Vista Group, the Auckland-based company that dominates the global market for movie theatre management software, reported big full-year revenue and profit hits today, as expected, sinking $58m into the red as revenue cratered.
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The company – once one of the few listed NZ technology companies flying high over the $1 billion market cap mark – was also one of those most exposed to the pandemic, and has lost some two-thirds of its value since the outbreak began.
In the early days of Covid, Vista chairman Kirk Senior relied on a gut-feel argument. People were social animals. they would ultimately come back to multiplexes, whatever gains streaming made in the meantime.
Today, the company’s chief executive, Kimbal Riley, was able to point to more concrete signs that cinema was making a comeback.
He pointed to China, where the virus is largely vanquished, which saw record box office receipts over the lunar New Year holiday. A New York Times report pegged them at US$1.55 billion ($2.1b).
“In Japan, the first six or seven weekends of the year have run to about 95 per cent of 2019 levels. And Russia has been at 90 per cent … The evidence is when theatres are open, and content is there – in their case local, because there’s no Hollywood content -then people go back to the cinema.”
He points to the fact that cinemas in Mexico – “a big moviegoing market” are reopening today. New York cinemas will reopen next week. And in the UK, where some 20 million or a third of the population have had at least their first Covid-19 vaccine shot, multiplexes will throw open their doors again on May 17.
And from his insider’s view of Hollywood pipelines, Riley says the big studios are starting to ramp out their output again.
Early in the pandemic, as Vista raised $62m through an equity issue, culled staff, cut wages and opened new lines of credit, Senior said the company has positioned its balance sheet to survive what he called the worst-case scenario: most cinemas worldwide being shut for all of calendar 2020, and all of calendar 2021.
With vaccination programmes finally underway and infection rates in retreat in many countries, is he confident the cinema industry will have largely put the pandemic behind it by the end of this year?
“It would be unwise to be 100 per cent certain, but the evidence that I see certainly supports that,” Riley says.
On a conference call this morning, analysts were told that Vista is now “positioned to drive strong ebitda recovery in late 2021 and growth beyond”. [The company’s financial year coincides with the calendar year.]
It’s not all Jaffas rolling down the isles, though.
Last year, Vista told investors that a handful of Hollywood films due for release in mid-to-late 2020 could kickstart a nascent cinema revival – among them, Disney’s live-action remake of Mulan.
But in the end, the Mouse House decided to release Mulan straight to its Disney+ streaming service in most countries – helping its streaming revenue jump a stunning 73 per cent to US$3.5b in 2020 as total worldwide subscriptions to its stable of streaming services more than doubled to 142m.
Other studios followed suit, either releasing major titles straight-to-streaming, or dramatically shortening theatrical windows (the number of weeks a title is in cinemas before it goes to rental – or these days the likes of Netflix or Amazon’s Prime Video or a studio-owned streaming service).
Some pundits see a long-term shift in the power balance toward streaming.
Today, Vista said in an NZX filing, “We acknowledge there will likely be some changes in the theatrical window – perhaps shorter and more dynamic.”
Early in the pandemic, Vista teamed with Hamilton’s Shift72 to create a “white-label” streaming service that cinemas could put their own badging on, and use to stream pay-per-view movies into patrons’ living rooms. It will ultimately give a Vista slice of the streaming pie, but uptake has so far been modest, with three arthouse cinemas
Kimbal added to the Herald – three in NZ and one in Poland – adopting it. Riley says the key issue has been getting a good flow content for exhibitors. It’s now positioned as a long-term project some distance from full fruition rather than a pandemic stop-gap.
The 'new normal' hurts
But while Riley sees a return to largely “the old normal” in 2022″, and his company is picking an ebitda turnaround for that year, the hear-and-now makes grim reading
For its full-year to December 30, 2020, Vista’s revenue fell 39 per cent to $87.5m as it sunk to a $56.7m net loss (including $70m in non-cash items) from its year-ago profit of 21.3m.
Operating cashflow fell 81 per cent but was still $3m in the black as cash burn in the second half fell to $3.7m, within the forecast $3m to $4m range.
Vista reported an operating loss of $29.1m versus its prior-year operating profit of $21.4m.
Buoyed by a $62m equity issue early in the pandemic, plus staff cuts, the company ended the year with a cash balance of $67m and $39m in undrawn debt facilities.
A major project for 2021 will be a pilot of its new Vista Cloud, which it seems simplifying life for theatre chains that use Vista’s various products for managing their cinemas and marketing their content. As things stand, however, recurring revenue was down 26 per cent for 2020.
Riley says shorter theatrical windows could actually play into Vista’s hands, as studios will need to make the most of how they manage their briefer period of exclusivity – and extension of his company’s line that the pandemic provided an incentive or theatres to take their management digital as they wrangled the challenges of chequerboard seating and kerbside popcorn pickups. A rapidly changing cinema world, in his view, is one that calls for more Vista software and services.
Shares were down 2.3 per cent to $1.66 in early trading for a market cap of $380m. The stock, which traded above $5 during its 2019 peak, is down 45 per cent over the past 12 months.
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