Videndum Plc (VID.L) Earnings Call Transcript & Summary

[Audio Gap] and welcome to The Vitec Group plc Half Year Results 2021 Call. My name is Bethany, and I will be coordinating your call today. [Operator Instructions] And with that, the presentation will now begin.

Good morning, everyone, and welcome to Vitec's half year results presentation for 2021. I'm Stephen Bird, Group Chief Executive; and presenting with me today is Martin Green, Group Finance Director. Today, I'll start with our performance, and then I'll update you on the market and our strategy. So what's been going on at Vitec? After an extraordinary 18 months, I'm pleased to say that the group has bounced back and is stronger than ever before. The content creation market is a great place to be, being larger and growing faster than we previously expected, and Vitec is right at the heart of this fast-growing market. The group is, therefore, very well placed for long-term sustainable growth and value creation for all our stakeholders. Vitec delivered a positive first half performance, and Martin will give you the financial details shortly. Trading improved significantly across the group in the half and June finished with a record closing order book. While the pandemic continued to present challenges, we delivered revenue growth versus 2019 in a number of areas, and the group benefited from the mitigating actions we put in place in 2020. We remain focused on tightly managing our cost base, and this enabled us to deliver strong operating leverage and margin improvement, while continuing to invest in our key priorities. Our cash performance was excellent, with high operating cash conversion, and the recent acquisitions of Lightstream and Quasar have expanded our addressable market and increased our higher technology capabilities. Given our robust first half performance and our confidence in the future, we're proposing to pay an interim dividend of 11p per share. Second half trading has also started extremely well, and we expect the combined order intake for July and August to be roughly 20% above 2019. Looking forward, I'm pleased to tell you that our outlook for the full year is above current market forecast, despite the fact that clearly, like most businesses, we've got some challenges, particularly around component shortages that will restrict our ability to ship products. And there's also uncertainty about how quickly things will return to normal, particularly travel, which will impact certain product lines. The content creation market is now more attractive, larger and growing faster than pre-pandemic. This is a result of the dramatic increase in the capture, consumption and sharing of video and scripted TV content. Vitec is right at the center of this fast-growing market, with strong brands and market positions. The group has therefore emerged as a stronger, faster-growing and higher quality business than pre-pandemic. We're larger and more diverse than our competitors, and we're in multiple market segments, now including vlogging, gaming and streaming. Our margins are improving, with increased volumes and tight cost control as we start to really benefit from strong operating leverage. We protected our R&D investment during the pandemic and focused our resources investment on the fastest growing segments of the market, and increasingly, software-enabled technology. I'm proud of how our people have handled the pandemic, what we've achieved so far, and I'm really excited about the opportunities ahead of us. Now I'll provide a market and strategy update. It's now clear that the pandemic has driven fundamental and lasting structural changes to our market. The democratization and digitalization of media has accelerated as more people communicate by video and more video content is produced, streamed and watched on subscription channels and social media platforms. We believe that these market drivers will continue long term. First, vlogging and sharing content on social media has increased significantly. This means that more people are using our JOBY products to create and share content on their phones and cameras. Second, live streaming and video has grown exponentially, driving demand for our streaming products. Third, more content has been consumed on subscription channels like Netflix and Amazon Prime, and original content creation is growing dramatically, driving demand for our video transmission and monitoring systems. And finally, there's further automation in the studios to drive efficiencies, which will benefit our robotic camera systems and our voice-activated prompting solutions. Now let's look at our total addressable market. We believe that our TAM has expanded to GBP 2.6 billion from GBP 2 billion pre-pandemic. And that, in total, it will grow faster than we previously expected at high-single digits in 2022 to 2024 compared to low single-digit prepandemic. This is mainly due to our ability to serve the newer streaming, gaming and vlogging markets, and we're also seeing growth in some of our more traditional markets. Imaging Solutions markets have seen a stronger-than-expected recovery, and the TAM has increased to GBP 1.2 billion, particularly due to the increase in vlogging. We estimate that the market CAGR for 2022 to 2024 will be approximately 2% to 5%, up from about 1%. Production Solutions markets have seen a strong recovery. The TAM has not changed, but we estimate that the market will now grow slightly, where previously it was flat. In Creative Solutions markets were they last to reopen, but are now seeing a strong recovery. The TAM has increased to GBP 1 billion, particularly due to the increase in streaming, the growing spend on original content, and our abilities to serve the gaming market. We believe that the market CAGR will be circa 20% to 25%. Hence, our continued focus on investments in this area over the last 7 years. Now moving to discuss each of our 3 divisions. Imaging Solutions had an excellent half. Despite the fact that the travel market remains very subdued, which has impacted our hobbyist supports and bags. Overall, the market is now larger and growing faster than pre-pandemic, and we continue to invest in new product development in the faster-growing segments of vlogging, audio and mechatronics. The pandemic has also accelerated the transition to the higher margin e-commerce channel, and our digital revenues continue to grow. Our high-end professional and B2B segment is resilient. But what's really changed in our Imaging division is that we're now increasingly marketing to professional influencers who earn their money in front of the camera or phone, sharing their content on social media. And although the JOBY is the market leader, we really only scratched the service of this huge untapped market. And here's a video from Marco to tell you a bit more. [Presentation]

JOBY is an important strategic growth engine for the group, with a huge untapped customer base. It's seen as a core unique brand with unique technology, operating at the premium end of the market, and we have a robust defendable IP with numerous enforceable patents that we use to defend our market share. As Marco mentioned, we've in-sourced production of some of JOBY's key products, including the GorillaPod to Italy, and production of the first product started this month. The Made in Italy stamp differentiates us from our competitors, gives us greater control of the design and manufacturing process, improves customer service, has a lower environmental impact, is cost competitive and improves margins. Imaging Solutions has made remarkable progress in the last 12 months, and we believe that the business will now grow much faster than we previously expected. Now let's look at Production Solutions. Production Solutions also recovered strongly, and the market is now growing faster than pre-pandemic. We continue to invest in new product development in the faster-growing segments, including news and sport, LED lighting and mobile power. We're benefiting from rescheduled major sporting events, and the division also continues to drive further margin improvements through lean manufacturing initiatives. In April, we acquired Quasar, an LED company whose products are used in film and scripted TV productions. Quasar products are highly complementary to our Litepanels brand, and integration is going well. Now onto Creative Solutions. Creative Solutions is our greatest market opportunity, fastest area of growth and has our highest margin potential. Although the Cine market was the last to reopen, the divisional's TAM is now larger and growing faster than pre-pandemic. We believe that we can grow by delivering the 4K/HDR replacement cycle and also by growing our streaming products for medical, gaming and enterprise customers. In the Cine market, we've seen a strong recovery in original content production. There are more large project films in production now than in Q3, 2019. And as production sets to reopen towards the end of the half, sales of our 4K/HDR products started to take off. But we estimate that we're only about 10% through that replacement cycle. In the enterprise market, we expect continued growth in our high-end Teradek live streaming solutions for corporates, governments, schools and even space travel. And there are significant growth opportunities in the medical segment, where our Amimon wireless video solutions are being used in operating theaters. Now let's look at Lightstream. In April, we entered the gaming market with the acquisition of Lightstream, who provide a cloud-based video production and editing software-as-a-service platform to enable content creators to enrich their live video streams. Live streaming across all industries has grown exponentially during the pandemic, and it's become a significant growth opportunity for our Teradek brand. The gaming market was a logical extension to our live streaming strategy, and the acquisition of Lightstream enables us to address the growing demand for cloud-based content creation, as well as starting to increase our recurring revenues. Integration is going well, and our marketing and sales teams have just started promoting Lightstream in the major global gaming markets, as well as to our JOBY customers. And we're planning to apply Lightstream's technology to our enterprise customer base. Lightstream's Rainmaker Analytics platform, although new, is growing very well and is used by the majority of game developers and publishers, such as EA, Sony PlayStation and Amazon Games. It's a cutting-edge business intelligence tool, which provides audience analytics for live streamers on any platform, including Twitch, Facebook and YouTube. Customers buy a subscription to be able to use the data to effectively promote to these audiences. Finally, we're upgrading our high-end streaming products with Amimon reliable transport or ART, which we expect to launch towards the end of this year. ART dramatically improves the viewer experience with higher video quality and a lower transmission delay over the Internet or mobile network. Here's a video that Nicol and the Creative Solutions teams have made primarily for customers and employees, but I think it's helpful for all stakeholders to see. [Presentation]

So the technology and people that Amimon and Lightstream have bought to the group has cemented Vitec's future in the Cine, enterprise and gaming markets. Before I hand over to Martin, I'd like to update you on our ESG program. Over the last 6 months, we've continued to develop our ESG strategy. We're on a journey, have set clear targets and are ensuring a focused and coordinated group-wide approach, and we'll report as we go. Our initiatives are centered around the 7 key priorities listed on this slide, and there's a lot more detail on the group website. Now I'll hand over to Martin for more details on our financial performance.

I'm delighted to be here to share our strong financial results for the first half of the year. Given the extraordinary period we've been through, we thought it's useful to give as a one-off disclosure, this slide, showing our order intake on a moving annual basis and the shape of our recovery. As you can see, 2020 was severely impacted by the pandemic, particularly in Q2, but orders did begin to recover in the second half of the year, with Q4 intake positioning us well for 2021 as we closed with a strong order book. We've continued to see strong demand for Vitec's premium products and leading technologies. And on an organic constant currency basis, excluding the Olympics, we saw a 12% growth in order intake compared to H1 2019. This order intake performance is remarkable given many of our markets were still partly closed during the first half. It's an encouraging backdrop, which informed our outlook comments today. As you'll have seen, we've recovered well in the last 6 months. As a result of the high order intake, half year revenue was GBP 181.4 million, which is similar to 2019 levels. Gross margin was 44%, despite headwinds from higher freight and duty costs. That's very similar to H1 2019, which was 44.5% after excluding SmallHD insurance proceeds, which were accounted for in profit, but not revenue. As expected, operating expenses rose compared to H1 2020, but they were lower than H1 2019 as we benefited from restructuring savings and lower spend on travel and exhibitions, given global travel restrictions remaining in place in H1 2021. With our strong operating leverage, we made a half year operating profit of GBP 21.9 million and profit before tax of GBP 20 million, which was better than we expected. As a result of the strong trading performance and improving market conditions, the Board has decided to pay an interim dividend of 11p per share for the half year. For the full year, we expect dividend payout to be within our dividend policy of 2.0x to 2.5x cover of adjusted earnings for the full year. So let's now take a deeper look into how each of the divisions performed in the first half. First, to Imaging Solutions. As Stephen has already mentioned, the markets here have returned faster than we had anticipated, although reduced travel is still significantly impacting sales of compact photo supports and bags. On an organic constant currency basis, revenue was only down by 1% on H1 2019. JOBY has seen double-digit revenue growth on H1 2020 and 20% growth in H1 2019. Our products continue to be popular with vloggers, with content creation growing significantly, largely driven by TikTok. Although JOBY is the market leader, the penetration of this expanding market is low, and as Stephen shared, this is a key strategic priority for us. Sales to the B2B channel have increased materially compared to H1 2019 driven by demand for lighting supports from sports analytics and streaming companies. They're using Manfrotto lighting supports to safely secure their sports cameras at an elevated height to film training to be used for game and analysis, and this has driven sales up by 20% versus H1 2019. And what about Production Solutions? Well, they delivered revenue in line with H1 2019 on an organic constant currency basis despite the Cine market, in particular, being less than half open in the first quarter. Revenue was also supported by royalties received for the Litepanels brand. The new generation Sachtler aktiv fluid heads and the Gemini 1x1 Hard LED panel have both proven to be extremely popular. The fluid heads allow camera operators to mount, level and lock the head in seconds, and the Gemini product is the brightest 1X1 LED light ever made. You may have seen our equipment in use at EUROs, especially with our shots through and behind the goal. You may also have seen our equipment at the Olympics, and we'll also be supplying equipment for the 2 largest sporting events in 2022. The acquisition of Quasar has performed as expected in the first few months of trading, delivering GBP 0.9 million of revenue and an adjusted operating loss of GBP 0.2 million. As mentioned, the Cine market took a while to recover, but is now fully open, albeit with some COVID-19 restrictions in place. This had the greatest impact on our Creative Solutions division, where we sell our high-margin Bolt products. We're now selling both 4K Bolt transmitters and receivers and SmallHD monitors, so we expect margins to accelerate now that the market is fully open. The global shortage of components was largely mitigated in the first half, although it does pose a risk for us in the second half of the year. We continue to see high growth in sales to the enterprise market. We've managed to triple sales to the medical market compared to H1 2019, with high demand for Amimon products within the operating room. The acquisition of Lightstream has performed as expected in the first few months of trading, delivering GBP 0.5 million of revenue and an adjusted operating loss of GBP 0.3 million. So that's how our P&L performed. But let's now have a look at how this flowed through to cash. Operating cash flow was very strong, and cash conversion was excellent at 118%. We managed our working capital well. As you'd expect with higher sales, inventory has increased, but we've maintained focus on cash generation, with our total working capital decreasing by GBP 2.6 million. It's worth noting, capital expenditure, included GBP 1.9 million for the in-sourcing of JOBY that Stephen and Marco have mentioned. Free cash flow was broadly in line with 2019 at circa GBP 16 million despite a GBP 3.2 million tax payment in relation to EU State Aid. So what does that mean for net debt? Well, the strong free cash flow effectively has been able to fund the acquisitions of Lightstream and Quasar and the 2020 final dividend. As previously guided, net lease additions were exceptionally high due to renewals for 3 of our largest sites. These additions going forward will return to the levels seen previously. Excluding lease additions, net debt was broadly flat versus December 2020. Total liquidity has reduced since December 2020, as we repaid the GBP 50 million CCFF in March. I hope you'll agree, this is a strong set of results. So that's where we've been. What I'd like to finish with is where we're going on margins. We're back on track towards mid-teen margins. As we grow our top line revenue, we expect it to fall through to operating profit margin improvement as we deliver strong operating leverage. Operating leverage is a key focus for the group and will be achieved through careful control of costs, whilst enabling investment in growth. We'll also benefit from other tailwinds. As you've heard from Stephen and Marco, JOBY is in-sourcing production in Italy instead of relying on a third party in China. Continually targeting productivity improvements through operational efficiencies is part of our DNA as the 4K/HDR replacement cycle gathers pace, we'll see improved mix from these high-end, high-margin products in Creative Solutions. We'll also continue to benefit from our actions to grow online sales, especially in Imaging Solutions, where we can achieve higher margins through online distribution channels than physical retail. These benefits are expected to more than offset potential headwinds from increased amortization and increased freight and duty costs. We'll be able to recover raw material inflation with pricing increases. So overall, a really good performance in the half and with exciting times to come in the future. With that, I'd like to hand back to Stephen.

So to summarize, the group has emerged from the pandemic in great shape. And second half trading has also started extremely well. Vitec is now a stronger, higher quality business with improving margins increasingly being driven by strong operating leverage. The content creation market is a great place to be, being larger and growing faster than previously envisaged, and Vitec is right at the heart of this fast-growing market. Despite the current uncertainties, the group is well placed for long-term sustainable growth and value creation for all our stakeholders. So that concludes the formal presentation. We're now going to move on to our question-and-answer session. So I'd like to hand over to our operator, and dial-in details are shown on this slide. Thank you.

[Operator Instructions] The first question comes from Scott Cagehin from Investec.

My first question is just talking about margins. So clearly, you're delivering good margins. We can see that in the numbers, as you talk about you're on track towards mid-teens adjusted margin. But just wondered what the potential is given these faster growing markets potentially a better margin mix. What does mid-teens actually mean? And what's the potential, that's the first question.

Yes, great question. And I think the wider context is that this is a really exciting time for Vitec. We've been -- I've been working for many years, 10 years to get to this point where we are really starting to see real growth in our end markets and margins improving at the same time. So that's -- I mean, it's pretty obvious, but that's what every business wants, and that's what we are now seeing and delivering. So what we've got at the moment is a growth trajectory that's now even stronger than pre-pandemic. So we're seeing our exposure to vlogging, which -- what you've seen from Marco's video of 40 million vloggers and influencers now. Potentially our market is phenomenal. We're seeing more content being produced by subscription channels like Netflix, we're exposed to gaming, we're exposed to live streaming as a result of the pandemic. So all of that is hugely exciting and now means that we can grow, we think, at least at high single digit, and we've seen that. So orders in H1 were up 12% and July-August, up 20%. So you can see what the trajectory is. So that's the growth story, and that allows us to have a margin story that I think is enormously exciting. So we've got strong margin drivers anyway, things like we expect to see margin recovery in Creative Solutions because of the 4K technology using Amimon, which nobody else has. So we've got a very strong competitive position. We're getting our prices up. We've raised our prices this year, sort of 3% to 5% at least, which is more than offsetting all the headwinds around -- everyone knows about around freight and raw material inflation. We've got great technology mix. We've got insourcing as more products are sold through e-commerce, we get better margins there, and we've got software-as-a-service coming along. So the margin story is now very exciting. And as we start to deliver this growth, we're going to see very strong operating leverage, because we're controlling our costs and our cost base is actually lower than 2019. So the answer to your question is mid-teen margins has always been an ambition, and it's now a very realistic goal reasonably soon. And then beyond that, who knows -- if you do the math, and we are -- if we grow at high-single digits for a couple of years, and we deliver 30% to 50% operating leverage, then you do the math, you can see where the margins get to. Now there are things always go against you a little bit. But clearly, getting to that higher level of margin is something that's enormously achievable. And that's what we're very focused on.

The second question was just around the ongoing uncertainties and how that sort of manifesting and perhaps how long you think that will go on forward. You mentioned price increases, but just wanted a bit sort of color on that versus cost inflation that's also add, please?

Yes. So I mean, the uncertainties, I mean there's nothing pretty particularly unique about us. We've clearly got some capacity constraints. I mean the business is taking off incredibly fast. We've got to basically put capacity in. We've had increase, for example, in Italy, the number of temporary workers we've got by about 120. So we got -- we're having to put a lot of capacity in to meet the demand. And in some areas, we can't meet all that demand, so we are seeing our order book going up. So one of the other exciting thing about this is that Vitec has traditionally been a business that has kind of almost no order visibility. We always used to write that we don't have any visibility of the future. We're not a company that has a lot of order coverage. Coming into this year, we had a much bigger order book than normal. So it was, I think, around GBP 45 million, which is well over double what you'd normally expect. That order book has gone up, so it's now something like GBP 60 million. And that's -- for us, that is an enormous order book, and that's because we can't deliver everything. So we're going to see some capacity constraint, which -- in the way I think what I characterize that is going to hold back growth a little bit. We've got some component shortages, particularly in Creative Solutions, which means we're having to sort of choose where we put some of the chips and so on. But it's not a huge issue. It might be holding revenue back less this year by, let's say, GBP 10 million, something like that, nothing significant than that. The other uncertainty, I think, is the obvious one, which is just when do we all get back to normal if we ever do, and particularly travel. So we are -- although, the business is doing very well, and we're growing very nicely, we would be growing even more if everybody was traveling and buying our photographic bags and our travel tripods, which they're not at the moment. So that business is quite depressed. So that's about GBP 20 million of revenue that we haven't got this year that we would have had in 2019. So if we all start traveling again, which hopefully, we do, and I'm certainly going to start traveling soon, then people will start hopefully going and doing interesting holidays and buying cameras and travel tripods to do that and buying travel photographic bags and so on. And that could be a really exciting bounce back. So your guess is a good in mine when we start to see that. But people can start going on nice holidays and taking the cameras with them, then that's going to be exciting. And also, obviously, returning to things like having weddings and so on. So those are really the main questions we've got. We've got freight and duty and stuff like that going on, which is adverse. But our pricing is more than offsetting that. So what our pricing power has never been stronger. The competitive position has never been stronger. A lot of our competitors cannot ship or cannot compete with our delivery times. I spoke to the CEO of B&H, who's our biggest customer last week, who just wanted to say to us, thank you for doing a great job. We, as businesses, work very closely together. We shipped direct to them a lot of the time. And we've kept them in stock in pretty much all their products, whereas some of our competitors have not. And that means that we've -- we got a very strong competitive advantage.

The next question comes from Andrew Douglas of Jefferies.

You've, kind of, covered my first question on competitive position. I just want to make sure that there's nothing looking out there that could be a potential threat to that competitive addition. It feels to me like, if anything, your competitive position is strengthening as opposed to any threats out there, and that's kind of, across all divisions. Is that a fair question? I think you predominantly answered that, but just want to make sure I'm not missing anything.

Yes. I think -- I mean, I don't want to make too much of [ voice ] we can comment, but I might as well. The business now is -- we have fewer competitors than we did when I joined the business 11, 12 years ago. So the competitive position is stronger. So if you look at our core business, core tripod business, there are good, decent competitors, mainly in China, but they are less strong than they were 10 years ago. And that -- and you see that across the board. And particularly during the pandemic, I think, and particularly as we move towards e-commerce, our capability to really maximize our position in e-commerce is very, very strong. As Marco said, we've got very strong digital presence. And we are -- although we're a little company in the areas we operate -- in the niche areas we operate, we are a strong company. So we're very strong in that area. And then in other areas, so for example, Teradek is now the go-to product in onset monitoring. It didn't use to be. It used to be a much more open market. We now have a very strong position there. And if you want to monitor what you're shooting in 4K there is only one product that you can buy, and that's Teradek, because we have the technology, we own the technology. No one else can do that in 4K with 0 delay. So we own that. And it's for us to develop market and so on, so stronger position there. And then even in something you might regard as a sort of boring old product, which is lighting stands, where we have a brand called Avenger, which is aimed at the Cine and photograph and film market primarily. It's also being used by lots of photographers and so on. Avenger and Manfrotto lighting stands are growing very strongly because, again, the competition has struggled to keep going during the pandemic, and we've managed to keep Feltre, our Italian facility open most of the time. I think we closed for 4 weeks. We kept our distribution hub open through the pandemic. Our people have done an amazing job keeping everything going. And so as a result, so lighting stands, which is regardless a bit of a boring old business is actually quite exciting, and we've seen that business sort of really pretty much double this year. So go from EUR 20 million to something like EUR 40 million this year comparing with EUR 30 million back in 2019. So again, an exciting area. So competitive position, very strong. What's the main threat? I think as we get into new areas. I think there are some areas which are going to be enormously attractive to other people. Live streaming is a more competitive area. We didn't really have a strong presence in live streaming. We've got a stronger presence now. That's quite a big market with quite a lot of people in it. But we -- that's a very attractive place to be because of the technology we've got is so unique that we think we can take a nice big share of an enormous market. So that's a bit more competitive, but that's a nice problem to have, because it's a huge, exciting market.

Yes. In terms of the livestream gaming opportunity, clearly, it's increased your TAM very significantly. Do you need anything else within that market to scale up to where you need to get to? For example, do you need an additional technology? Or is it anything that you can add on to that technology to further improve your offering? Or do you guys have what you need for now? And I guess that is wrapped up in a bigger M&A question in terms of the evolution of the end markets that you serve. Has that changed your thoughts on opportunity for M&A or maybe where you want to go with M&A in the future?

Yes. No, it's a great question. So I mean that's a big strategic challenge for us at the moment. So we are in a fantastic place, which is that we have the Amimon technology, which basically means that -- again, we're a small company, but we are the world leader in 0 delay wireless video transmission. And that's why we are so strong in on-set monitoring and so on, while we've got into medical where it's used in endoscopy and so on. That technology that we're developing, we've got the Amimon technology, which has been used over wireless networks. As Nicol was saying, we've now got technology called ART, which is Amimon reliable transport, which is basically taking that Amimon technology and basically being able to use that over the Internet. So over -- the over Internet or on a mobile network. And the potential for that, in theory, is absolutely enormous. So potentially, that could mean that for all live streaming, you can improve the quality of the -- this -- the video signals have a better picture because of the way Amimon is -- the technology works, it allows them to maximize the quality of the signal and at the same time, not compress it as much as other people do, so you get less delay. And so we know that we can do that. We know it will work. We prototyped it is working. The question is, is that going to be a marginal improvement or a significant improvement? And the answer is we don't really know yet. But for example, for gamers, the biggest problem that live streaming gamers have is they're playing games online -- any latency, any delay is a real pain. It really is a big issue. So if we can reduce that latency, then that is the jackpot, basically. Now the question is -- your question is absolutely spot on. And we are looking at options about how we can unlock that value, that technology and Creative Solutions, how do we do that? Can we do it on our own or do we have to partner with other people? Do we have to talk to the larger companies to help us take that to market, because the issue may be about -- I think we've got the technology, but how do we take it to market and take it into that channel, and we might need help with that. And that's probably -- and we bought Lightstream, which helps us a lot with that, but it might be -- rather need to make another acquisition to help us with that channel than we need to find some companies to partner with or even license to take advantage of that technology. So that's a little bit further down the line, but the exploiting and that technology and unlocking the value in Creative Solutions is the big exciting next step.

And then 2 just sort of follow-ons, sorry...

Yes. Does that make sense? I mean I think, Martin you can add something on M&A?

No, I think all I would say about M&A is that we'll continue to look at other opportunities in, you might call the more traditional markets, as well as in the -- in some of these technology areas. We've obviously got to integrate and use the Lightstream technology in the core Teradek business as well. So there could be opportunities in the, what I call the more traditional areas of Vitec as well as in Creative Solutions.

Yes. So I mean, that's a good point. I mean so as -- Creative Solutions is very exciting, but actually what's happened in Imaging in the last 12 months is in some ways even more exciting, because the whole vlogging market, as you've seen from the video, has taken off. We believe there are 40 million people out there with 1,000 followers who care about the quality of the video that they're posting on to TikTok and YouTube because they want more followers, because they will, therefore, monetize what they're doing. So anything that is remotely touching vlogging, even if it's kind of dull old product, which is just about helping those people produce a better video, is enormously interesting. So we -- and with which we would have significant synergies. So we are looking at a few businesses in that area as well because this area is really, really exciting.

And then just 2 quick follow-on -- 2 quick short questions. In terms of the JOBY in-sourcing, what percentage are you now at and how far can that go? Could you insource everything on that? And then just quickly on software-as-a-service, which has been mentioned a few times. I just want to make sure from your end, there's no IAS 38 wrinkles to come in the future?

Well, I'll let Martin talked about his wrinkles in a moment. But first of all, JOBY -- yes, I mean, so the answer to that, although Marco's produced a very lovely video, at the moment, the answer to that at the moment, it's kind of zero. We're just starting to produce the JOBY product. It will be -- we're focusing on the higher end product, the higher end GorillaPod product, particularly. So it will get to 30% next year. So -- and will we do everything, probably not, there will be some stuff that we probably won't be able to do cost competitively that we will continue to source elsewhere. But it's in that sort of zone. And so -- I mean this -- yes, absolutely there's lots to go for. And as you've seen, it's a no-brainer, being able to say that we make the stuff and make this stuff initially as very attractive. Marco and his team, considering they've done this during the pandemic, and they've done this with people having to work in difficult circumstances -- what the Italian team has done is unbelievable. So hugely impressive. And we've got a -- that business -- Feltre in absolute jewel in our crown.

And then just following up on IRS 38, no, Andy, we're not aware of anything that would cause me any more wrinkles than I've already got.

The next question comes from Henry Carver of Peel Hunt LLP.

Actually, a couple of questions, and I think you touched on this answering Andy's one. The first one just being in the M&A section of the statement. You talk about Creative Solutions being a better market opportunity and the Board is considering how best over time to maximize, it clearly demonstrate to shareholders the potential value of the division. I just sort of wanted a bit more clarity on what that meant? And is that what you were alluding to answering Andy's question about potentially partnering or anything else, which is just an explanation of what that comment meant?

Sure. Yes. And good question. And obviously, that paragraph is not in there by accident. So we, clearly, believe Creative Solutions is a huge, exciting business, doing very well, considering what's been going on and considering the Cine market it was shot for so long, it's done extraordinarily well. And we will start to see that business -- the margins improve and the business pick up as we start to go through the 4K replacement cycle and so on. So Creative Solutions is in great shape, and we will see exciting things going forward. The thing that is, if you like, keeping me awake, is that we have this technology, which is the Amimon technology that we bought a while ago, that is clearly relevant for -- over the Internet and over a mobile network, and so as we've said, can improve the experience. And because of the exposure in live streaming, so live streaming -- we've always been in live streaming, but it's been a kind of one of the smaller bits of the business. Because of explosion in live streaming, because we are all now live streaming and everybody is live steaming, corporates are live streaming and so on. The opportunity to take that technology and scale it up and make it applicable to a much wider market is hugely exciting. Now we're at the very early stages of that. And so what that paragraph is supposed to explain is that there may be -- we may -- there are multiple options. We may continue as we are, but we may also look at how we can either license it or we can ask other people to help us take it to market, because potentially, we think we've got an enormously exciting asset here, and an enormously exciting technology that much larger companies than us might find extremely interesting. So we just got to work out the best way of unlocking that value for our shareholders.

Second question, just on JOBY, actually, again it's still a competitive landscape linked to M&A. But the 10% market penetration that you talk about and you being a market leader, I just wanted to best understand is that that the rest of this addressable market is incredibly fragmented. Is it therefore consolidation opportunity inorganically? Or is it primarily just a question of grabbing more of that market it's really investing in it more?

Sure. So yes, so let me explain that precisely. So we see the market -- the potential market as enormous. So 40 million people who are potentially in the market for buying all sort of products. So accessories around – particularly on the smartphone, so GorillaPods to hold your phone; audio, to make the audio better; lighting, to make the lighting better and so on. Huge opportunity that has come from virtually 0. So this is 40 million people in front of the camera -- doing stuff in the front of the camera, dancing around, putting videos on TikTok and having followers and making money out of that. So completely new market, didn't exist 5 years ago, 3 years ago, so completely new market. JOBY in the sort of premium end of accessories, probably has about half of that market. So this fragmented composition we may have -- we may even have more than that. But the 10% point is that we've only really started to penetrate that market, scratch the surface. So last year, JOBY sold about 2 million units into that market. So if you think about that, there are a bunch of people who are starting to buy products, and so I want to shoot a better quality video, but most of them are not yet doing that because they maybe don't know about the market, they haven't decided if that's what they want to do. But the potential to basically sell into that larger market is enormous. So we've got -- let's say, we've got half the market. At the moment, that market is -- JOBY is about $30 million, so the market is probably twice that -- $60 million. But the potential is that it's more like a $500 million - $600 million market, because of all the people out there that we can start to use our digital marketing capabilities to target. And say, if you're doing this, why don't you try and shoot a better quality video, and why don't you buy these product? And so that's what we're out there to try and do. So that's how that's going to work.

So effectively, there is no competition. This is the people who are currently balancing the phone on a [ Burk ] and easy.

Actually, you've just put it much better than I did. Yes, exactly. So the competition at the moment is people just exactly putting it on the -- against the packet of cornflakes and don't really see the need for it yet. And we've got to basically develop the market and explain that they do need it, so very well put, thank you.

The final question comes from Tom Fraine of Shore Capital.

My questions have largely been covered already. But if you don't mind touching a bit more on the applications of the zero lag streaming technology. Obviously, you've talked in-depth about this already in the past. But for example, would it be useful for musicians like potentially perform together remotely? What other opportunities do you see in applications of the technology? And how else would you go about growing it, both in terms of applications and the number of users that are there?

Good question. So I mean, very simplistically, so this is all about video. So the difficult thing is being able to send a -- particularly a 4K video signal wirelessly or through the Internet without some degradation in either the video quality or some sort of delay or both. So what Amimon does is uniquely, it looks at the type of channel and network it's trying to send the signal over. It adapts itself. It takes out the pixels that are not needed and does not compress or compresses very marginally -- does not compress the signal. So it sends -- tends to send an uncompressed signal, which means you get very -- you get zero-delay usually or very little delay. So the applications for that 3 or 4 years ago were fairly niche. So it's onset monitoring that was the main thing. It's also medical, so it's been used in -- and as we said, in endoscope. So if a surgeon is having a look inside someone and making a decision to cut something, they don't want to delay between what they see and what they do, so -- obviously, because they don't want to make a mistake. So zero-delay and no delay is very important. What we think we can do is broaden the appeal of that by taking that technology and not having it just wireless, but also having it over the Internet. So that, in theory, for gamers or even for video conferencing on Zoom where if you've got a suboptimal network, particularly -- and by the way suboptimal network, any mobile network is suboptimal. It will allow you to have a better quality picture and less delay. And we've got to see how big that application is. The audio piece is not really what we're after. I mean audio is much easier to do. So audio is kind of easy and there are companies doing that. And we -- although we will get into audio, particularly with the vloggers and so on, audio is not particularly where we're targeting. It's all about video, which is massively more difficult and basically, no one else can do what we can do at the moment. So we've got to work out how we can find applications for that. But in theory, as I said, we're looking at gaming, because what live streaming gamers are doing is that they're streaming live, the fact that they're playing a game, and that's being streamed onto Twitch platform. And we've got the Lightstream who allow people to basically do switching and manage and they do the content. And then people are watching that on a mobile device, but they've got a delay. So if they want to interact -- they're interacting with the gamer, which is what people do, and they say, why don't you do this or good shot or whatever. If there's a big delay, it does reduce -- deteriorate the experience. So we think that we can have an impact on that. The question is how -- whether it's going to eliminate the delay or half the delay or only reduce the delay by 10%. So that's what we've got to do and going out and finding those markets is what we're working on now. Martin, do you want to add anything on that?

No, no. I think the only other thing I would say is just, obviously, we've done very well on the wireless piece in terms of medical. And if there's scope to use that technology in a wide capacity using our ART in the medical market, that's obviously a particularly attractive place as well as gaming.

Tom, does that make sense?

Yes. That's brilliant. So just to give us an idea of the materiality of the application. So I know it's still very early days. But how big do you think this can be in terms of medical? I mean what growth rate do you see? And how big is the sort of addressable market for us and the rest of it outside the medical, what growth do you see?

Yes. So medical is growing significantly. So the desire of that, and particularly in the post-pandemic, the desire for hospitals to be able to communicate with each other and doctors to be able to communicate with each other and operating theaters communicate with other people, and people be able to watch what's going on, and students, for example, be able to watch what's going on in the operating theater. So that whole market is growing significantly. Our business this year will triple, I think.

Correct.

Martin. It's still not massive, but it is very high margin, but it's -- this year, we're looking in the zone of about $10 million.

Yes.

Yes. The high margin, that market is potentially much, much bigger than that. So we've got a nice share of the endoscopy market, but there was a bigger market in operation theaters and so on. And so obviously, sort of hundreds of millions of dollars potentially. But perhaps even the bigger opportunity is wide on that, is whether you can -- we can then use this technology in other applications. So particularly, in other live streaming applications. So live streaming, we believe, for our type of products is a significant market now, so we think that's grown to about $300 million for our type of products. And potentially, if we can start to apply that to gaming and so and then it's much, much bigger. I wouldn't really want to put a figure on that yet. Is that okay, Tom?

Yes, that's great. If you wouldn't mind just briefly that so what -- so $10 million for medical? And how about the rest of the markets that you've got the applications for this streaming technology?

Sorry, Tom, can you say that again?

So what's the -- so what's the total revenue you sort of expect to generate on a full year basis from this technology aside from just medical?

So if you're talking -- I mean, basically, the Amimon enabled technology, so the zero-delay technology is a very large part of Creative Solutions. So it is pretty much all of Teradek. So it's in the zone. This year, it will be in the zone of, say, $60 million, something like that. Okay. I think that might be all the questions, unless anyone contradicts me.

That's it all the questions.

Thank you very much. Great. Well, thank you, everyone, who's been watching or listening. And hopefully, we get a chance to meet you on -- not face-to-face, probably on Zoom soon. And thank you, everyone, for listening, and have a lovely day. Thank you.

Thank you.

This concludes today's conference call. Thank you for joining, and you may now disconnect your line.