Zoo Digital Group Plc · LSE:ZOO
Zoo Digital — FY2023 Earnings Presentation
56 slides from Zoo Digital's earnings presentation, Aug 10, 2023
Slide 1: ZOO Digital Group Plc
ZOO DIGITAL GROUP PLC August 2023
Slide 2: Disclaimer
DISCLAIMER Final Results FY23 This document has been prepared by ZOO Digital Group plc (the “Company”). It should not be reproduced, redistributed or passed to any other person. This document, the talks given by the presenters, the information communicated during the delivery of the presentation and
Slide 3: Meet Our Presenters
Final Results FY23 MEET OUR PRESENTERS Stuart Green, CEO Phillip Blundell, CFO • Co-founder and CEO since 2006 • Senior finance professional and Chartered Accountant • Over 30 years experience in team building and • Over 20 years experience in software industry executive management in the TMT indust
Slide 4: To Global Entertainment
Final Results FY23 TO GLOBAL ENTERTAINMENT • Fourth successive year of strong revenue growth with improved margins and profitability • Increased share of a growing market; remain strategically positioned to meet customer demand • Strengthened international presence in strategically important regions
Slide 5: Short Term Industry Disruption
Final Results FY23 SHORT TERM INDUSTRY DISRUPTION Page 5
Slide 6: Major streaming companies are undergoing strategic reviews
Final Results FY23 Major streaming companies are undergoing strategic reviews • Refocus on profitability over subscriber growth • Process commenced by Disney in early 2023, others have followed (Paramount, WBD, NBCUniversal, Amazon, Netflix) • Restructuring, headcount reductions, trimming new conten
Slide 7: Streaming profitability pressure and continuing end-market strength
Final Results FY23 • Large media companies under pressure to evolve streaming services to become profitable • All media localisation providers are affected by the hiatus and smaller players more marginalised However, • The end markets for media & entertainment are as large and strong as ever • Strea
Slide 8: The disruption is temporary, improvement expected
Final Results FY23 • The disruption is temporary, improvement expected in the short- to medium-term • Large buyers now favour E2E vendors – rationalisation of suppliers benefits ZOO • ZOO is confirmed as a key supplier to major buyers with ZOOstudio embedded • ZOO’s flexible cost base is an advantag
Slide 9: FY23 Results
Final Results FY23 FY23 RESULTS Page 9
Slide 10: Financial Highlights – Fourth Successive Year of Revenue Growth
Final Results FY23 FINANCIAL HIGHLIGHTS – FOURTH SUCCESSIVE YEAR OF REVENUE GROWTH & IMPROVED MARGINS Revenue up 28% 70.4 90.3 Adjusted EBITDA*† up 119% 7.1 15.5 Operating profit† up 330% 1.9 8.1 -0.2 Reported PBT† up 3826% 7.9 Net cash from operations up 197% 5.2 15.5 Net cash at year end up 99% 6.
Slide 11: Highlights
Final Results FY23 HIGHLIGHTS • ZOO selected as a key vendor by a second major content • Worldwide freelancer network grew by 4% to 11,467 (FY22: 11,028) producer with ZOOstudio adopted to support its content • Leading standard of customer satisfaction maintained – retained sales localisation across
Slide 12: Key Performance Indicators
Financial KPIs Final Results FY23 Revenue up 28% to $90.3 million (FY22: $70.4 million) Opex as a % of revenue 1 EBITDA margin improved 29% (FY22: 27%) KEY PERFORMANCE by 7.1 points to 17.1% (FY22 restated: 10.0%) INDICATORS Operational KPIs Number of freelancers 2 up 4% to 11,467 1 Adjusted EBITDA
Slide 13: Consolidated Statement of Comprehensive Income
Final Results FY23 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Restated 2 $000’s 2023 2022 % change Revenue 90,260 70,403 28.2% Cost of sales (56,327) (49,562) (13.6%) Gross profit 33,933 20,841 62.8% Revenues Operating expenses Other operating income 8 204 (96.1%) • Localisation up 34% • Fixed o
Slide 14: Segmental Analysis
Final Results FY23 SEGMENTAL ANALYSIS $000’s Revenues 2023 2022 % change Localisation 56,578 42,186 34.1% Revenues Media Services 32,115 26,425 21.5% • Localisation – dubbing market acceptance of Software Solutions 1,567 1,792 (12.6%) ZOO’s proposition providing traction Total 90,260 70,403 28.2% •
Slide 15: Consolidated Statement of Financial Position
Final Results FY23 CONSOLIDATED STATEMENT Restated 1 OF FINANCIAL POSITION $000’s 2023 2022 Non-current Assets Non-current assets 31,041 28,831 • Intangible assets up 5% due to the investment in software Trade and other receivables 16,532 22,972 platforms and goodwill relating to the Indian acquisit
Slide 16: Market Update
Final Results FY23 MARKET UPDATE Page 16
Slide 17: Content Spend Growing as Consumers Transition to Streaming
Final Results FY23 CONTENT SPEND GROWING AS CONSUMERS TRANSITION TO STREAMING US Hours Spent per day with Premium SVOD Quarterly Subscription Global content spend ($B)3 TV vs. Digital Video Among Adults 1 Growth 2 260 03:33 16 50 240 220 14 03:18 03:16 40 03:11 200 12 03:07 30 Global content spend (
Slide 18: Heightened Competition Leading to New Monetisation Models
Final Results FY23 HEIGHTENED COMPETITION IS LEADING TO NEW MONETISATION MODELS Global SVOD Market Shares December US AVOD Viewers2 FAST Channel Revenue by Region 2022 1 165.4 $B 3 158.5 150.6 14 140.1 Netflix 129.0 12 Other 10 8 61.2% 59.5% 57.4% 6 54.3% 4 50.9% Apple TV+ Prime Video 2 0 Max 2021 2
Slide 19: Streamers Are Increasingly Focused on Profitability
Final Results FY23 STREAMERS ARE INCREASINGLY FOCUSED ON PROFITABILITY Demand for Foreign Language Netflix Originals Iger Predicts Disney Will by Country of Origin ‘Meet or Exceed’ $5.5 Billion Cost-Cutting Goal Other 24% Japan 29% France Warner Bros. Discovery 3% Increases Cost-Cutting China Synerg
Slide 20: Growing Media Localisation Market Serviced by Fewer Global Vendors
Final Results FY23 GROWING MEDIA LOCALISATION MARKET SERVICED BY FEWER GLOBAL VENDORS Media Localisation Market Size (Slator) Media Localization Vendors in the Nimdzi 100 3.5 1,400 14 3 1,200 12 Number of companies 1,000 10 2.5 Market Size ($ Billion) Revenue (USD) 800 8 2 600 6 1.5 400 4 1 200 2 0.
Slide 21: Impact on ZOO
Final Results FY23 Impact on ZOO • Resilient content spend – all market forecasts point to continuing growth • Increasing reliance on trusted vendors – growing YoY market share of large/E2E vendors • Demand from new streaming models – AVOD and FAST provide new opportunities • Localisation unlocks RO
Slide 22: ZOO considers AI an opportunity rather than a threat
Final Results FY23 ZOO considers AI an opportunity rather than a threat • ZOO has been active in R&D for many years • Speech-to-text already incorporated • Many AI technologies have limited application in the Media & Entertainment market • Focused on technology to supplement rather than replace • In
Slide 23: Strategic Progress
Final Results FY23 STRATEGIC PROGRESS Page 23
Slide 24: Progress of Five Pillars
Final Results FY23 PROGRESS OF Five pillars differentiate ZOO in the market and provide competitive advantage Innovation Scalability Collaboration Customer Talent Create value-adding Operate an extensive Work with like- Secure preferred Engage with software technology freelance network minded, world
Slide 25: May 2023 placing for investment in Japanese outsource partner
Final Results FY23 • In May 2023 completed a placing of £12.5 million ($15.5 million) for an investment in existing Japanese outsource partner • ZOO’s cloud-based services will enable significant capital-efficient expansion of capacity • Strengthen foothold in Japan, a leading growth market, and abi
Slide 26: Outlook
Final Results FY23 OUTLOOK Page 26
Slide 27: Outlook
Final Results FY23 • Customer cost-saving programmes and industrial action have created a temporary hiatus • This has resulted in softening of H1 FY24 revenues • Large customers are now rationalising their supplier bases – ZOO is strategically positioned to benefit as one of the few E2E vendors • Th
Slide 28: Investment Summary
Final Results FY23 Delivered 34% CAGR since 2016 100 Revenue ($ million) 80 INVESTMENT 60 40 20 SUMMARY 0 FY16 FY20 H1 FY21 H2 FY22 FY23 A leading vendor with currently a low market Operating in a strong growth market for share in an industry shifting to a small number of media localisation services
Slide 29: Thank You
Final FinalResults ResultsFY23 FY21 THANK YOU Page 29
Slide 30: Appendix
Final Results FY23 APPENDIX APPENDIX Page 30
Slide 31: ZOO's Proposition
Final Results FY23 ZOO’S PROPOSITION Page 31
Slide 32: On the Waterfront quote
Final Results FY23 You don't understand. I coulda had class. I coulda been a contender. I coulda been somebody, instead of a bum, which is what I am, let's face it. On the Waterfront, 1954 Page 32
Slide 33: Needs of Media Localisation
Final Results FY23 NEEDS OF From completion of a new title, work is required to prepare technical materials for distribution (“media services”) and adapt for different countries, languages and cultures (“localisation services”) Media Localisation Subtitling Dubbing Pre-production Production Post-pro
Slide 34: Competitive Landscape
Final Results FY23 COMPETITIVE LANDSCAPE Language Offering Subset or local languages only Global languages Media services specialists End-to-End Vendors All services Service Line Offering 100s of independent dubbing studios Multilingual subtitling specialists Subset of services Some multinational du
Slide 35: Our customers are the world's biggest content creators
Final Results FY23 Our customers are the world’s biggest content creators that distribute TV shows and movies to vast multilingual audiences via global streaming services. Page 35
Slide 36: Interconnected ecosystem of production and management platforms
Final Results FY23 • Interconnected ecosystem of production and management software platforms • Focus on efficiency, quality and security • A tech-enabled dubbing solution removes the need to own and operate facilities in every country Page 36
Slide 37: ZOO's customer quality metrics among the highest in the industry
Final Results FY23 ZOO’S CUSTOMER QUALITY METRICS ARE AMONG THE HIGHEST IN THE INDUSTRY Client Quality Scorecard by Month FY23 Client Quality Scorecard by Year FY21 to FY23 100.00% 100.00% 99.00% 99.00% 98.00% 98.00% 97.00% 97.00% 96.00% 96.00% 95.00% 95.00% 94.00% 94.00% 93.00% 92.00% 93.00% 22 22
Slide 38: Our Ecosystem
OUR ECOSYSTEM Secure, scalable global servicing capacity made possible by our global ecosystem • Regional hubs, dubbing studios, partners and freelancers work together in the ZOO technology ecosystem • Guarantees consistent security, process efficiency, production quality and rapid scalability acros
Slide 39: Global Growth Initiative
Final Results FY23 GLOBAL GROWTH INITIATIVE • Establishing regional hubs in strategic locations • Investing in high growth markets Growing a connected global network through • Flexible, multipurpose facilities acquisition and strategic partnerships • Supporting all service lines • All operations in
Slide 40: Growing a connected global network through acquisition and partnerships
ZOO Korea ZOO Turkey ZOO Denmark ZOO India Growing a connected global network through acquisition and strategic partnerships • Enhanced existing facilities Further investments planned • Investments in strategic partners • Europe • Flexible, multipurpose facilities • Southeast Asia • Supporting all s
Slide 41: Services charged predominantly based on minutes of runtime
Services charged Final Results FY23 predominantly based on minutes of runtime Freelancers paid on same basis Current contribution margins are lower than the business at maturity, due to being in a heavy investment phase Projects allocated based on quality of service Sales External COS Internal COS C
Slide 42: ZOO has good ESG credentials
Final Results FY23 ZOO has good ESG credentials and is committed to building a responsible future-focused business • Minimising travel of freelancers • Smaller infrastructure footprint • Flexible working for staff and freelancers Implemented the following in FY23 • Established Diversity, Inclusion,
Slide 43: Enjoyment of Subtitled vs Dubbed Content
Final Results FY23 ENJOYMENT OF SUBTITLED VS DUBBED CONTENT, Q3 2020 60% Markets with strong Proportion of respondents who enjoy watching dubbed content dubbing preference Italy Brazil Markets without strong 50% India preference for dubbed Germany Turkey or subtitled content Spain Mexico Saudi Arabi
Slide 44: Global Streaming Video on Demand Services
Final Results FY23 GLOBAL STREAMING VIDEO ON DEMAND SERVICES Service Provider Global reach Featured content Est. content spend 2023 Paramount+ Paramount Global c. 56m Star Trek, South Park, Yellowstone, Blue Bloods, Top Gun, $15.9bn ambitious new original content plans. Prime Video Amazon c. 157m Lo
Slide 45: FY23 Financial Statements
Final Results FY23 FY23 FINANCIAL STATEMENTS Page 45
Slide 46: Consolidated Statement of Comprehensive Income
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Final Results FY23 2023 Restated* 2022 $000 $000 Revenue 90,260 70,403 Cost of sales (56,327) (49,562) Gross Profit 33,933 20,841 Other operating income 8 204 Other operating expenses (25,860) (19,165) Operating profit 8,081 1,880 Analysed as: EBITDA be
Slide 47: Consolidated Statement of Financial Position
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER Final Results FY23 2023 Restated* 2022 $000 $000 ASSETS Non-current assets Intangible assets 10,341 9,870 Property, plant and equipment 14,736 13,317 Equity accounted investments 4,300 4,154 Deferred income tax assets 1,664 1,490 31,041
Slide 48: Consolidated Statement of Cash Flows
CONSOLIDATED STATEMENT OF CASH FLOWS Final Results FY23 2023 Restated* 2022 $000 $000 Cash flows from operating activities Operating profit for the year 8,081 1,880 Other income 8 - Depreciation and impairment 3,973 3,022 Amortisation and impairment 1,762 1,659 Share based payments 1,650 513 Changes
Slide 49: Long-Term Aspirations
Final Results FY23 LONG-TERM ASPIRATIONS Page 49
Slide 50: Addressable Market
ADDRESSABLE MARKET Addressable Market ($million) • 8-year market forecast by customer 3,000 Assumptions: 2,500 • Market annual growth 7.5% 2,000 • US streamers will continue to take 1,500 market share 1,000 • Market growth will be driven by 500 International expansion by 5 companies - • ZOO current
Slide 51: ZOO Revenue Progression
ZOO REVENUE PROGRESSION ZOO Revenue Progression ($million) 400 Assumptions: 350 • Media services growth rate 10%+ 300 • Subtitling growth rate 15%+ • Dubbing growth rate 45%+ 250 • Overall revenue growth rate 24%+ 200 150 100 50 Sources: 0 1. Year 1 and 2 are FY22 and FY23 Actual Year 1 Year 2 Long-
Slide 52: ZOO Margin Progression
ZOO MARGIN PROGRESSION ZOO Operating margin progression 80 • Media services gross margins grow from 58% to 70%+ 70 60 • Subtitling gross margins grow from 35% to 37%+ 50 • Dubbing gross margins grow from zero to 25%+ 40 • Overall revenue gross margins improve from 31% to 35% 30 • Operating expenses
Slide 53: The Board and Shareholder Register
Final Results FY23 THE BOARD AND SHAREHOLDER REGISTER Page 53
Slide 54: The Board
THE BOARD Final Results FY23 Gillian Wilmot, CBE Since 2019 Extensive board level leadership in private and public environments with industry experience Chairman across B2B, technology, advertising and communications. Strengths in value creation, operational insight and corporate governance. Mickey
Slide 55: Major Shareholders
MAJOR SHAREHOLDERS Final Results FY23 Shareholder* No. Shares % of capital Canaccord Genuity Group Inc. 13,223,616 13.53 Stuart Green (CEO) 11,458,972 11.72 Herald Investment Management Ltd 9,681,978 9.90 Invesco Ltd 6,424,607 6.57 Stonehage Fleming Investment Management Ltd 4,686,739 4.79 Janus Hen
Slide 56: www.zoodigital.com
www.zoodigital.com