shows that media technology spending shifts once HD transition is complete

 

 

Impact on technology vendor performance:

  • Spending pause in studio and infrastructure
  • Has spending resumed in delivery and OTT?

 

 

Review of NAB 2015 Strategy Conference:

  • Drivers of technology strategy
  • Insights from broadcaster CTOs, vendor CEOs, service providers

 

 

Review of 2015 Big Broadcast Survey (BBS):

  • Ranking and review of top media technology projects
  • Ranking and review of top media technology trends
  • Review of growth expectations for product categories and geographic regions

 

 

Thoughts on future industry evolution:

  • Where do technology suppliers add value in the future?
  • Timing of next technology transition
  • Impact of Software Defined Networking (SDN)
  • The move away from specialized products and applications
  • Implications for suppliers of media technology and services
  • The next format war – where is future value, and who is battling for dominance

 

 

Research background

 

 

We welcome feedback, comments, and questions on this report.

If you would like to schedule a meeting at the IBC Show, please let us know as soon as possible.

We are in the process of our IBC Show schedule, and have very limited availability remaining.

We hope to see you in Amsterdam.

 

 

Please click here to download a PDF copy (8 MB) IBC Show 2015 – Observations and Analysis of the Media Technology Industry from Devoncroft Partners (registration required).

 

 

Related Content:

Download IBC 2015 Media Technology Industry Analysis from Devoncroft Partners (registration required)

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

2015 Big Broadcast Survey (BBS) Reports Now Available

 

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Evertz Revenue Declines 3 Percent in Q3 FY 2015, Cites New Wins in Tough Market

Broadcaster Financial Results, Quarterly Results | Posted by Joe Zaller
Mar 05 2015

evertz-logo

Evertz announced that revenue for the third quarter of its 2015 fiscal year was C$90.7m, down 3% versus the same period a year ago, and up 9.5% versus the previous quarter.

Net earnings for the third quarter were C$21.2m (C$0.28 per share), down approximately 1% versus the same quarter last year, and up 47.9% versus the previous quarter.

The company generated C$27.5m cash from operations in the quarter, up from C$24.4m, last year, and C$17.5m last quarter.

The results (which were the fourth highest sales quarter in the history of the company), were in line with the consensus estimates of equity analysts.

Evertz EVP Brian Campbell said that the company’s revenue in the quarter was well-diversified, with the top 10 customers accounting for approximately 38% of sales.  The company had 72 orders of more than C$200,000 during the quarter (versus 78 last year, and 71 last quarter), and no single customer represented more than 7% (C$6.35m) of revenue.

According to Campbell, the company’s product mix profile during the quarter was “very consistent with the last few quarters,” specifically citing success with its EXE and IPX IP routing products, the DreamCatcher replay system, video compression products, and IRDs.  Campbell said that these new product families pull through traditional processing and infrastructure equipment with them.”

As evidence of this pull-through effect, Campbell highlighted how the “recent adoption of Evertz new Integrated Receiver/Decoder technology by a leading US national broadcast network customer, resulted in the purchase order of over C$10m” for Evertz IRDs, compression products, infrastructure products, and monitoring & control solutions.

Looking specifically at IP routers, Campbell said that although Evertz has not announced many wins for its EXE IP-based router (which it also calls SDVN), the company continues to have very good success with the EXE at its 46 terabit size, and has recently started to gain traction in the mobile production community with a newly introduced half-rack version of the EXE, which has a throughput capacity of 23 terabit per seconds.  Campbell added that the company currently has “in excess of 30 customers” for the EXE and IPX IP-based router products, and customer demand for these products remains “very good,” particularly with sports trucks, where the company is winning new business.

Revenue in the US/Canada region was C$53.6m, down 2.5% versus the same period a year ago, and up 18.1% versus the previous quarter. US/Canada sales were 59.1% of total revenue during the quarter, flat with the same period a year ago, and up from 54.7% of revenue last quarter. Evertz does not provide details of currency adjusted trading, but one analyst estimated that revenue in the US/Canada region was likely down 10% on a constant currency basis.

International revenue was C$37.2m, down 2.5% versus the same period a year ago, and down 1% versus the previous quarter. International sales were 41% of total revenue, flat with last year and down from C$45.2m last quarter.

Commenting on the US versus international results, Campbell said Evertz was “seeing good strength in the Canada/US region,” but internationally “there is a fair bit of geopolitical and economic instability,  so whether that’s Russian, Ukraine, parts of the Middle East or elsewhere, we are in a fairly challenging global economic market.”

Gross margins in the quarter were 56.2%, down from 57.6% last year and flat with the previous quarter. Evertz executives said that the gross margin performance in the quarter were within the company’s target range of 56% to 60%.

On the earnings call, RBC Capital analyst Steve Arthur asked why the company’s gross margins are “stubbornly at the lower end of your traditional range,” and what it will take to move gross margins “up towards the middle part of the 56 to 60 kind of range.” Evertz CFO Anthony Gridley said that gross margins in the quarter were driven by product mix, and that gross margins vary between geographies.  Gridley also said that “some of the larger scale projects can sometimes have lower margins, and this this quarter, we had some positives from currency, but they were offset by some few lower margin deals,” resulting in the 56% level.

R&D expenses in the third quarter were C$15.8m, an increase of 4.8% versus the same period last year, and up 4.3% versus the previous quarter.  R&D expenses were approximately 17.4% of revenue in the quarter, up from 16.1% last year, down from 18.2% last quarter when revenue was slightly lower.

Selling, general and administrative expenses for the quarter were C$16.4m, down 5.3% versus the same quarter last year, and essentially flat with the previous quarter. SG&A expenses represented approximately 18.1% of revenue in the quarter versus 18.6% of revenue during the same period last year, and 19.8% of revenue last quarter.

The company said that its shipments in February 2015 were C$19m, and that its purchase order backlog at the end of the third quarter of fiscal 2014 was in excess of C$65m. The combined C$84m total backlog in shipments represents a 24% year-over-year increase.

Evertz ended the quarter with C$103.3m of cash and short term investments, up from C$90.4 at the end of last quarter.

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Related Content:

Press Release: Evertz Technologies Reports Results for the Third Quarter Ended January 31, 2015

Previous Year: Evertz Q3 FY 2014 Revenue Jumps 30 Percent on Big Deals in North America

Previous Quarter: Evertz Revenue Increases 2 Percent in Q2 FY 2015, Misses Analyst Estimates

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© Devoncroft Partners 2009 – 2014. 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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NeuLion Revenue Increases 17 Percent in Q4 2014

Annual Results, Broadcaster Financial Results | Posted by Joe Zaller
Mar 04 2015

NeuLion,_Inc_-729822400065

Online video platform provider NeuLion reported that its revenue for the fourth quarter of 2014 was $16.5m, an increase of 17% versus the same period a year ago, and up 32% versus the previous quarter.

Consolidated net income for the quarter was $1.6m, or $0.01 per basic and diluted share, an increase of up from $1.1m last year, and $0.2m last quarter.

Operating income for the quarter was $1.8m, up from $1.1m last year, and $0.2m last quarter

Company CEO Kanaan Jemili said the NeiLion’s improved performance for the quarter reflects the company’s “continued gains in volume and usage from new and existing customers and demonstrating the earnings power of our business model.”

 

On a segment basis:

  • Revenue from Pro Sports was $7.9m, an increase of 18% versus the same period a year ago, and an increase of 52% versus the previous quarter. The company attributed the year-over-year increase in pro sports revenue to growth in variable subscription fees.
  • College Sports revenue was $3.6m, down 8% versus the same period a year ago, up 16.1% versus the previous quarter. The company attributed the year-over-year decline college sports revenue to the loss of the company’s ability to sell subscriptions for certain colleges, as colleges move to consolidate into conferences and sports networks
  • Revenue from TV Everywhere was $5m, up 43% versus the same period a year ago, and up 47.1% versus the previous quarter.  The company said TV Everywhere revenue increased because of increases in monthly fixed fees and variable usage fees.

 

Expenses during the quarter were up across the board.  Selling, general and administrative expenses, including stock-based compensation, were $8m, an increase of 27%, versus the same period a year ago. Including in selling, general and administrative costs were approximately $0.8 million of acquisition-related expenses and $0.2 million in costs associated with compliance with Section 404 of the Sarbanes-Oxley Act.

Research and development expenses in the fourth quarter were $2.1m, an increase of 5%, compared to the fourth quarter of 2013.

 

Full year 2014 Results

NeuLion’s revenue for the full year 2014 was $55.5m, up 18% versus the previous year.

Consolidated net income for the full year 2014 was $3.6m, or $0.01 per basic and diluted share, compared to a net loss of $2.3m in 2013.

Full year 2014 operating income for the quarter was $3.5m, versus an operating loss of $1.6m in 2013.

 

NeuLion CEO Kanaan Jemili said the company’s improved performance for the quarter reflects the company’s “continued gains in volume and usage from new and existing customers and demonstrating the earnings power of our business model.”

“With the acquisition of DivX, we have entered 2015 excited about our expanded set of opportunities globally to continue scaling the business and to seize leadership from both a technology platform and consumer experience perspective in the fast-growing online video market,” added Dr. Jemili. “We are intently focused on enlarging our customer base of both sports and entertainment content owners and consumer electronics manufacturers while continuing to expand relationships with our established customers. As adoption of ultra HD/4K video and Over-the-Top services accelerates, our end-to-end solution offerings, which enable digital content management, distribution and monetization, perfectly position NeuLion to deliver high quality on-demand and live interactive digital content anywhere, on any device,” concluded Dr. Jemili.

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Related Content:

Press Release: NeuLion Reports 22% Year-Over-Year Increase in Third Quarter Revenue to $12.2 Million

NeuLion Completes Acquisition of DivX

Broadcast Vendor M&A: Rovi Sells DivX and MainConcept to Parallax Capital and StepStone Group for $75 Million

Rovi – Parallax Capital: DivX Purchase Agreement

Press Release: Rovi Announces Sale of DivX and MainConcept Businesses

Press Release: Parallax Capital Partners and StepStone Group to Acquire DivX

Rovi to buy Sonic for $720 million

Sonic Solutions to buy DivX in $323M bid to become digital media leader

Sonic Solutions Integrates Newly Acquired MainConcept, Forms New Pro Technology Division

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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Broadcast Vendor M&A: EVS Acquires All Shares of SVS GmbH and Dyvi Live SA

Broadcast technology vendor financials, Broadcast Vendor M&A, Broadcaster Financial Results | Posted by Joe Zaller
Jan 07 2015

EVS_Logo (2013)

EVS announced that it now owns 100% of Scalable Video System GmbH (SVS) and Dyvi Live SA, two related firms that produce and market IP-based production switchers.

EVS, which purchased 25% of SVS in May 2013, has now paid €1m in cash to acquire the remaining 75% it did not already own. The deal also includes an “a possible future earn out based on the performance over the 2015-2020 period.” However, the terms of the earn-out provision were not specified.

Separately, EVS also paid €100,000 to acquire the remaining 5% it did not own in Brussels-based Dyvi Live SA, which distributes SVS products under the DYVI name

In its Q3 2014 financial results, EVS said the principal reason it had invested in SVS was to give the company access to SVS’s “promising technology.” The company went on to describe it’s financial relationship with SVS and DIVT, saying: “Notwithstanding that EVS only holds 25.1% of the shares outstanding as at September 30, 2014, the Group considers to have the control of SVS because it has the power on the business decisions and it controls totally the outflow of the company through the exclusive distribution agreement between a new fully owned subsidiary (DYVI LIVE, fully consolidated in the EVS accounts) and SVS. Moreover, EVS finances the future expenses occurring for the SVS development. Consequently, SVS is fully consolidated and non-controlling interests are accounted for (74.9%). In 9M14, these two entities have contributed EUR 0.1 million to EVS revenues, EUR -2.7 million to EBIT and EUR -1.7 million to net group profit, including non-controlling interest. At September 30, 2014, goodwill amounted to EUR 1.1 million.”

In announcing it has acquired the remainder of the outstanding shares in both SVS and DIVY, EVS said “these moves will enable EVS to manage that promising product line in a more efficient and holistic way.”

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© Devoncroft Partners 2009 – 2015. All Rights Reserved.

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