Posts Tagged ‘Henk Derksen’

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

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

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


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


Q4 2017 Broadcast Revenues Impacted by Revenue Recognition Issues

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

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

Belden CEO John Stroup at 2017 Devoncroft Executive Summit

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

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

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

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

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


Shipments of IP-based Products Accelerate

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

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



Positive Outlook for 2018

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


Full Year 2017 Broadcast Results

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



Related Content:

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

Press Release: Belden Reports Solid Results for Third Quarter 2017



© Devoncroft Partners 2009-2018.  All Rights Reserved.

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

Broadcast technology vendor financials, Broadcast Vendor M&A | Posted by Joe Zaller
Apr 01 2014

Belden announced that it has completed the acquisition of the previously announced offer to purchase Grass Valley. When the deal was announced in February 2014, Benden CFO Henk Derksen told equity analysts that the $220m deal would be funded with existing cash.

Grass Valley had approximately $290 million in revenue according to Belden’ press release, so the deal values Grass Valley at 0.75 revenue.

It is believed that the enlarged company will be branded Grass Valley.

According to Belden, the value of the combination of the two companies is clear for both customers and shareholders is clear. The company says that by aligning both resources and strategies, the business will have a broader offering, while realizing the benefits of scale.

Belden also says the combined company “will be able to deliver the ability to simplify the purchasing and management of highly complex infrastructures.”

Belden says acquisition of Grass Valley will be immediately accretive to adjusted earnings per share with an estimated impact of approximately $0.20 in 2014 and $0.50 in 2015.

Much of the increased profitability of the new company is likely to come through synergy savings.

One of the hallmarks and core competencies of the Belden team is the efficient integration of acquired companies into the Belden family, and the associated inculcation with the “Belden Business System, including LEAN enterprise techniques and the Market Delivery System.”

There are many examples of Belden buying underperforming companies and subsequently using its internal processes to achieve strong financial performance and operating return.

Indeed, the company says “there is a significant opportunity in the application of the Belden Business System” in the case of Grass Valley

Derksen told analysts at the time of the announcement that Belden plans “to invest approximately $25 million during the first 12 months of integration largely through restructuring efforts to capture the value of the combined company. The strategic actions will include cost actualization, manufacturing footprint and leveraging a combined sales and marketing function and the implementation of lean principles.”

At same time Belden CEO John Stroup said “the result of the integration is unlikely to include meaningful reductions in R&D investment. However, I think there’s going to be an opportunity for Miranda to throttle back on some investments where Grass Valley’s stronger and for Grass Valley to throttle back on opportunities where Miranda’s stronger. Manufacturing is a clear opportunity. Today, Grass Valley outsources a lot of their manufacturing. We think there’s an opportunity for us to leverage our existing fixed cost structure, absorb that manufacturing. So that’s a clear opportunity to create value in the combined business and there’s clearly an opportunity to leverage our global sales force. Both of us at 200 and 300 million respectively, have created a global sales force calling on the same customers and we see a clear opportunity to improve our efficiency there. So the assumptions that we have in place include manufacturing cost synergies as well as the opportunity to leverage the combined sales organization, both in terms of cost and revenue.”


The following slides show the strategic rationale for the Miranda – Grass Valley merger, as explained by Belden in February 2014.


Belden Buys Grass - 1



Belden Buys Grass - 2.


Belden Buys Grass - 3



Belden Buys Grass - 4



Belden Buys Grass - 5



Given that it is believed that the combined company will be branded as Grass Valley, the deal marks a new beginning rather than the end of the road for the formidable broadcast brand.

Prior to officially becoming part of Belden, what is now Grass Valley has been through a number of strategic changes in the last 10-15 years.

This started in December 2000 when Thomson purchased Philips Professional, which at that time had revenue of approximately 250m Euros, and employed 1,050 people. Philips products, which included cameras, film imaging, signal processing, media networking & control, and systems integration services, became part of Thomson Multimedia.

After the Philips acquisition, the combined company, which was renamed Thomson Multimedia, had combined revenue of approximately 366m Euros.

In 2001, Thomson bought Grass Valley in 2001 for $172m.  At that time, Grass Valley had revenues of about $200m.

Technicolor then went on a buying spree, acquiring multiple companies that were ultimately folded into the Grass Valley brand.

Thomson added to its Grass Valley holdings with the 2005 acquisition Canopus for more than $100m.

By the late 2000s Thomson – which had by this time changed its name to Technicolor – put Grass Valley on the block, initially with what has been described as a very high price tag.

After several rumored bids, and more than a year on the block Technicolor sold what is now Grass Valley to Francisco Partners, a San Francisco – based private equity firm.

Technicolor retained other parts of the business, including transmitters and head-end equipment, and later sold-off these assets in two separate transactions.

Technicolor sold the Grass Valley transmission business to PARTER Capital Group.

The Grass Valley head-end business was sold to FCDE in March 2011.

Grass Valley is one of the industry’s great companies and I am sure that the people there are happy to finally have resolved their fate.  Let’s hope they can now focus on making great products – and of course money for their new owners.



Related Content:

Press Release: Belden Announces Successful Completion of Grass Valley Acquisition

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

Press Release: Technicolor to sell its Broadcast Services activity to Ericsson

Belden Q3 2012 Revenue Declines 6 Percent, Miranda “Off to a Slow Start”

Broadcast Vendor M&A: Miranda Buys Softel

Belden Closes Deal to Acquire Miranda

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

More Broadcast Vendor M&A: Technicolor Closes Deal to Dispose of Grass Valley Transmission Business

Technicolor Receives Binding Offer for Video Head-End Business

Technicolor decides not to sell digital signage provider PRN

Technicolor completes sale of Grass Valley to Francisco Partners




© Devoncroft Partners 2009 – 2014. All Rights Reserved.



Belden Creates Broadcast Business Unit, Discloses Broadcast Revenue and Profitability

Broadcast technology vendor financials | Posted by Joe Zaller
Apr 25 2013

Belden announced that it will now report its earnings according to the following four business segments: Industrial Connectivity Solutions, Industrial Information Technology (IT) Solutions, Enterprise Connectivity Solutions, and Broadcast Solutions.

The company said that these reporting changes have no impact to Belden’s consolidated financial results and no adjustment to previously provided financial guidance or strategic goals is intended or implied by this announcement.

Belden will be reporting results under these new business segments on the beginning with its Q1 2013 earnings announcement.

As per the chart below, the company had previously reported its financials according to geography.

Belden Segmentation



Belden CFO Henk Derksen said that the reporting changes are a more intuitive and insightful way to present Belden’s results going forward changes, and that the solutions-based orientation enables Belden to be more focused and agile as an organization, and provide investors with further transparency into the company’s business operations.

The broadcast business will continue to be managed by Strath Goodship (Miranda CEO), Dave Jackson, and Jimmy Rayford (Belden VP, Business Development).

Denis Suggs, EVP, Americas Operations & Global Cable Products, who had previously overseen the broadcast business, has decided to pursue opportunities outside of Belden. Denis will continue at Belden through July to allow for an orderly transition. “We thank Denis for his solid performance over the past six years, and appreciate the strong team he has assembled. We wish Denis the best in his future endeavors.” said John Stroup, president and CEO of Belden.

As shown below, the company’s broadcast solutions segment consists of Belden’s existing broadcast sales as well as those of Miranda (acquired in July 2012 for $362m) and PPC (acquired in December 2012 for $515.7m).


Belden Broadcast Segment Financial Metrics


Belden’s broadcast business had 2012 revenue of $362.6m in 2012.  However these results include only 5 months of revenue from Miranda, and minimal contribution from PPC.

According to Derksen, if full year 2012 revenue from both Miranda and PPC were included in the broadcast business figures, total broadcast revenue in 2012 was $684m with an operating margin of 13-15%. For reference, according to previously published reports Miranda’s last full year of reported revenue was approximately $180m, and PPC’s revenue in 2012 was approximately $238m.

As part of the changes to reporting, Belden will no longer report geographic results on a regular basis, but may occasionally report geographic results for illustrative purposes.  However, in order to help analyst transition their financial models, Derksen disclosed that 87.2% of 2012 broadcast revenue came from the Americas, 7.9% was from EMEA, and 4.9% was from APAC.

Similarly the company will not make product results available as the company mores from product sales to solution selling.

The company also said it will not be breaking out its operating expenses (R&D, G&A, and sales and marketing) on a segment basis.

Derksen said these changes were made because “the old way of looking at Belden is no longer insightful” due to the many changes at the company and in its markets over the past several years.

“This announcement marks another key milestone in the transformation of our business. We believe this action highlights our strategic focus on continuing to build leading global businesses with strong financial attributes. Through this, Belden can deliver even more value to our enterprise, industrial and broadcast customers around the world and quickly capitalize on new market opportunities,” said Stroup.



Related Content:

Press Release: Belden Announces Formation of Global Business Segments

Revenues at Miranda Technologies Down 10 Percent in Q4 2012


© Devoncroft Partners. All Rights Reserved.



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