January – March 2016
- Deployed license base
o The VAS (value added services) enabled license base grew by 1% in the first quarter, adding 21 thousand licenses to an accumulated base of 2,7 million
o Substantial license sales pushed into the second quarter 2016 with approximately 600 thousand licenses sold during the second quarter to an accumulated base of 3,4 million
- Net sales and other operating income increased 48% quarter-on-quarter to SEK 56,3 million (SEK 38,0 million)
- EBITDA in the quarter were SEK -2,5 million (SEK -19,2 million)
- Net result in the quarter was SEK -15,8 million (SEK -27,6 million)
Events after the reporting date
- On June 23, 2016 the company announced it had completed a private placement of convertible bonds of SEK 65 million and plans to conduct a rights issue of SEK 50 million in the second half of 2016
- On July 13, 2016 the company announced a landmark deal with Megacable, Mexico’s largest multiple-system operator (MSO)
Comments from Jorgen Nilsson, CEO of Zenterio:
Changing consumer viewing habits continue to put dramatic pressure on all participants in the TV industry. The demand for multiscreen, multiroom and the increasing number of OTT applications are forcing innovation and new ways of doing business for pay TV operators. The response we see is that more and more effort is being put into creating a truly seamless solution that can offer the best of both linear TV and OTT.
During this first quarter of 2016, we have already had a number of our customers express a growing desire to combine linear TV with popular OTT services in order to update their offering and remain competitive. As a result of this, Zenterio has started a project that allows us to pre-integrate the most popular OTT services with our independent OS, meaning that any new or existing customer will have easier access to these services. To integrate them into the operators overall offering also means that the operator can retain control over the customer relationship, billing and the consumer data that is generated.
However, as much as OTT is shaping the future, pay TV subscriber numbers are still growing globally, even though the most mature markets has leveled off. The total number of Pay TV subscribers reached 957 million at the end of 2015, as more than half of all households paid for some form of traditional subscription video service. Amongst these growing numbers, the fastest growing technologies are IPTV and DTH, which are both focus areas for Zenterio and something that will support rapid license growth in emerging markets.
Another trends that we are seeing, is that the numbers of Smart TVs are growing rapidly. More than three-quarters of televisions in China were Smart TVs in 2015 and in North America the number grew from 36 to 48 percent of all TVs sold with the popularity of Netflix and other services reinforcing demand. The total number of Smart TVs shipped in the fourth quarter reached 34,2 million, contributing to shipments breaking the 100 million mark for the first time in 2015. Smart TV shipments will continue to grow and reach 109 million in 2016, rising to 134 million in 2020.
Regardless of any hardware choice, the standardization of the TV client OS, together with detailed analytics, will be the fundamental enablers for a faster response to new consumer viewing habit and demand for new services. Zenterio’s recently updated product portfolio encompasses an independent OS, a state of the art user interface, a powerful data analytics tools as well as an interactive advertisement management system and is therefore well suited to meet this new demand.
As a result of this, during Q1, we have initiated discussions with several Tier-1 operators to better understand their needs and their current situation. Based on those engagements, and with the strong reference case we are building, we are confident that our solutions and services will find traction with additional Tier-1 operators during the course of the year.
In the first quarter we have also increased the number of resources that are focused on our business with Deutsche Telekom Group to meet their 2016 launch dates. In addition to this, we have also initiated a review of all of our existing customer contracts with the objective to improve the overall business performance and to reduce working capital with a more commercially viable structuring of payment milestones. The renegotiations will significantly improve our financials, even though our license base growth will remain very much cyclical in nature, and we expect that the majority of that increase will happen during the later parts of the year.
In order to secure the company’s finances in the best way possible, and to meet the influx of new business, we communicated on the 23 June 2016 that the company has issued a private placement of convertible bonds that will be followed by an offer to participate in a rights issue during the second half of 2016. With an approximated total of 115 MSEK in additional capital raised we will be well prepared to continue our strong expansion.
Towards the end of Q1, as a result of the developments we are seeing in the OTT domain and the popularity of new services such as multiroom and multiscreen, we have decided to increase our focus on recurring revenue propositions. A recurring revenue model makes us more flexible and will cover the cost associated with these services, as they need to be continuously updated, and require additional resources with a highly specialized set of skills. This alternate business model allows us to adapt to changing requirements from the operators and make us well prepared for dealing with the OTT opportunity.
As always, I also want to take the opportunity to thank all of our employees for their commitment, our customers and partners for their trust in Zenterio and our board and shareholders for their strong support.
For more information, please contact:
Jorgen Nilsson, CEO
Phone: +46 736 33 34 00
Mattias Arnelund, CFO
Phone: +46 70-789 5812
Zenterio provides an independent OS for interactive TV aimed at creating an industry standard. Zenterio also offers an intuitive multiscreen UI, a powerful Data Analytics solution, Consulting Services and additional Value Added Services to TV operators. Zenterio partners with global system integrators, set-top box suppliers, CA/DRM providers, chipset manufacturers and services providers. Zenterio has offices in Stockholm, Linköping and Atlanta and is owned by private investors and private equity firm Scope. The Chairman of the Board is former Nokia CEO Mr. Olli-Pekka Kallasvuo and the CEO is former Ericsson executive Mr. Jorgen Nilsson. For more information please visit zenterio.com.