Vista Group International Ltd - Upgrades Revenue Guidance; Monitoring Cineworld

Business model

VGL’s business model spans the cinema/film industry from production and distribution to exhibition and the movie goer. It generates revenue via: (1) Recurring revenue (non-SaaS) primarily from on-premise subscription and maintenance fees for Vista Cinema; (2) Recurring SaaS revenue principally from annual subscription fees to access cloud-hosted software (Vezzi, Movio, Maccs, Numero and now Vista Cinema); (3) Variable SaaS fees (largely from ticket sales via Vista Cinema); and (4) Non-recurring revenue from perpetual licensing of Vista Cinema on-premise software (now 5% of revenue) and various one-off services across its businesses. The majority of VGL’s revenue (68%) is derived from Vista Cinema and Vezzi, with the remainder from Movio (15%) and the four smaller companies (17%). 83% of VGL’s FY21 revenue was classified as recurring (including SaaS fees [28% of total revenue]). The geographic FY21 revenue split was US (33%), UK (30%), NZ (18%) and other countries (19%).

NZ$3.1m EBITDA in June half; monitoring Cineworld

VGL recently disclosed the following H1 (June half) FY22 financial information: (1) NZ$62.4m revenue (up 39% on pcp) as it benefited from the post-lockdowns resurgence of movie goers and ceased recurring fee discounting; (2) NZ$3.1m EBITDA (5.0% margin); (3) NZ$18m net loss (includes $10m China impairment); (4) NZ$5.1m operating cashflows and NZ$3.2m free cash outflows (includes $7.6m capitalised development spend); and (5) NZ$33.5m net cash (includes NZ$18.4m debt). Notably, VGL upgraded its FY22 revenue guidance from NZ$118- $123m (~20% growth) to NZ$123-128m (~28% growth) attributable to the strength of the cinema industry recovery. Separately, one of its key customers, Cineworld, recently stated that it may file for bankruptcy.* VGL’s response was it “does not expect it to have a material impact on the current year guidance” but “is continuing to monitor the situation closely.” *Cineworld filed for US bankruptcy on 7 September.

Trading at a premium to ASX All Tech Index EV/EBITDA

VGL is trading at 3.0x FY22f EV/Revenue and 50x FY22f EV/EBITDA. For FY23f, the metrics are 2.8x and 27x respectively (Source: Refinitiv). With no listed pure-play peers, the ASX All Tech Index (XTX) provides a valuation yardstick – with VGL trading at a discount to XTX’s 12- month forward mean EV/Revenue of 3.3x but a premium to its EV/EBITDA of 17x.