TIDMVTC
RNS Number : 0597V
Vitec Group PLC (The)
12 April 2021
12 April 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD
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JURISDICTION.
The Vitec Group plc
Acquisitions and Trading Update
The Vitec Group plc ("Vitec" or "the Group"), the international
provider of premium branded hardware products and software
solutions to the growing content creation market, announces two
acquisitions and a brief update on the Group's Q1 2021 trading and
outlook.
-- Agreed the acquisition of Lightstream, for an expected total
cost of $35.9 million (GBP26.0 million) in cash and shares.
Completion is expected shortly. Lightstream develops cloud-based
live production software to enable content creators, particularly
gamers, to enrich their live video streams.
-- Acquisition of Quasar, for up to $6.1 million (GBP4.4
million) in cash. Quasar designs and develops a range of
market-leading, innovative linear LED lighting solutions for
cine-style applications.
-- The Group also provides a brief trading update regarding its
existing operations and, despite some uncertainty about when
markets will fully reopen and foreign exchange fluctuations, is
increasingly confident about delivering a strong recovery in
2021.
Stephen Bird, Group Chief Executive of Vitec, commented:
"Lightstream is a world-leading live streaming software
business. This acquisition enables Vitec to enter the substantial
and fast-growing adjacent gaming market, adding innovative and
complementary software for our live streaming customers and
significantly expanding our customer reach. With Lightstream as
part of the Group, we will be able to address the growing demand
for cloud-based content creation as well as more than doubling our
recurring revenue stream.
"Quasar products are highly complementary to our Litepanels
brand and this acquisition will enhance our position as a leading
player in the growing LED lighting market.
"These acquisitions are an excellent strategic and technological
fit, have great medium-term prospects and are expected to increase
our underlying revenue CAGR.
"This is an exciting time for Vitec as we continue to increase
our higher technology capabilities and expand our total addressable
market. I am delighted to welcome both talented teams to the
Group."
Acquisition of Infiniscene, INC trading as Lightstream
("Lightstream")
Lightstream is a US-based technology company that provides a
cloud-based video production and editing Software-as-a-Service
("SaaS") platform to enable content creators to enrich their live
video streams. Lightstream is a world leader in live streaming
technology for the fast-growing gaming market and has strong
strategic partnerships and technology integrations with the leading
streaming and gaming platforms, including with Microsoft's Xbox and
Amazon's Twitch.
Lightstream will become part of Vitec's Creative Solutions
Division. The business has 22 employees, the majority of whom are
highly skilled software engineers. The four co-founders, including
the CEO Stu Grubbs, will also join Vitec.
Strategic rationale for the acquisition
This acquisition is driven by Vitec's long-standing strategy to
increase our higher technology capabilities and expand our
addressable markets. Live streaming across all industries has grown
exponentially during the pandemic and it has become a significant
growth opportunity for the Group with our Teradek brand. The gaming
market is a logical extension to our live streaming strategy; it
has an estimated 13 million content creators and more than two
billion viewer hours per month. Of the 13 million, management
estimates c.300,000 currently pay monthly subscriptions to
gaming-based streaming services, and that revenue generated from
these gamers has grown at c.100% CAGR in recent years.
Lightstream brings leading technology and highly skilled
software engineers as well as a subscription-based business model.
The technology and brand are established and well-respected, and
subscriptions have grown by c.11% each month year to date. As of 31
March 2021, Lightstream had over 16,000 paying subscribers. Of
these, around 90% are gamers and the other 10% are content creators
using Lightstream technology for non-gaming video applications.
Sales to date have been predominately driven by word of mouth. We
plan to use Vitec's extensive digital marketing capabilities to
grow Lightstream's customer base in the major global gaming
markets.
Creative Solutions' current Teradek cloud-based live streaming
software is focused on distributing video content; Lightstream's
software is focused on producing and editing the video content. We
believe that combining Teradek's leading video encoding and cloud
distribution capabilities with the Lightstream cloud editing
platform will greatly improve the experience of both the gamer and
the viewer, leading to further growth in demand. We also plan to
apply Lightstream's technology to our enterprise customer base.
In addition, the acquisition opens up growth opportunities to
sell Lightstream's software into Vitec's growing JOBY vlogger and
social media influencer customer base, and to bundle Lightstream
subscriptions and Vitec hardware accessories for gamers.
Financial aspects of the acquisition
Lightstream reported unaudited results for the year to 31
December 2020 of $1.8 million (GBP1.4 million) revenue and an
EBITDA loss of $2.6 million (GBP2.0 million). Gross assets were
$1.5 million (GBP1.1 million) at 31 December 2020. A small
operating loss is expected in H1 2021.
The consideration payable at completion is $21.9 million
(GBP15.9 million) on a cash/debt free basis and comprises:
(i) $17.1 million (GBP12.4 million) including deal related costs
paid in cash on completion, drawn from the Group's committed
revolving credit facility; and
(ii) $4.8 million (GBP3.5 million) satisfied through the issue
of 309,753 new ordinary shares of 20 pence each in the capital of
the Company ("Ordinary Shares") at an issue price of GBP11.225 per
new Ordinary Share (based on the average share price for the 20
working days prior to completion) to certain employees of
Lightstream, which are subject to listing and then certain lock up
periods.
Vitec has also agreed to pay certain additional amounts to
certain key individuals who will be employed by the Group
post-completion, comprising:
(i) retention awards totalling $9.0 million (GBP6.5 million).
These will be payable in equal parts for each of the three years
2021-3 to the eligible participants on the anniversary of
completion. Each $3.0 million (GBP2.2 million) per year will
comprise $1.0 million (GBP0.7 million) in cash and $2.0 million
(GBP1.4 million) in Vitec ordinary shares (based on the average
share price for the 20 working days prior to completion);
(ii) a further cash payment of $5.0 million (GBP3.6 million)
payable not earlier than 30 June 2021 and not later than the third
anniversary of completion. The aggregate cash payment will increase
proportionately if the Creative Solutions Division has increased in
value at the time of the payment.
The financial impacts of the acquisition and the benefits to
Vitec include:
(i) revenue synergies from our two high-growth markets (live
streaming for gamers and content creators) and technology;
(ii) EBITDA (including synergies): de-minimis for FY 2021 as a
whole with an H2 benefit weighting, at least $1.5 million (GBP1.1
million) benefit in FY 2022 and at least $4.2 million (GBP3.0
million) benefit in FY 2023;
(iii) The return on investment is expected to exceed Group WACC
from FY 2023 onwards;
(iv) Proforma 2021 year end net debt to EBITDA is expected to
increase by 0.2x and decline materially during FY 2022.
Acquisition of Quasar Science ("Quasar")
Based in Los Angeles, Quasar products are used in professional,
large-scale film and scripted TV production as well as small scale
new media markets and are highly sought after for their
industry-leading colour quality and versatility. The products are
highly complementary to Vitec's existing Litepanels brand and there
are growth opportunities to sell them through Vitec's global sales
and distribution network as well as using Quasar's expertise and
network to grow our Litepanels brand in the cine market. Quasar's
revenue for the years to 31 December 2019 and 2020 was $7.7 million
(GBP6.0 million) and $3.5 million (GBP2.7 million) respectively. A
small loss and working capital outflow is expected in H1 2021.
The acquisition is driven by Vitec's strategy to expand our
higher technology capabilities in strategic growth markets. When
production sets reopen fully, we expect original content creation
to grow dramatically, driving demand for LED lighting.
Quasar will become part of Vitec's Production Solutions
Division. The business has 18 employees, the majority of whom work
in sales, R&D and product design and development in Los
Angeles. The four co-founders will also work with Vitec.
The acquisition completed on 5 April 2021 and the initial cash
consideration was $2.3 million (GBP1.7 million) on a cash/debt free
basis, including deal costs. Up to a further $3.8 million (GBP2.7
million) in cash will be payable dependent on retention and
post-acquisition performance. The initial consideration will be
funded from Vitec's committed bank facilities.
Trading update
Q1 2021 saw a continued good trading performance, with order
intake and revenue broadly in line with the same period in 2019,
despite our markets not being fully open. We continue to achieve
high cash conversion and, while there will be some inventory build
in H1 2021, we remain confident about delivering a strong cash
performance for the year.
Although there remains some uncertainty about when our markets
will fully reopen, particularly production sets in the US, and we
are mindful of foreign exchange fluctuations and the shortages in
electronic components, we are increasingly confident about
delivering a strong recovery in 2021.
While 2021 will be a year of recovery and investment, we believe
our markets will grow faster longer-term than we previously
expected, and that we will deliver strong margin recovery.
Annual General Meeting ("AGM")
The 2021 AGM will be held at the Company's registered office at
11.00 am (UK time) on Thursday, 6 May 2021. Due to COVID-19
restrictions, shareholders will not be permitted to attend the AGM
in person. Shareholders are therefore encouraged to submit a proxy
form voting their shares and may also submit questions in advance
of the meeting by email to info@vitecgroup.com .
Total Voting Rights
Applications have been made (i) to the Financial Conduct
Authority (the "FCA") for the 309,753 new Ordinary Shares to be
admitted to the premium listing segment of the Official List of the
FCA and (ii) to the London Stock Exchange plc (the "London Stock
Exchange") for the admission of the 309,753 new Ordinary Shares to
trading on its main market for listed securities (together
"Admission"). It is expected that Admission will take place at or
around 8.00 a.m. (London time) on 14 April 2021. The new Ordinary
Shares, when issued, will be fully paid and will rank pari passu in
all respects with the existing issued Ordinary Shares of the
Company, including, without limitation, the right to receive all
dividends and other distributions declared, made or paid in respect
of the Ordinary Shares after Admission.
Following Admission, the Company will have 46,246,535 Ordinary
Shares in issue, of which 133,600 Ordinary Shares are held in
treasury. Therefore, the Company hereby confirms that, following
Admission, the total number of voting rights in the Company will be
46,112,935. This figure may be used by shareholders as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change to their
interest in, the Company under the FCA's Disclosure Guidance and
Transparency Rules.
-Ends-
For further information please
contact:
The Vitec Group plc Telephone: 020 8332 4602
Stephen Bird, Group Chief Executive
Martin Green, Group Finance Director
MHP Communications Telephone: 020 3128 8147
Tim Rowntree/James Bavister
Notes
1. Average foreign exchange rates in the period from 1 January
to 31 December 2019: GBP1 = $1.28
2. Average foreign exchange rates in the period from 1 January
to 31 December 2020: GBP1 = $1.29
3. Estimated foreign exchange rate at completion: GBP1 = $1.38
4. Nothing in this announcement should be construed as a profit forecast
5. Current Analyst consensus forecasts: FY 2021 Adjusted PBT
range is GBP28.5 - GBP32.7 million; FY 2022 Adjusted PBT range is
GBP32.8 - GBP43.1 million
6. This statement is based on information sourced from management estimates
7. This announcement contains inside information. The person
responsible for arranging the release of this announcement on
behalf of The Vitec Group plc is Jon Bolton, Group Company
Secretary.
A snapshot of The Vitec Group plc
Vitec is a leading global provider of premium branded hardware
products and software solutions to the growing content creation
market.
Vitec's customers include broadcasters, film studios, production
and rental companies, photographers, independent content creators
and enterprises. Our product portfolio includes camera supports,
video transmission systems and monitors, live streaming solutions,
smartphone accessories, robotic camera systems, prompters, LED
lighting, mobile power, bags and motion control, audio capture and
noise reduction equipment.
We employ around 1,600 people across the world in 11 different
countries and are organised in three Divisions: Imaging Solutions,
Production Solutions and Creative Solutions.
The Vitec Group plc is listed on the London Stock Exchange.
More information can be found at: www.vitecgroup.com
About Lightstream
Lightstream builds cloud-native live production technology to
empower more storytellers and grow the communities in which they
tell them.
The first to deploy browser-based broadcast software,
Lightstream continues to innovate, offering a full creative suite
to support the entire creator journey.
Lightstream Studio and Rainmaker.gg empower creators to easily
create unique content, understand and grow their audience, and
engage their community from any device.
-- Their authoring products allow gamers to enrich their game
video with multiple video feeds, graphic overlays, scoreboards and
chat rooms before streaming to viewer platforms like Twitch,
Facebook and YouTube. This drives up viewer engagement and
increases viewing hours.
-- Their analytics platform then measures and tracks this
engagement, allowing gamers to respond to the audience in real time
and to monetise the viewership with branding.
-- Their pioneering cloud video architecture is also available
to developers as Lightstream Cloud - powering a growing number of
live streaming platforms and products.
More information can be found at: www.golightstream.com
About Quasar Science
Quasar Science is a motion picture LED lighting manufacturer
that was founded in Los Angeles in 2012 by a group of I.A.T.S.E.
Local 728 Studio Electrical Lighting Technicians with over 100
years combined expertise in lighting movie sets.
The creative LED lighting products developed by Quasar Science
are highly sought after on motion picture productions for their
industry-leading colour quality and versatility. Quasar Science is
an innovator of custom LED technology and its unique products are
available from cine equipment specialists and the Quasar Science
website.
More information can be found at: www.quasarscience.com
LEI number: 2138007H5DQ4X8YOCF14
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