ZOO Digital | The Big Picture Newsletter

Welcome to the Big Picture

Our quarterly investor newsletter featuring the latest news from ZOO and updates from across the global entertainment industry.

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Successive trading updates point to sustained market recovery

FY24 revenue and cash ahead of expectations

In March, we announced the resumption of orders relating to work on feature films and TV shows completed following the industry strikes of 2023. This saw March 2024 become the highest invoicing month in nearly a year.

As a result, we expected to beat revised market guidance for FY24 with revenues of at least $40 million, reduced EBITDA loss and year-end net cash of at least $3 million, also higher than revised market expectations.

As set out in our May trading update, this momentum continued throughout March and April with visibility now extending to September 2024. Year-end net cash was $5.3 million, significantly better than indicated previously following stronger collections than anticipated in the month of March.

In May, we renewed for a further twelve months our debt facilities of up to $3 million with HSBC. These facilities remain fully undrawn but provide the Company with enhanced financial flexibility for working capital purposes in an improving market environment.

Revenues for FY25 Q1 are expected to be 36% up on FY24 Q4 which, together with recently implemented cost savings, is expected to result in EBITDA at break-even in Q1.

With market commentators forecasting a return to 2022 levels of entertainment output in 2025, the Board continues to see opportunities to rebuild revenues following the significant industry disruptions of FY24 and is confident of at least meeting FY24 market expectations.

May Trading & Debt Facilities Update

March Trading Update

ZOO appointed by a major film and

TV distributor

In February 2024, ZOO was appointed by another of the major film and TV distributors as a primary vendor for dubbing in several languages and a preferred partner for subtitling of global languages.

We have subsequently started received dubbing and subtitling orders from this customer.

ANALYST NOTE: PROGRESSIVE EQUITY RESEARCH

Recovery continues as pipeline accelerates

“ZOO is emerging post supplier rationalisation as one of the few trusted end-to-end suppliers, with its capital-efficient approach involving production hubs in key locations, which we anticipate will deliver profitable revenue growth as the run rate recovers.”

Read the full research note:

Progressive Equity research

CIAO Italia – ZOO EXPANDS to Milan

ZOO has further enhanced its global network with the launch of dubbing studios in Milan. We have acquired long-time partner LogoSound, positioning ZOO as a key player in providing exceptional dubbing services in Italy.

Acquisition of LogoSound establishes dubbing
studios in Milan

Founded in 2006, LogoSound has been a trusted provider of Italian dubbing services to companies such as de Agostini Editore; Boing; Malvista Entertainment; Turner Broadcasting system Europe; and CDI Camera Distribuzion.

The studio will play a pivotal role in ZOO's global end-to-end offering for major studios and streaming services. The TPN-approved dubbing facility will not only serve international entertainment giants but also empower local content creators to extend their reach by bringing Italian-language film and TV to global audiences.

ZOO establishes ZOO Italy with the launch
of dubbing studios in Milan

THE PROFITABILITY PARADIGM – HOW ARE STREAMERS ADAPTING?

As the streaming industry’s focus shifts from subscriber growth to sustainable profitability, we explore how media companies are faring in reshaping streaming models to their advantage.

Netflix takes the lead

Streamers have provided early evidence that this ‘pivot to profit’ transition is working for some. Netflix reported Q1-2024 net income of $2.33 billion as earnings per share nearly doubled year-on-year to $5.28, ahead of expectations. The company will no longer publish membership numbers as it focuses on revenue and operating margins as its primary financial metrics.

In the 'What We Watched: A Netflix Engagement Report', Netflix has highlighted the diverse tastes of its global audience. It found a significant audience interest in non-English narratives—contributing to 30% of total viewership—as well as the huge demand for older, licensed titles, demonstrating the value that can be captured with rich content libraries. The report offers a comprehensive look at over 18,000 titles, encapsulating 99% of viewing on the platform, and revealing a remarkable nearly 100 billion hours of content engagement.

One subscription does not fit all

Increased competition for paid subscribers and changing consumer preferences have led streamers to prioritise customer retention and spending. As a result, streamers are now offering a broader range of options to accommodate customer budgets. In its “2024 TMT Predictions report,” Deloitte forecasted that the number of streaming video-on-demand (SVOD) tiers offered by the top US providers will increase from an average of four in 2023 to eight in 2024.

Growing profit per customer

Whilst overall subscriber growth is still a key measure of streamers’ performance, many are now looking at indicators of growth in spending per customer. For example, growth in average revenue per user (ARPU) suggests more lucrative and enduring relationships with individual subscribers. For example, despite marginal subscriber growth and a decline in total revenues in FY23, Warner Bros Discovery successfully drove up the ARPU 7% in the US from the previous year and its streaming service, Max, was one of the only streamers to turn a profit.

What it means for ZOO

ZOO remains a beneficiary of the evolution of the global entertainment industry and the sustainable growth of streaming. The Group is seeing customer demand increase with customers wanting a wider range of content representing many languages and cultures. We're thrilled to play a vital role in preparing some of the most globally celebrated titles to be enjoyed by audiences around the world.