Posts Tagged ‘2016 media technology trends’

Disney Acquires Equity Stake in BAMTech

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Aug 09 2016

Disney announced a $1 billion acquisition of a minority stake in BAMTech, the entity holding Major League Baseball’s streaming technology and content delivery business.  The spin-out of BAMTech from MLB Advanced Media (“MLBAM”) was announced in late 2015.  The Disney investment in BAMTech had been rumored for several months.

In its quarterly SEC filing, Disney disclosed it acquired an initial 15% equity position in BAMTech for $450 million.  Disney has committed to purchasing an additional 18% equity interest in BAMTech for $557 million in January 2017.  Those two investments value BAMTech at $3.05 billion.

Disney declined to provide any specifics on BAMTech’s operating profile, though did note there is “some very slight dilution from the acquisition.”  However, Disney’s management felt this was more than offset by the trajectory of BAM Tech’s business and the opportunities to combine with Disney’s content properties, most notably ESPN.

Based on the previous public statements by MLBAM’s CEO Bob Bowman, the  $3.05 billion valuation level implies a revenue multiple of 12.2x expected 2016 revenue for BAMTech (please note several estimates involved in that calculation).

As part of the investment, Disney also gains the right to acquire majority ownership “in the coming years.”  The NHL currently holds a 7% – 10% equity position in BAMTech based on the August 2015 partnership deal between the companies.

The announcement coincided with Disney’s fiscal third quarter results.  During Disney’s call with analysts, CEO and Chairman Bob Iger, added context on Disney’s diligence of BAMTech.

“I love the business model because I love the quality of what they’ve created, largely from a technology perspective.  You’re look at an industry-leading platform.  And we did a fair amount of due diligence on this, speaking with people who have been clients of their service.  And also, we did our own due diligence in the sense that we’ve been clients of competing services.  And we concluded that what they’ve got is really robust” said Mr. Iger.

Since Disney is already a customer of BAM Tech, one immediate question is why Disney thought it was necessary to buy BAM Tech as opposed to renting its services as a customer.  During an interview with CNBC, Bob Iger responded to the customer vs. owner question from CNBC host Julia Boorstin.

“First of all, we think it is a good investment. We love their business model.  We think that in today’s world having the ability to stream on a scale basis live sports and live programming is a competitive advantage and something that is necessary.  We love the user interface.  So, overall we look at is as an investment.  But as a partner, as a part owner, and ultimately as a majority owner, we feel it gives us an ability to jump start not only ESPN, but are other business as well, into a space that we think is not only very exciting but extremely important in a very dynamic media marketplace.  So much better to own than to rent” responded Mr. Iger.

 

Related Content:

Press Release: Disney Acquisition of Minority Stake in BAMTech

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Clear-Com Acquires Trilogy Communications

Analysis, Broadcast Vendor M&A | Posted by Josh Stinehour
Aug 08 2016

Intercom solution provider Clear-Com has acquired competitor Trilogy Communications.  The purchase price equates to a valuation of 0.9x annual revenue.  cc-trilogy

Clear-Com is a subsidiary of Poway, CA based HM Electronics (“HME”).  Trilogy is headquartered in Andover, Hampshire UK and had been owned by the Foresight Group, a UK based infrastructure and private equity investment manager.

In its 2015 annual report, Foresight had indicated Trilogy was pursuing strategic options including a possible sale.

Based on Foresight’s disclosure, the acquisition price for Trilogy is GBP 2.9 million.  According to its regulatory filings, Trilogy’s revenue for the trailing twelve months ending February 2016 was GBP 3.26 million.  Using these figures the transaction values Trilogy at a 0.9x multiple of annual revenue.  When HME purchased Clear-Com from the Vitec Group in 2010, the valuation was 0.4x annual sales.

Trilogy’s revenue declined (in GBP terms) 23% in the twelve months ending February 26, 2016.  This was preceded by revenue decreases in 2013 and 2012 (2014 showed slight growth).  In aggregate, annual sales decreased 62% between the fiscal year ending February 2012 and the most recent fiscal year ending February 2016.

Trilogy’s profitability was impacted by the decline in sales.  EBITDA loss was GBP 762,000 for the fiscal year ending February 2014 and GBP 509,000 for the fiscal year ending February 2015.

Foresight’s financial reports provide additional context on the declining performance of Trilogy.  The principal cause cited for the revenue declines since 2012 were delays in US Defense orders.  The broadcast division of Trilogy was cited as facing a difficult trading environment in each of 2014 and 2015.

In the press release announcing the acquisition, Mitzi Dominguez, CEO of Clear-Com stated, “Both companies have been serving the professional intercom business for decades and bring a wealth of industry knowledge to the marketplace. The efforts of our combined teams will deliver tremendous added value to customers all over the world and will create new business opportunities for both companies. We extend a warm welcome to all Trilogy employees and customers.”

Bob Boster, President of Clear-Com, added some context on the technology alignment of the businesses.   “Their specialized matrix solutions perfectly complement Clear-Com’s highly-programmable and scalable digital matrix portfolio, increasing each team’s capabilities to meet the ever-growing and vastly-diverse communication needs across the markets we serve.  Trilogy’s SPG solutions will also be well received by our broadcast customers globally” said Mr. Boster.

 

Related Content:

Press release: Clear-Com Acquisition of Trilogy Communications

 

 

© Devoncroft Partners 2009-2016.  All Rights Reserved.

 

 

Avid has Strong Q2, Raises Full-Year Guidance

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Aug 08 2016

Avid Technology announced Q2 2016 GAAP revenue of $134.1 million, a year-over-year increase of 22.1% against Q2 2015, and a decline of 6.5% versus Q1 2016.  Avid Logo_ white background

Approximately 60% of the year-over-year growth is attributable to a change in the accounting treatment of revenue recognized for the release of the latest Pro Tools version 12.5.  The ability to more quickly recognize revenue reflects Avid’s progress over the past two years of eliminating the practice of implied support for products and transitioning to explicit support and recurring revenue models.

Avid did not disclose the amount of the growth attributable to revenue contribution from Orad, which was purchased in late June 2015.  As a reference, Orad had $10.4 million of revenue during Q1 2015.

Net income for the quarter was $13.0 million or $0.33 per share.  This compares to Q2 2016 net income of ($4.0) million or ($0.10) per share.  During the first quarter of 2016 Avid had net income of $20.9 million or $0.53 per share.

Gross margins (GAAP) for the quarter were 65.5%, an increase of 510 basis points when compared to the year earlier period, and a decrease of 420 basis points against the preceding quarter.

Operating income for Q2 2016 was $18.8 million, a substantial increase over the operating loss of $8.1 million in Q2 2015, though a decline of 26.8% versus Q1 2016.

R&D expense for the quarter were $21.4 million, an 8.1% decline against Q2 2015 R&D levels, and flat when compared to the first quarter of 2016.  As a percentage of revenue R&D expenses were 15.9% for the quarter, compared to 21.2% of total revenue in Q2 2015.

Sales and marketing costs for Q2 2016 were $30.2 million, representing an 8.0% decline versus Q2 2015 sales and marketing levels, and a decline of 4.4% versus Q1 2016.  Sales and marketing expenses were 22.5% of Q2 2016 revenue, a decline versus 29.9% of total revenue from the second quarter of 2015.

G&A expense was $16.8 million for Q2 2016, a decline of 3.5% versus the year-earlier quarter, and a decline of 5% against the preceding quarter.  Expressed in terms of total revenue, G&A expense was 12.5% of sales in Q2 2016 versus 15.9% in Q2 2015.

When considering the comparable period Q2 2015 figures do not include a full contribution of Orad’s operations (purchased in late June 2015), the decline across all operating expense categories – especially in sales – illustrates the impact of Avid’s recent restructuring initiatives.

There are many one-time expenses and non-cash items in Avid’s income statement results.  To provide a more normalized view of profitability Avid cites adjusted EBITDA, which is defined as operating income plus expense add backs for costs attributed to amortization, restructuring, restatements, stock-based compensation, acquisitions, integration activities, and efficiency program costs.  Adjusted EBITDA for the quarter was $29.4M, a substantial increase over the adjusted EBITDA of $1.4 million from Q2 2015.

Product and Services Revenue Breakdown

  • Product revenue for the quarter was $75.6 million, a slight decline of 0.7% versus the prior year, and a decline of 10.5% against the preceding quarter. Products represented 56.4% of overall revenue in the quarter, a decrease versus the 69.3% contribution during the second quarter of 2015.
    • Video solutions represented $44.5 million of Product sales, an increase of 3.9% versus the prior year. The primary cause of the increase in sales for the quarter was the contribution of revenues from the Orad acquisition.
    • Audio solution revenue for the quarter was $31.1 million, a decrease of 6.6% against the year-earlier period. Lower audio sales for the quarter were attributed to weaker Pro Tools sales.
  • Services revenue was $58.5 million, an increase of 73.9% versus the year-over-year period, and a slight decline of 0.8% against the preceding quarter. The rise in Services revenue was due to the accelerated revenue recognition associated with Pro Tools 12.5 sales.  For the quarter Services contributed 43.6% of total revenue, an increase versus the 30.6% contribution from Q2 2015.

Revenue by Geography

  • Revenues from the United States were $44.4 million for the quarter, an increase of 5.8% versus Q2 2015
  • Revenue contribution from Other Americas was $10.2 million, an increase of 54.2% on a year-over year basis
  • EMEA revenues were $58.9 million, a 25.3% increase against Q2 2015
  • The Asia-Pacific region contributed $20.5 million in revenue for the quarter, a rise of 44%

Update on Efficiency Initiative and Cash Generation

During the first quarter of 2016, Avid announced a $68 million (annualized) efficiency initiative.  As part of the Q2 2016 earnings release Avid’s management increased the efficiency target to $76 million.  A total of $57 million of the annualized savings have been achieved through the end of the second quarter.  The full savings are expected beginning in 2017.

Given the complexity of Avid’s financial statements, it is helpful to review the impact on the Company’s cash balance.  Cash used in operations for the quarter was $33.8 million.  This compares to cash used in operations of $30.8 in Q2 2015 and $11.2 million during the first quarter of 2016.

During Avid’s earlier first quarter release, Management cautioned the second quarter would experience negative cash flow between $27.5 million and $32.5 million.  It was attributable to a lower end of quarter accounts receivable balance for the first quarter, which was brought on by a decline in bookings.

Avid ended the quarter with $50.4 million in cash.  Avid had started the quarter with $87.8 million of cash.

Several factors have combined to make Avid’s financial disclosures difficult to comprehend, most notably the restatement in late 2014, which introduced a considerable amount of amortized revenue from prior financial periods.  Though this revenue is now recognized in Avid’s income statement, it does not represent any actual cash received from clients.  In other words, it is non-cash revenue with 100% gross margins.  Adding to this complexity are the effects of recent restructuring initiatives, the impact of the Orad acquisition, and the ongoing transition to a subscription model.  (Much of the complexity will abate during the second half of 2016.)

In an effort to better communicate the results of Avid’s ongoing transformation, management references several new metrics.

Update on Transformation:

Below is a chart from Avid’s investor presentation for Q2 2016 illustrating several areas of progress on the market adoption of Avid’s Everywhere Platform.

avid-transformation

Commenting on the transformation progress, Avid CEO Louis Hernandez, Jr. stated, “Our financial results and operational performance this quarter underscore the progress we are making to transform our company into a service-platform business with strong positions in higher-growth categories and a greater proportion of recurring revenue. We have a clear path to complete this transformation by our target of mid-2017, which will enable us to accelerate growth, realize a more efficient cost structure, increase revenue visibility, and generate enhanced value for our shareholders over the long-term.”

Business Outlook:

Bookings for the quarter were $102.2 million, a decline of 13.3% versus Q2 2015, and a 4.3% increase compared to the first quarter of 2016.  The original guidance for Q2 2016 bookings was for $99 million to $115 million, so the results were in line with Q1 guidance.

For Q3 2016, management provided guidance of bookings between $100 million and $120 million.  The full backlog (post impact of restatement) was $464.7 million at the end of second quarter, a 14% decrease over the backlog at the end of the second quarter of 2015.  Avid has worked through much of the backlog introduced from the 2014 financial restatement.  The balance for the “pre-2011” backlog has been reduced to $8 million as of the end of the quarter.

Avid is expecting to begin generating adjusted free cash flow in the second half of 2016, starting with a breakeven cash flow result for the third quarter of 2016.  As part of the earnings release, Avid increased its full year guidance for 2016 (link to previous guidance) to the following,

avid-guidance

“We are raising our full-year guidance range for non-GAAP revenue and adjusted EBITDA. We are also improving our guidance range for non-GAAP operating expenses because we are increasing our annualized run-rate cost savings target to $76 million. We are on track to be cash flow positive for the full year as we continue to execute our efficiency program and growth initiatives. We are reaffirming guidance for bookings, although we expect to be at the lower end of the range, due to higher than expected volatility in the media enterprise marketsaid Mr. Hernandez.

 

Related Content:

Press Release on Avid’s Q2 2016 Earnings Results:

Earnings Presentation Avid Q2 2016 Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Quantum Announces 20th Consecutive Quarter of Scale-out Storage Growth; Cites Large Virtual Reality Deal

Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Jul 28 2016

Quantum announced results for its first fiscal quarter of 2017, representing the three month period ending June 30, 2016.  QuantumTotal revenue for the quarter was $116.3 million, an increase of 4.9%
versus the year earlier period (FY Q1 2016), and a 3.1% decrease versus the preceding quarter (FY Q4 2016).  The first fiscal quarter of the year is generally Quantum’s weakest.

The quarter’s revenue of $116.3 million exceeded the high end of management’s guidance of $115 million (issued during the previous quarter).  The Company’s gross margins were in-line with guidance for the quarter, and its earnings result were slightly above earlier guidance.

Gross margins (GAAP) were 43.3% for the quarter, a slight improvement over the 42.4% gross margins from the year earlier period, and a slight decline compared to the 45.6% gross margins in the preceding quarter.

Net loss (GAAP) for the quarter was $3.8 million, equating to $0.01 loss per diluted share.  Quantum recorded a net loss of $10.7 million (or a loss of $0.04 per diluted share) during the year-earlier period and a net loss of $52.4 million in the preceding quarter.  The preceding quarter, fiscal fourth quarter of 2016, included a non-cash goodwill impairment charge of $55.6 million.

As of June 30, 2016 cash and cash equivalents were $34.5 million, a slight increase over the $33.8 million balance as of March 31, 2016.

Most relevant to Quantum’s activities in the media and entertainment segment, the Company’s scale-out storage business, which includes Quantum’s StorNext storage offerings, registered its 20th consecutive quarter of year-over-year growth.  Scale-out storage revenue was $30.8 million in the quarter, an 11% increase versus last year’s first quarter.

Management disclosed a win rate for scale-out storage in the quarter in the 70% range.  Over 120 new scale-out storage customers were added during the quarter, which compares favorably to the more than 90 new customers added in the first quarter of fiscal 2016.  During the call with equity analysts, management also highlighted several recent scale-out storage projects in the media and entertainment sector including a $200,000 plus deal “with one of the emerging leaders in virtual reality.”

The earnings release noted Quantum’s NAB Show announcement of integration between Avid’s Interplay MAM system and Quantum’s StorNext.  The integration enables media customers to control StorNext archive and restore functions through Interplay.  Commenting on the Avid Integration at the NAB Show, Geoff Stedman, SVP of Marketing at Quantum, said, “Through initiatives ranging from solution development to closer alignment of sales and support activities, Quantum is working closely with Avid to help Avid customers better manage their content over the long term. Together our technologies empower users to optimize their media storage and access to content on a broad range of archive platforms, providing significant time and cost savings that make it easier to achieve their creative and business goals.”

 

Update on Convertible Notes due November 2017

Quantum’s CFO Fuad Ahmad provided an update on Quantum’s efforts to address its convertible note balance, in the amount of $69.3 million, due in November 2017.  On the earnings call with analysts, Mr. Ahman said, “we want to be proactive, but sensible about our financing options. To that end, we’re in discussions with a number of financial institutions regarding expanding our credit lines to provide sufficient near and long-term liquidity and to create a clear and executable roadmap to address the convertible notes, which I may add will mature in another 15 months.”

Quantum had repurchased approximately $83 million dollars of prior convertible notes during November 2015.

 

Guidance for Fiscal Second Quarter, Full Year 2017

Quantum’s management issued guidance for the second fiscal quarter of revenue between $188 million to $122 million with GAAP gross margins of between 41% and 42% and a GAAP loss per share of $0.01 to $0.00.

Management also reaffirmed the full year guidance of at least $500 million in total revenue, equating to year-over-year growth of at least 5%.  Driving this growth is an expectation of a continued increase in scale-out storage revenue across Quantum’s vertical focus areas – Media and entertainment, surveillance and intelligence, and unstructured data archives for technical workflows.

Scale-out storage is expected to account for 35% to 40% of Quantum’s total revenue, which would represent a year-over-year growth of 40% to 60%, if achieved.

Quantum’s CEO Jon Gacek offered the following commentary on the outlook for scale-out storage, “Looking more closely at scale-out storage, Q1 was our 20thth consecutive year-over-year growth quarter, and given our increasing market traction and opportunity, we feel very good about our ability to achieve our scale-out growth objectives for the year.”

 

Related Content:

Press Release: Fiscal first quarter 2017 earnings release

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Akamai Media Division Declines in Q2, Despite Strong Growth in OTT Business

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Jul 27 2016

Content Delivery Network (CDN) service provider Akamai announced Q2 2016 financial results.  Akamai does more than $2 billion in annual revenue with operations across multiple industry verticals and several technology segments.  In its financial disclosures Akamai breaks out its revenue for Media Delivery Solutions (product category reporting) and for its Media Division (customer type reporting).  Akamai-Logo

Media Delivery Solutions encompasses a broader use case than traditional media operations.  Revenues associated with gaming, social media, software downloads, and other activities are reported in the Media Delivery Solutions category along with revenues related to the streaming of movies, television shows, and live events.   In a similar way, the Media Division includes revenues separate from the streaming of movies and television, such as technology solutions for security or website acceleration.

To address investor concerns on exposure to “do-it-yourself” initiatives from large customers, Akamai has started disclosing the revenue contribution of six large internet platform customers – Amazon, Apple, Facebook, Google, Microsoft, and Netflix.  In aggregate these six customers represented less than 11% of Akamai’s total revenue in Q2 2016, down from 18% in Q2 2015.  During the quarter’s earnings call, Akamai’s CFO’s Jim Benson indicated the six customers are predominantly classified as media customers.  Because of this, the revenue declines associated with “do-it-yourself” initiatives from these six internet platform customers has negatively impacted Akamai’s results in both Media reporting segments.

Media Delivery Solutions Category

Akamai’s Media Delivery Solutions category generated $197 million in revenue, a 9% year-over-year decline against Q2 2015 and a decline of 4% against the previous quarter, Q1 2016.  On a constant currency basis, the Media Delivery Solutions category was down 10% when compared to last year’s second quarter.

Management attributed the revenue declines to lower traffic from one of its largest customers.  Outside of Akamai’s business with the six large internet platforms, Media Delivery Solutions revenue grew 11% in the quarter versus the year prior.

As a percentage of Akamai’s total revenue, Media Delivery Solutions represented 34% during the quarter.  This compares to 45% of total revenue in Q2 2015.

Media Division

The Media Division had $288 million of revenue in the quarter, a decrease of 2% versus Q2 2015 and a decline of 1.2% against the preceding quarter.  Again, the decline was attributable to lower revenue from the six large internet platform customers.  Excluding activity from these six customers, Akamai’s Media Division grew 14% year-over-year.

During the quarter, the Media Division accounted for 50.4% of Akamai’s total revenue.  For the year-earlier quarter, the Media Division contributed 54.5% of Akamai’s sales.

In his prepared remarks on the Company’s earnings call, Akamai’s CEO Dr. Tom Leighton highlighted the strength of Akamai’s OTT business within the media division.  “…our OTT business has continued to grow at a rapid rate, following the record breaking results of the Super Bowl and March Madness in Q1, Akamai delivered a very successful EURO 2016. In addition to providing very high video quality in countries throughout Europe and North America, we set a new record for internet traffic for a single sporting event, during the final round match between Portugal and France” said Dr. Leighton.

 

Commentary on Media Vertical Results

The negative growth rates for its Media Delivery Solutions and Media Division were anticipated by Akamai’s management team.  Akamai experienced a moderating of growth in its Media Division segment during 2015 because of “do-it-yourself” initiatives, in particular at two of Akamai’s largest media customers (included in the six large internet platforms).  These two large customers accounted for 5% of Akamai’s total revenue in Q2 2016, down from 12% of the Company’s revenue in Q2 2015.  This continues a broader trend of Akamai’s Media Division (customer category) experiencing a declining growth rate in each of the last 10 quarters.

In responding to a question from Ganjit Sing of Morgan Stanley on growth rates related to over-the-top video (OTT) distribution, Mr. Benson offered commentary on OTT’s relative revenue contribution to Akamai’s Media Division.

“…it’s not a huge contributor to revenue in the near term. It just isn’t. What we’re seeing is steady growth in that customer base in the traffic. Steady growth in revenue. You have not seen a step function move to viewing content via those platforms. They are growing steadily. They’re growing nicely, but there has not been a catalyst yet to see a huge movement of people cutting the cord and moving online. So I think they will be a steady grower, but today the larger contributors to revenue and the media business are still software download customers, gaming, and social media.”

Later in the call, Dr. Leighton added further context on the video business when responding to a question about the nature of tasks insourced by large media customers.  Dr. Leighton stated, “…The insourcing of traffic is mostly around files where quality matters less and it’s easier to do…On the other side of the house, as we talked about, our OTT business is growing very well, much faster than the media business as a whole. And that’s because it’s more difficult to do with a high quality level, especially live and linear. And people are often paying to watch it, and so you really want to have a good experience there”

 

Successful Litigation Resolution

Separate to the earnings announcement, Akamai benefited from a final judgement in a long-standing legal case.  The day after the second quarter ended, July 1, 2016, Akamai received a $51 million judgement in its favor regarding a decade old patent dispute with Limelight.  The U.S. District Court in Massachusetts entered the final judgement after a series of appeals stemming from original damages awarded to Akamai in a 2008 jury ruling against Limelight.  The appeals process even reached the U.S. Supreme court in 2014.

 

 

Related Content:

Press Release: Q2 2016 Earnings Results

Press Release: $50 million dollar judgement in Akamai’s favor

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Net Insight Announces Record Second Quarter for 2016

Analysis, Broadcast technology vendor financials, Quarterly Results | Posted by Josh Stinehour
Jul 22 2016

Video transport technology provider Net Insight reported its Q2 2016 financial results.  Revenue was SEK 132.3 million, an increase of 42% over Q2 2015 and up 20% versus Q1 2016. logo-net-insight

A positive currency impact contributed 5.5% of the gain for the quarter and the acquisition of ScheduleALL contributed an additional 43.8% of the quarterly revenue increase.  Organic year-over-year growth for the quarter was still strong at 21.3%.

Management attributed the strong organic performance to deliveries relating to the Euro 2016 Football Championship in France and the upcoming Olympics in Brazil.  “We have had a great start to the year and I’m proud to present the strongest quarter ever for Net Insight” stated CEO Fredrik Tumegård at the outset of the Company’s earnings call.

Net income for the quarter was SEK 5.7 million or (0.01 earnings per share), an increase of 55.8% over Q2 2015, though a decrease of 71% against the preceding quarter, Q1 2016.

Gross margins for Q2 2016 were 62.8%, an increase above the 60.6% from the previous year’s quarter, and an improvement over the 61.7% gross margins from Q1 2016.

Operating income for the quarter was SEK 12.0 million, a 144.8% increase over the same 2015 period, and a 53.8% increase over the preceding quarter.  Operating margins were 9.0% for Q2 2016, which compares favorably to the 5.3% from Q2 2015 and the 7.1% operating margin from Q1 2016.

Since Net Insight capitalizes a portion of its development expenses, not all of the development expenditures in a given quarter are recognized in operating income.  This is offset by the amortization of previously capitalized development expenditures.  The difference in current development expense capitalization and historical development expense amortization for the quarter was SEK 4.4 million.

Net Insight had operating expenses of SEK 71.1 million in the quarter, an increase of 38% compared to Q2 2015, and an increase of 18.5% versus Q1 2016.

Sales and marketing expense was 36.4 million, an increase of 11.6% versus Q2 2015.  Expressed as a percentage of revenue, sales and market expense was 27.5% in the quarter versus 34.9% during Q2 2015.  The decline in sales and marketing as a percentage of revenue is consistent with the expected sales synergies from last year’s acquisition of ScheduALL.

Administrative expenses increased by 88.6% from 7.9 million SEK in Q2 2015 to SEK 14.9 million during the current quarter.  Administrative expenses represented 11.2% of revenue in the quarter, compared to 8.5% in the year earlier period.

Total Development expense (including the capitalized portion) for the quarter was SEK 38.4 million, a rise of 72.1% when compared to Q2 2015.  For the quarter total Development expense was 29% of revenue versus 23.9% in Q2 2015.   The increase in Development expense was caused by the integration of ScheduALL and further investments in Net Insight’s Live OTT Solution, Sye (released at the 2016 NAB Show).

Cash flow from operating activities for the quarter was SEK 7.7 million, a decrease of 48% against the year-earlier period, and a decline of 81.4% compared to the preceding quarter.  Net Insight’s CFO Thomas Bergstrom attributed the decline in part to a sharp increase in account receivables of SEK 28.5 million, which was caused by sales recognized late in the quarter.  Expressed in terms of trailing twelve month revenue, the accounts receivable balance on June 30, 2016 equates to 103 days of sales outstanding.  This compares to a figure of 81 days sales outstanding as of December 31, 2015.

Revenue by Geography

  • For the quarter, Net Insight generated sales from Western Europe of SEK 60.85 million, an increase of 4.1% versus previous year’s quarter. Western Europe was the largest contributor to total revenue, accounting for 45.7% of sales during the quarter.  In Q2 2015, Western Europe represented 62.3% of overall sales.
  • The Americas contributed SEK 38.7 million or 29.2% of Net Insight’s revenue in the quarter (versus 24.2% in the Q2 2015). Compared to Q2 2015, revenues from the Americas increased by 71.2%.  The increase is primarily attributable to the acquisition of ScheduALL, but also deliveries associated with the 2016 Olympics in Brazil
  • Rest of World sales were SEK 33.2 million, an increase of 165.6% versus the year earlier period. As a percentage of total sales, Rest of World contributed 25.4% in the quarter versus 13.4% during Q2 2015. The Company cited strong activity in both the Middle East and South Africa in its earnings release.

Revenue by Type

  • Sales attributed to Net Insight’s hardware products were SEK 66.3 million in the quarter, an increase of 32.8%. As a percentage of total sales, hardware products were 50.1% of the quarter’s sales versus 53.5% during Q2 2015.
  • Software licenses accounted for SEK 28.7 million of revenue in the quarter, an increase of 26.9% over the year earlier period. Software contributed 21.6% of overall revenue during the quarter versus 24.2% in Q2 2015.
  • Support and services sales were SEK 35.7 million during the quarter, an increase of 66.8% versus the year earlier quarter. Support and services were 26.9% of overall revenue in the quarter, an increase from the 22.9% contribution in Q2 2015.

Revenue by Vertical

  • Sales in the Broadcast & Media (BMN) business vertical were SEK 123.0 million, a 60.9% increase over the prior year’s quarter. BMN was responsible for 93% of Net Insight’s revenue in the quarter, more on a percentage basis versus the 82% in Q2 2015.
  • Sales in the Digital Terrestrial TV (DTT) vertical were SEK 9.26 million, a decrease of 37.8% over Q2 2015. On a percentage basis, DTT represented 7% of overall revenue in Q2 2016, compared to 16% in Q1 2015.
  • The CATV/IPTV vertical was0% of total sales in Q2 2016. It was 2% of total sales during Q2 2016.

Net Insight ended the second quarter with 202 employees, a substantial increase over the 138 employees from a year earlier, and a slight decline from the 204 employees at the end of the first quarter.  The acquisition of ScheduALL is the primary cause for the year-over-year increase in headcount.

Cash and cash equivalents was SEK 195.0 million at the end of the quarter, down from the SEK 170 million balance as of March 31, 2016.

 

Management Commentary on Live OTT Solution Offering

During Net Insight’s earnings conference call, CEO Fredrik Tumegård talked extensively on the capabilities and potential of Sye.  Net Insight is still working to secure its first commercial deployment of Sye and management was measured in setting expectations for the market adoption of the product.  “The commercial tests currently underway in Live OTT are proceeding according to plan, as we’ve previously communicated, although it will be some time before revenues hit the bottom line. This is due to a naturally long sales cycle in combination with a renewed business model, where the revenue is first made visible when the viewers are using the new services. It’s important to point out that our technology is innovative and that it always takes time for new technology to gain foothold on the market” said Mr. Tumegård.

The below slide illustrates commercial progress with Sye.  It is sourced from Net Insight’s Q2 2016 earnings presentation.

NetInsight-Slide

 

Related Content:

Press Release: on Q2 2016 Results

Net Insight CEO Statements on Q2 2016 Results

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

2016 Big Broadcast Survey (BBS) Reports Now Available

broadcast technology market research, Broadcast Vendor Brand Research, market research | Posted by Josh Stinehour
Jul 21 2016

The 2016 Big Broadcast Survey (BBS) Reports are now available.

We have been publishing the BBS Reports since 2009.  Each new edition is created through several months of research, including interviews with technology end-users, global surveys of technology decision makers, analysis of the end-user responses, and visualization of the data collected.  Now in its eighth year of publication, the BBS remains the most comprehensive annual study of technology end-users in the global broadcast and media technology industry.  Nearly 10,000 technology professionals in 100+ countries participate in the BBS each year, making it the largest market study of the media technology industry.

Based on feedback from technology vendors, media companies, and investors, we have updated the vendors, product categories, and market trends profiled in the 2016 BBS to better align with recent market developments.

Select updates include the global tracking of IP Standard Adoption, a product level review of the 4K upgrade cycle, and planned usage of programmatic advertising exchanges.

The continual updates over the past eight years have helped the BBS reports remain a critical reference for industry executives to improve strategic decision-making, customer engagement, marketing strategy, product planning, and sales execution.  In addition to technology vendor and service provider strategic planning, BBS reports are also used frequently for M&A and investment activities by both buyers and sellers.

Three types of 2016 BBS reports are available:

  • 2016 BBS Global Brand Reports: provides deep insight into how each more than 100 broadcast technology suppliers (see full list below) are perceived by market participants, along with comprehensive benchmarking of broadcast technology vendors on a wide variety of metrics
  • 2016 BBS Product Reports: provide detailed information from buyers, specifiers, and users of broadcast technology products in 32 separate categories (see full list below)
  • 2016 BBS Global Market Report: provides detailed information about industry trends, major projects being planned, products being evaluated for purchase, current and future plant infrastructure, broadcast technology budgets, and planned deployment of new technologies including 4K, HEVC compression, and IP-based technology infrastructure

 

For additional information on the 2016 BBS report, please call or email me.

As is Devoncroft’s custom, we will publish highlights from this year’s BBS reports on the Devoncroft website.  These articles are posted on a semi-regular basis, so please check back often.

To receive posts when published, please enter register with your email in the box in the upper right-hand corner of the page.

The below table of logos (in alphabetical order) lists the technology vendor brands covered in the 2016 BBS.

2016-BBS-Logos

 

Technology Product Categories & Vendor Brands Covered in the 2016 BBS, by Application Area

 

Acquisition & Production:

ENG Cameras

Canon, Hitachi, Ikegami, JVC, Panasonic, Sony

Large Format Single Sensor Cameras

ARRI, Blackmagic Design, Canon, Red, Sony

Production Switchers

Blackmagic Design, For-A, Grass Valley, NewTek, Panasonic, Ross Video, SAM, Sony

Studio / System Cameras

Grass Valley, Hitachi, Ikegami, JVC, Panasonic, Sony

 

 

Post Production: 

Graphics & Branding

Adobe, Autodesk, Avid/Orad, ChyronHego, Evertz, Grass Valley, Imagine Communications, Ross Video, Vizrt

Video Editing

Adobe, Apple, Avid, Blackmagic Design, EVS, Grass Valley, Imagine Communications, Sony

 

 

Content Communications and Infrastructure:

Bonded Cellular

Dejero, LiveU, Teradek, TVU

Routing Switchers

Blackmagic Design, Evertz, Grass Valley, Imagine Communications, Ross Video, SAM, Utah Scientific

Signal Processing / Interfacing / Modular

Aja Video, Axon, Blackmagic Design, Evertz, For-A, Grass Valley, Imagine Communication, Ross Video, SAM

Video Transport

Aspera, Cisco, Ericsson, Evertz, Harmonic, Imagine Communications, Lawo, Media Links, Net Insight, Nevion, Riedel, Signiant

 

 

Storage:

High Performance Shared Storage:

Avid, Harmonic, Hitachi, HPE, Isilon Systems/EMC, NetApp, Quantum

Playout / Transmission Servers

Avid, EVS, Grass Valley, Harmonic, Imagine Communications, Ross Video

Production Servers

EVS, Grass Valley, Harmonic, Rohde & Schwarz, SAM

 

 

Audio:

Audio Consoles

Avid, Calrec, Lawo, Salzbrenner Stagetec, Solid State Logic (SSL), Soundcraft, Studer, Wheatstone, Yamaha

Audio Processing & Monitoring

Adobe, Avid, Dolby, Linear Acoustic, RTW, TSL, Wohler

Intercom / Talkback

Clear-Com, Riedel, RTS Intercom Systems, Trilogy

Microphones

AKG, Audio-Technica, beyerdynamic, Electro Voice, Marshall Electronics, Neumann, Schoeps, Sennheiser, Shure, Sony

Monitors (speakers)

Adam, Avid, Focal, Genelec, JBL, KRK Systems, Mackie, Neumann, PMC,

 

 

System Automation and Control:

Broadcast Business Management Systems

arvato/S4M, Imagine Communications, MediageniX, MSA Focus, SintecMedia, Wide Orbit

Archive & Archive Management

Masstech, Oracle/Front Porch Digital, Quantum, SGL, XenData

Media Asset Management

arvato/S4M, Avid, Dalet, EVS, Imagine Communications, Prime Focus Technologies, Vizrt, VSN

Playout Automation

Grass Valley, Imagine Communications, Pebble Beach, Playbox, Snell

Workflow Orchestration / BPM

Aspera, Avid, Imagine Communications, IBM, Sony, Telestream

 

 

Playout and Delivery:

Encoding / Transcoding

Arris, ateme, Cisco, Dalet/AmberFin, Elemental Technologies, Ericsson, Harmonic, Imagine Communications, Telestream

Integrated Playout (Channel in a Box)

Evertz, Grass Valley, Harmonic, Imagine Communications, Pebble Beach, Playbox, SAM

On-line / Streaming Video Delivery Platforms

Brightcove, Kaltura, Neulion, Ooyala, Piksel

Transmitters

GatesAir, Hitachi, NEC, Plisch, Rohde & Schwarz, Screen Service, Toshiba

 

 

Test, Quality Control and Monitoring:

Multiviewers

Avitech, Axon, Evertz, For-A, Grass Valley, Imagine Communications

Test & Measurement

Imagine Communications, IneoQuest, Leader, Phabrix, Rohde & Schwarz, Tektronix

 

 

© Devoncroft Partners 2009 – 2016. All Rights Reserved.

 

 

Avid Restructures and Refinances as it Enters Final Phase of Corporate Transformation

Analysis, Broadcast technology vendor financials, SEC Filings | Posted by Joe Zaller
Feb 29 2016

Avid_Logo (Black Background)

Avid Technologies said in regulatory filings that it has committed to a restructuring plan, which includes “reductions in workforce, facility consolidation, transferring resources to lower cost regions and reducing other third-party services costs.”

According to the company, these actions will enable Avid to “more efficiently operate in a leaner, and more directed cost structure.”

Avid says these actions represent “the final phase of talent alignment and facilities rationalization program – Avid is putting the right people in the right roles in the right locations with the right cost structure which will position Avid for the end of its transformation in 2017. In connection with this effort, redundant offices will also be closed or downsized.”

“Since we began Avid’s transformation, the Avid Everywhere vision – to build our portfolio of products as applications on a single platform, the Avid Media Central platform – has been central to our strategy to solve the industry’s most important issues with greater innovation, flexibility and efficiency. Avid is in the final stretches of its dramatic transformation and we’re pleased that the growing adoption, stability and maturation of the Media Central Platform will now allow us to fully realize its potential to drive a more efficient operating model by eliminating components and processes that are no longer required with a single global platform.” said Louis Hernandez, Jr, Chairman, President, and CEO of Avid.

Scheduled to be completed by the end of the second quarter of 2017, the restructuring plan is expected to deliver appropriately $68m of annualized costs savings.

Avid quantified these expectations, saying  “personnel related savings account for two-thirds of overall efficiency gains. Many of the personnel related actions have already been completed with savings expected to be realized on an accelerated basis with each successive quarter. The remainder of the efficiencies will be achieved through consolidating and darkening underutilized facilities and further rationalizing spend on external vendors.”

The company “expects to incur incremental cash expenditures of approximately $25 million relating to termination benefits, facility costs, employee overlap expenses and related actions.” Approximately $14 million of the expenditures will be recorded as restructuring expenses in the quarters ending December 31, 2015 through June 30, 2017.

In connection with the announced cost efficiency program, Avid entered into a new five-year, $105 million senior secured credit facility, which consists of a $100 million term loan and an undrawn $5 million revolver. The company borrowed the full amount of the Term Loan, or $100,000,000, as of the Closing Date (February 26, 2016), but did not borrow any amount under the Credit Facility as of the Closing Date.

Avid said the company “granted a security interest on substantially all of their assets to secure the obligations of all obligors under the Credit Facility and the Term Loan. Avid Worldwide provided a guarantee of all the Company’s obligations under the Financing Agreement. Future subsidiaries of the Company (other than certain foreign and immaterial subsidiaries) are also required to become a party to the applicable security agreements and guarantee the obligations under the Financing Agreement. The Financing Agreement includes covenants requiring the Company to maintain a Leverage Ratio (defined to mean the ratio of (a) consolidated total funded indebtedness to (b) consolidated EBITDA) of no greater than 4.35:1.00 for the four quarters ending June 30, 2016, 5.40:1.00 for the four quarters ending September 30, 2016, 4.20:1.00 for the four quarters ending December 31, 2016 and thereafter declining over time from 3.50:1.00 to 2.50:1.00.  The Financing Agreement also restricts the Company from making capital expenditures in excess of $20,000,000 in any fiscal year.”

Proceeds from the term loan will be used to replace the company’s existing $35 million revolving credit facility, finance the company’s efficiency program and other transformation initiatives, and provide operating flexibility throughout the remainder of the transformation in this period of heightened market volatility.

The company estimates that after paying for both debt issuance costs and the efficiency program, the new financing will provide approximately $70 million of available liquidity, about half of which replaces the existing revolving credit facility with the remainder providing incremental liquidity to strengthen the Company’s balance sheet.

“The new debt facility further strengthens our liquidity position and supports the execution of the last leg of our transformation, including the efficiency program,” said John Frederick, Chief Financial and Administrative Office of Avid. “We continue to expect positive adjusted free cash flow generation in 2016, although we do anticipate using cash in the first half of the year as we execute on the cost initiatives. We look forward to updating the investor community on our 2015 results and 2016 guidance, as well as sharing more details behind the 2016 growth and efficiency initiatives, in our fourth quarter and full-year 2015 earnings and business update call. We now have a capital structure that we believe allows us to make the investments necessary and finish executing on our plan.”

“Our clients and community are fully supportive of our vision, said Hernandez.  “Hundreds of large and sophisticated global media companies who have purchased over 32,000 Media Central licenses, punctuated by the record contract with Sinclair Broadcast Group signed in December 2015. Clients everywhere are enjoying the benefits of the platform as they look to capitalize on major industry shifts in the media landscape. For Avid, 2016 will be marked by a focus on additional platform-enabled growth and efficiency initiatives, which will demonstrate our ability to generate a meaningful financial return for our shareholders.”

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Related Content:

Press Release: Avid Technology Announces Next Milestone in Company Transformation

Avid SEC Filing: February 26, 2016

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© Devoncroft Partners 2009 – 2016. All Rights Reserved.

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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.

 

 

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