GROSS MARGIN UP FROM 52% TO 56%
INCREASE IN NET CASH
|In € millions||H1 2018||H1 2019||Variation|
|Cost of goods and third-party services resold||3.0||1.6||-46%|
|Commercial gross profit||22.2||23.0||+4%|
|Other cost of revenues||9.0||9.3||+3%|
|Research and development||6.4||6.9||+7%|
|Selling and marketing||4.8||5.4||+12%|
|General and administrative||2.7||2.9||+9%|
|Current operating income||(0.7)||(1.5)||-|
|Net income, Group share||(0.9)||(1.9)||-|
DALET, a leading provider of software solutions for the creation, management and distribution of multimedia content for broadcasters, operators and content producers, has published its financial results for its first half-year ended June 30, 2019.
DALET achieved a turnover of €24.6 million in H1-2019, down -2% compared to H1-2018. This decrease is due primarily to declining hardware resale (-46%), which is a low margin, non-strategic and volatile revenue stream. Excluding hardware resale, revenues were up close to 6%. The commercial gross margin (defined as sales minus cost of goods and third-party services resold) rose by 4% to €23 million, driven by growth in Maintenance (+14%) and Services (+22%).
Gains in gross margin, sustained R&D and marketing efforts
Gross Profit, which includes the cost of services, was up 4% at €13.7 million. The resulting Gross Margin was 55.8%, up 330 basis points year-over-year, largely driven by the improvement in service margins.
Operating expenses increased over the first half of the year, but in line with the budget. In particular, DALET increased its Research and Development expenses (+7%) in order to accelerate the market launch of its innovative Artificial Intelligence offers and the continued transformation of its products towards SaaS and virtualization. The increase in sales and marketing expenses is mainly due to a one-off effort in the first half of the year, particularly on tradeshow expenses, which will be lower in the second half, and to an unfavorable year-over-year differential of €0.2 million in provisions for doubtful accounts. The increased seasonality on expenses impacted operating income, resulting in a half-year loss of €1.5m compared with €0.7m in H1-2018. After financial expenses and tax, net income for the semester amounted to a net loss of -€1.9 million compared with -€0.9 million for the first semester of 2018.
Strong cash generation in H1-2019
Cash flow from operations before cost of debt and income tax was €1 million (of which €0.5 million was related to the application of the new IFRS16 norm on the recognition of leases), and operating cash flow increased from €0.6 million to €4.2 million, thanks to a significant improvement in working capital over the period related to successful collection of receivables balances. The company continues to enjoy a strong capital position, with a net cash balance of €3.4 million at June 30, 2019 (out of €7.8 million total cash), as compared to a net cash balance of €2.1 million at December 31, 2018 (out of €6.5 million total cash).
Acquisition of Ooyala's Flex Media business in July
Subsequent to the end of the first half of the year, DALET announced the acquisition of the assets of Ooyala (Ooyala Flex Media platform) for a total amount of €4.3 million, including €1.7 million in cash and the balance in existing and new shares, representing a dilution of approximately 5%.
This strategic acquisition offers multiple synergies and opportunities:
- Subscription/Recurring Revenue Models: Technological synergies with a flexible platform that will facilitate the development and migration of DALET solutions to subscription models, and the expansion of existing Ooyala product lines;
- Re-invigorate Sports & Corporate Channels: Commercial synergies with access to sports and corporate customers, as well as new customer tiers;
- Staffing & Human Talent: Team synergies with the integration of highly experienced international profiles;
- Expands Total Addressable Market: The Ooyala offering allows Dalet to expand its market opportunity to properly address Tier 2 and OTT customers.
Outlook for 2019
Given normal seasonality, DALET expects revenues to be higher in the second half of the year, with, a significant positive leverage effect on results. In addition, Ooyala's assets will contribute to revenue growth from the third quarter onwards. DALET is well underway with an integration plan that over the next 18 months will restore the profitability of the Ooyala business and limit the expected short-term losses (which losses were fully taken into account in the purchase price). We continue to expect Dalet's performance for 2019 (excluding Ooyala) to be in-line with our prior guidance of continued improvements in commercial gross profits and operating margins. Assuming the continuation of the sales efforts and operational efficiency initiatives underway for the acquired Ooyala business, Dalet targets, on a consolidated basis, break-even operating profitability in 2019 and a return to positive operating profitability in 2020.
Q3 revenues on November 5, 2019 after the close of trading
About Dalet Digital Media Systems
Dalet solutions and services enable media organisations to create, manage and distribute content faster and more efficiently, fully maximising the value of assets. Based on an agile foundation, Dalet offers rich collaborative tools empowering end-to-end workflows for news, sports, program preparation, post-production, archives and enterprise content management, radio, education, governments and institutions.
Dalet platforms are scalable and modular. They offer targeted applications with key capabilities to address critical functions of small to large media operations - such as planning, workflow orchestration, ingest, cataloguing, editing, chat & notifications, transcoding, play out automation, multi-platform distribution and analytics.
Dalet solutions and services are used around the world at hundreds of content producers and distributors, including public broadcasters (BBC, CBC, France TV, RAI, RFI, Russia Today, RT Malaysia, SBS Australia, VOA), commercial networks and operators (Canal+, FOX, MBC Dubai, Mediacorp, Mediaset, Orange, Charter Spectrum, Warner Bros, Sirius XM Radio) and government organisations (UK Parliament, NATO, United Nations, Veterans Affairs, NASA).
Dalet is traded on the NYSE-EURONEXT stock exchange (Eurolist C): ISIN: FR0011026749, Bloomberg DLT:FP, Reuters: DALE.PA. For more information on Dalet, visit www.dalet.com
Actus Finance & Communication : Investors: Guillaume Le Floch +331 53 67 36 70
Press-Media : Vivien Ferran +331 53 67 36 34