Vista Group International Limited (VGL) Earnings Call Transcript & Summary

Welcome to Vista Group's results announcement for the 6 months ended 30 June 2025. I'm Matt Thompson, CFO of Vista Group. Before we dive in today I'd like you to know that we'll be taking questions at the end of today's presentation. [Operator Instructions]. We've got a full agenda today. In addition to presenting our half year results, we'll be sharing strategic updates on our cloud migration journey and unavailing our new embedded payments offering. While our financial performance this half is very strong, we'll keep that section concise so we can focus on these exciting developments and still have plenty of time for your questions. With that, I'll hand you over to our CEO, Stuart Dickinson, to walk us through the first half highlights.

Thanks, Matt, and thanks, everybody, for joining us this morning. I'm really pleased to be here today to share the results, which reflect the progress we've made as a team and the momentum we're building. As you can see on the screen, our vision remains unchanged, and it's all about enabling exceptional cinematic experiences and that's exactly what our increasingly connected ecosystem is helping us to deliver. So let's begin with the highlights from the first half. I'm really pleased to report that we've delivered strong growth across all of our key metrics this half. Total revenue rose to $77 million, an increase of 11% year-on-year. Recurring revenue reached $70 million, also up 11%, reflecting the strength and consistency of our core business. EBITDA increased by 39%, climbing to NZD 10 million with our margin improving to 13%, a clear sign of the operational leverage and disciplined cost management that we have been delivering. And importantly, we achieved free cash flow positive for the second consecutive half demonstrating our commitment to continued financial discipline and our focus on sustainable performance. I'm absolutely delighted with this result. I believe it reflects the hard work, commitment and the talent of our people. So I want to take this moment to relay a huge thank you to the entire Vista Group team for all of the hard work that has gone in to delivering this outcome. Our momentum is continuing to build with strong client confidence in Vista Cloud. Some of the deals we've been able to announce this year include Odeon, who is committed to a multiyear rollout across 309 sites in the U.K., Ireland and Europe, which is a significant endorsement from one of the region's leading cinema chains and a subsidiary of AMC in the U.S. And closer to home, we announced Village Australia has joined the journey, which is an exciting win in our own region and testament to the strength of our offering. While there have been many more than just signed in the period, these reflect the trust our clients are placing in Vista and Vista Cloud and the value we see in partnering or they see in partnering with Vista Group for the future. The first half of the year saw a strong rebound in box office performance, particularly in the second quarter. Memorial Day weekend set new records; led by Lilo & Stitch; and the highest paying thrills of Mission Impossible. And while Stitch cause his own usual chaos, it was a Minecraft movie that stole the show, turning social media into a storm with audiences shouting chicken jockey and a whole lot of popcorn flying everywhere. This excitement translated into numbers, with the domestic box office reaching USD 4.1 billion in the first half. This resurgence and cinema attainment is a powerful sign of audience enthusiasm and the enduring appeal of a theatrical experience. Now I'll hand back to our CFO, Matt, to talk us through the full financial results.

Thanks, Stuart. Before I get into that, I want to a quick thank you to Stuart, the Board and our investors for your support over the past 6 months. It's been a privilege to serve as CFO for such an exciting business, and I'm proud to present these strong results today. As Stuart has already covered, we saw revenue up 11% to $77 million. ARR is up 13% and a continued improvement in EBITDA margin now at 13%, is up from 10% last year. What I'd like to highlight is the $3.3 million investment we have made in cloud transition projects, most of which will go live in the second half or into 2026. These costs are deferred to match the revenue risk and they serve as a leading indicator of future annuity streams. In other words, seeds of tomorrow's recurring revenue. Our contribution margin rose 6% to $24 million, representing a 31% overall margin. While this is roughly in line with the first half of last year, it's been slightly held back by the timing of project go-lives, which has much of which have been weighted towards the second half of the year. Finally, our loss before tax narrowed to $1.3 million, a 64% improvement. And I'll say this, I'll be delighted to be speaking to these profits in very short order. Let's take a look at the key takeaways from our P&L and the trends across the previous 5 half year periods, as shown on the slide. First, recurring revenue continues to grow. This is naturally stronger in the second half of each year. Second, we're seeing expanding operating leverage with EBITDA improving half-on-half, a clear sign that our model is scaling efficiently. And third is that we're seeing a critical phenomenon with our SaaS and non-SaaS revenues. As clients move to cloud, their maintenance revenues moved from non-SaaS to SaaS revenues, but what we're seeing is the non-SaaS revenues continue to hold. As I mentioned earlier, a significant portion of our team's effort this half has been directed towards projects due to go live in the second half of the year and in some cases, in 2026. This timing has met our gross profit and contribution margins remained broadly in line with the first half of '24. That said, our cost discipline continues to be a strength. Operating costs, excluding exchange rate impacts, are up 10% year-on-year. That's a solid result, especially when you consider that revenue is up 11%, and our guidance already points to a substantially stronger second half. Our revenue profile continues to reflect the seasonal patterns that are well understood here at Vista, like the Northern Hemisphere box office driven by the summer period, Thanksgiving and the end of year Christmas holiday season, all fall in the second half. In addition, key client contracts also tend to go live in the second half. On this slide, you'll see the purple bars representing the first half and the blue bars for the second half. What stands out is the strength of our first half revenue growth, clearly visible and very encouraging. But what excites me most is how this momentum carries forward. When we index our revenue and EBITDA against our full year guidance, we can already see the meaningful benefits that are set to flow through in the second half. This segment slide reflects the performance of Vista Group's 2 core businesses, cinema and film. These segments are managed to the contribution line, which includes cost to serve, sales and marketing and R&D costs. For those interested in the detailed breakdowns, you'll find them in the data file available on our Investor Center. General and administrative costs are managed at the total company level. Both segments delivered strong SaaS revenue growth with cinema up 29% and film up 10% year-on-year. And I'm especially pleased to report a strong report from our 50% owned creative studio business, Powster, after being impacted by the 23 strike, Powster bounced back with a 52% increase in revenue year-on-year, a fantastic result that reflects both market recovery and the strength of our offering. Now on to our cash flow, where I'm pleased to report that free cash flow was positive for the second consecutive half. Operating cash flow rose to $11 million with collections continuing to improve reaching 106% of revenue. development was down 5%, mainly due to the timing of a $1 million 2023 R&D grant. This doesn't reflect a reduction in innovation, more just the timing of that cash being received. Overall, our cash fleet performance reinforces the strength of our business model and our disciplined approach to deploying cash. Onto the balance sheet, which remained stable. Net cash increased by $2 million, and we had about $24 million in undrawn ASB bank capacity providing us with flexibility and confidence. Finally, the quality of our receivables, again, continues to improve. With that, I trust you'll agree that these results are very pleasing a reflection of the momentum, discipline and commitment across the group. And I'll hand you back to Stuart to discuss our crowd migration strategy and what's next on our journey.

Thanks, Matt, and thanks for your support as you've come into the role. This year, we've taken the time to reflect and continue to reflect on the learnings from an initial wave of cloud migration projects. But before diving into those insights, I want to remind everybody and set the scene for our cloud journey so far. In '23, we proved that Vista Cloud had market fit. In '24, we demonstrated that we could deliver Vista Cloud to clients at scale. And now halfway through '25, we're continuing with that delivery with a clear ambition to have 36% of our client sites live on the Vista Cloud platform by year-end. As we've progressed through our cloud migration journey, we're seeing firsthand how transformative Vista Cloud is for our clients' business operations. Those already live on the platform are experiencing tangible benefits. Their revenue performance has been optimized through smarter tools and data, their operational efficiency is improving across the board. And critically, our cloud clients are best protected against the risks of an increasingly complex cybersecurity and compliance landscape. These outcomes reinforce the value of our platform. This slide brings to life some of the real-world impact Vista Cloud is having for our clients. And it's just not us saying it. Path Netherlands has been using our assisted scheduling tool for over 6 months and reports a 50% time saving compared to manual scheduling. That's a huge operational win. Cinergy calls Vista Cloud the next-generation product they need, and FatCats highlights how their Lumos solution is helping them deliver the seamless empiric experience that today's audiences expect. We've made good progress in the first half of '25 with client onboarding with work focusing on projects expected to go live in the second half or in 2026. As of 30 June, 747 sites were now live on Vista Cloud platform, a significant milestone, and we'll remain on track to reach 1,600 sites for approximately 36% of our client base by year-end. The pace of delivery reflects both the strength of our platform and the urgency our clients feel to get into Vista Cloud. As we've moved through 2025, the level of interest from our clients in Vista Cloud has been strong with secured contractual commitments, which amongst others include Odeon and Village to our operational excellence capability. Our growing momentum has already prompted us to continue to increase our delivery teams. However, our commitment to maintaining free cash flow positive has naturally placed constraints on our rollout capacity. It's a balancing act, one that we've managed extremely carefully, but it's clear to us that demand is outpacing our current ability to deliver at the speed our clients want us to go. So we're listening to our clients and prioritizing taking action on client onboarding. We're scaling both our technology and delivery teams already operating at peak efficiency to accelerate onboarding and unlock the full potential of our pipeline. At present, we're scaling our capitalized development and cloud implementation costs, which in 2025 are expected to be around $25 million. To meet growing client demand, we plan to accelerate this to a peak of approximately $40 million over the coming years before tapering back to BAE levels of around $7 million once we reach 100% platform. There are several compelling reasons for this acceleration. We're listening to our clients and putting their needs first as through putting more delivery teams means we can run more projects concurrently and deliver the benefits of client to clients being on Vista Cloud faster. We're doubling down on our current AI efforts, embedding it into both our business practices and our technology. And we continue to accelerate the modernization of our tech infrastructure, which has evolved over a 25-odd-year time span to ensure we remain cutting edge and remain scalable and secure. And we're confident that doing more upfront will allow us to get additional revenue, attract new clients and to reach a 100% platform faster than if we continued at the current levels, all while derisking the journey. So we're making the strategic decision to accelerate, even if this means slightly more on our cash, future free cash flow ramp and debt facilities. Our clients are clear. They want to be on Vista Cloud as soon as possible, and our strategy is designed to meet that demand head-on. While we've made some technical adjustments to accelerate delivery, our overall platform strategy remains unchanged. Our cloud migration exploration is soon to reach $300 million and ARR at 100% platform. What's changed is the pace. By accelerating now, we believe we can increase both the number of clients we are onboarding at any one time and further improve our onboarding client velocity. By delivering more onboarding engagements concurrently, we also reduced the risk of any timing delays to our growth aspirations. Matt, I'm now going to hand over to you to speak more about some of our other growth opportunities ahead.

Thanks, Stuart. I'm always happy to speak to the incredible opportunities ahead for Vista. And today, I'm thrilled to officially announce the launch of our embedded payments offering. We've talked previously about the potential to embed a white-label payment solution within our processing software powered by a global payments provider. Historically, this came with risk, but now we're able to move forward with much of that risk being managed by the payment supplier, unlocking a safer, scalable path forward. To me, embedded payments as a natural growth opportunity made possible by our strong market share and the real problems we're solving for our exhibition clients. These include simplifying cash reconciliation and eliminating the pain of nonintegrated payment systems. We're giving clients access to cutting-edge payment technology typically reserved for large enterprises. And ultimately, we're delivering a more competitive cost solution compared to their current payment fee structure. For Vista, the benefits of our embedded payments offering are compelling. By 100% platform, we expect this initiative to contribute $15 million in ARR. Importantly, this revenue will be recognized net of processing fees under the agency basis in the revenue accounting standard. This accounting recognition of recognizing just the net take rate is revenue supports a high-margin model with the primary P&L cost being the dedicated team required to support the payment function. Most importantly, this offering a scalable, efficient way to unlock new value, both for our clients and for Vista. So what we're announcing today is that we're ready to get this off the ground. We're in final negotiations with our selected global payments provider, and we have begun the building of the initial interfaces and we expect to sign clients in the second half of this year. From there, we'll look to rollout in 2026, bringing this offering to more clients and unlocking the full potential of embedded payments across our platform. So the major milestone for Vista and one we're excited to deliver. Last year, we realized last year, we released the annualized gross transactional value, or GTV, processed through the Vista Cloud platform based on data for the month of December 2024. That snapshot helped illustrate the potential for variable revenue streams and importantly, the scale of the opportunity for our embedded payments offering. Today, we're going a step further. We're releasing the annualized GTV for the entire first half of 2025, which removes any seasonality and gives a more balanced view of platform activity. If we project that forward to 100% platform adoption and include Veezi ARR, we estimate that approximately USD 22 billion will be processed through our platforms annually. It's a powerful indicator of the scale we're building and the value we're positioned unlock. When we bring all the pieces together, the impact is clear: The additional $15 million in ARR, we expect from embedded payments allows us to upgrade our total ARR aspiration to $315 million at 100% platform. It's a meaningful step forward, one that reflects the strength of our strategy. Many of you will recognize this slide. It's one, we've used before to showcase the power and breadth of the Vista platform. Today, we're excited to build on that with our embedded payments offering. We've previously talked about family entertainment centers, or FECs, and it's worth highlighting again that our clients are already taking Vista beyond traditional cinema using our software to support the management of these facilities. Another opportunity we've identified is in film distribution. Vista is uniquely positioned in the industry. We serve clients who are studios, distributors and exits, giving us a rare vantage point across the entire entertainment ecosystem. There are certainly challenges in this space, but we believe we're in a strong position to tackle them over time. So as we look ahead, the substantial opportunity to unlock even more value for our clients and through our platform of breadth, its data capabilities and continued expansion in FECs and film distribution. While we've made strategic adjustments to meeting growing client demand and to embed AI more deeply into our operations, our EBITDA margin exploration, our 100% platform remains unchanged between 33% and 37%. We're continuing to manage costs carefully even if we invest in scalable growth. This balance ensures we remain disciplined in our financial approach while positioning Vista to unlock long-term value. To wrap up this section today, I wanted to leave you with a clear view of the strength of Vista's investment proposition. We hold a 46% global market share in Enterprise cinema. Our ARR exploration has been upgraded to $315 million at 100% platform. We're laser focused on expanding our total addressable market, and we're energized by the opportunities ahead and fully committed to unlocking them. Back to you, Stuart.

Thanks, Matt. Now I want to turn to our outlook. As we take a more broader look at the industry, confidence in the movie state continues to improve and is looking pretty fantastic for the second half of this year. We're seeing a strong lineup of high-quality titles. And then what is especially encouraging is the number of major releases already locked in for '26 and '27. As we look forward, we expect growth to track alongside a red bounding box office and increasing food and beverage inflation, which together create a favorable tailwind for Vista. Moving on to our 2025 guidance. At the start of the year, we guided our full year revenue to fall between $167 million and $173 million. That guidance was based on assumptions around the domestic box office and U.S. dollar, both of which, as many of you will know, have been tracking slightly against us this year. So based on what we know today, we now expect revenue to land at the lower end of that guided range. Importantly, though, we still anticipate delivering an EBITDA margin between 16% and 18%. As for our 2025 aspiration, we've always acknowledged that 175 would be a stretch goal for us by December 31. There's a few key factors not quite aligning, that aspiration now looks more likely to be achieved sometime during 2026. Looking out a bit further to our longer-term aspirations, we've upgraded our ARR to $315 million plus. Our EBITDA margin remains unchanged at 33% to 37%, and the 6,000 sites on Vista Cloud is also unchanged. These long-term aspirations reflect the scale of the existing platform opportunity, the strength of our strategy and the momentum we're building across the business. Before we wrap up on what's been a session that's covered more than just our half year results, I'd like to leave you with a few key takeaways. I'm delighted with our first half results. Demand for Vista Cloud is outpacing our current delivery capacity, and that's a great problem to have, but one we need to resolve for our clients, so we're accelerating to meet that demand head-on. Embedded payments is a powerful new growth lever, and we're excited to be officially getting it underway while upgrading our long-term ARR aspirations to $315 million. I'll now hand back to Matt, and we'll open up the line for our Q&A.

Thanks, Stuart. That concludes the presentation part of today's call, and we'll now move on to the Q&A. [Operator Instructions] Guy Hooper from Jarden [Operator Instructions] Please go ahead, Guy.

Yes. I'll start on the cost ramp front. Can you help us understand, I guess, where those constraints have emerged just given the near-term go-to-live profile hasn't changed? And then can you talk a little bit about what it means for the acceleration of full adoption timing? I mean how -- like how far forward does it pull full adoption?

So thanks, Guy. And I'll start with this and Matt might color a little bit more. So just in terms of the 2025 year adoption, we're continuing to focus on delivering that. But what we're starting to see and what we've been seeing is a number of clients who want to continue to onboard through '25 and then into '26 as well. And so by expanding the number of teams that we've got working on this and our capacity, we believe we can further accommodate those clients. And so it's about really setting us up beyond '25 for '26 and a ramp into '27 as well. And so to answer your question around what does that mean? Effectively, we're bringing some of the costs forward that we were planning to spend later in the process. The benefit for us is around that means that we get to 100% platform faster. We think it probably saves us between 1 and 2 years. So we're effectively getting it faster. And what that means is that we believe we'll be more profitable faster, but importantly, and I think this is a really key thing. What we're seeing from our clients is a demand to get on the platform. These projects take a little bit of time, as you know, some of them multiple years. And so the more that we can -- more we can start as quickly as possible, we believe we can get through the process more quickly as well.

Okay. Great. Appreciate the color there. I guess on the cost as well, that, I mean, you ramp up to $40 million at max, I think the previous profile was a number of years of around the low 20s. I mean, are we spending more in total or is the total amount expected to remain pretty similar and we just come off the ramp early?

Yes, I can take this one. The way I see it, Guy, is that we -- what we're doing is we're pushing that cost forward. And it's really -- if we're able to get to a 100% platform a year or 2 earlier, what we're doing is we're able to redeploy a bunch of our staff that are currently working on that in the cinema business to work on other things. And when I look at the amount of staff in our similar department of about 600, including contractors, I think our BAU state is probably around about 70% of that. And so about 180 heads I make it will be moving on to new adjacencies at that point and working on new revenue streams.

Okay. So I guess as we get to the end of that, much on cost necessarily ramp down too materially as they get redeployed and sort of other opportunities? I mean how do you think about the reinvestment priorities on those? And how big those opportunity are?

Yes. Guy, that's a good question. And so at the moment, our focus is very much around delivering Vista Cloud platform to our clients as quickly as possible. You've seen us move into, what I would call, first sort of area of adjacency, today, when we've added embedded payments. We've continued to talk about other opportunities that we see in the medium term around things like family entertainment centers and film distribution. We're not ready to talk more fully about them at the moment. So I can't give you a number on that. But what I do see very much is that getting our clients on the platform as quickly as possible is really just the start of the journey, the opportunities that can unlock for them and us at that stage could be pretty significant. But we'll look forward to sharing more about that as we go through this process. But focus at the moment remains very much around how do we get the client base on to the platform as quickly as possible and really help them get the benefits that some of the early adopters are starting to see.

The next question is from Stephen Ridgewell at Craigs.

Just the first question is on the -- for large customer may be deferred to next year. Just trying to be clear. So in terms of the target you set assume 100 sites operational weeks once the end of the year with customer to putting that target that the might be too?

In terms of the operational excellence, it's not material. The operational excellence, clients are in the process of onboarding at the moment and well understood. So the only client we're talking about there is a large one related to the digital area.

Okay. So not so much for revenue And then just on second question is on payments. Talk to payments been a high-margin incremental revenue opportunity once you get -- if you hit your adoption targets, but there's been no change to the 33% to 37% to the group margin target at 100% platform. Just thinking to rethinking it look if you do have those payment targets that we should maybe be thinking maybe upper end of that range at 100% platform?

Yes. I mean, it's a good question and differently clear. I think the way I think about it is a lower proportion of our $300 million ARR. And so when you go and put that across down to the EBITDA line, it will move the dial a few percentage points. But what we're saying here is that, look, we -- that's a long way down the road. Let's go for the 33 to 37 that we've already had out there because we want a little bit more going under the bridge before we start getting to a far head of ourselves.

No, fair enough. last one for me. the upgraded to $315 million ARR target assumes 6,000 sites. We've just seen just over 150 sites lost over the half, and we divested that 5 years ago. We're down about just over 1,000. We still that if you can talk to what gives management and the Board the conference that the site count will grow 1/3, which is in the targets? Are you starting to -- are you seeing strong environment query from potential customers who are not on preform at moment?

Yes. I think that's right, Stephen. So there's definitely been a little bit of movement in the site count over the last few years, and I'd expect there to continue to be some movement over the next few years as well. What we know and understand is that there is still a significant number of opportunities that are outside our current site count. We've got some pretty good line of sight to what those might be. And we believe that the cloud platform in many cases is way more uniquely suited to them, then maybe our on-premise technology had been. I also strongly believe that when you start to build momentum on the platform, it becomes even more compelling for a broader group of clients as you can start to unlock some of the other areas of opportunity around data and insights and analytics, et cetera. And so I think that this is about first step is make sure that we're looking after our existing clients well we're converting to the cloud platform as quickly as we can. And some of the churn has been driven by our ability to bring clients on as quickly as they would like. And so we're definitely looking to remove that as a challenge and a barrier through this acceleration as well.

The next question is from Jules Cooper at Shaw.

Look, the first one, just if we could just sort of zoom in here on the hiring profile. If I -- for round numbers, argument sake, if we said you're talking to maybe adding 100 people into the organization from now until the peak, how do you sort of see that phasing in now over the next couple of years? And could you give us a feel for the mix between those employees that will really help the onboarding process with your customers and maybe those that are focused on some new products, maybe around AI and things like that, that you are seeing some pretty good results from already with customers?

Yes, I can take that one, Jules. So in essence we've been saying that we expect the journey to be more like a 5-year journey than a 10-year journey. And what I expect us to do with that additional ramp to $40 million is roughly get there midway between now and then. And so we'll be doing targeted investment into these areas. This is something I want to scale up with the appropriate business cases. So bringing in the -- whether it's just sort of 10% of that is AI staff to see basically what they can unlock and what they can embed into both our business and our products. And then I see the rest of it roughly split between technology and additional delivery teams.

Excellent. All right. Now just on the payments piece because that was really good to see you start putting some early numbers around this opportunity. But USD 22 billion in total transaction volume processed potentially across your client base, what -- when you look at the $15 million incremental, can I ask what assumptions you've made around penetration? Because it would seem like that is still only scratching the surface in terms of the full opportunity.

Look, I can't give you a penetration, that will essentially give you the net take rate at that point. And that's obviously, highly commercial. But what we have said is that, look, this product offering is going to be more relevant to our clients at the smaller end of scale. So those with 50 sites or less. And if I were to think back, I would have thought roughly or just sort of 1/3 of our DTV that we announced is probably relating to those clients. Some of those will be in markets that our supply won't reach, and ultimately, the level of penetration is a large unknown at this point and something that we've made some high-level assumptions at this point.

So Jules, Stuart here, just coloring that slightly more. If you think about where we're at in this journey, we've obviously been doing quite a bit of work internally, working with a number of suppliers to get to 1 potential who we're in the final steps of. We've then got some technology to embed into our platforms. We started having conversations with our client base around what this might look like. I'm really encouraged by the feedback that we're getting. And so we'll look to continue to get there. I think the key for us, like the process we've been through with Vista Cloud as a first step is to really prove market fit here, make sure that the clients are getting value from the product and the solution and it's working well, we'll then work towards accelerating from there over the next period as well. And so as we go through that, we'll get a much better feel for exactly where could this end up in the future. The other thing that I'd also point out is as a global entity, we have clients in all different markets in the world. No payments supplier or no embedded payments supplier can actually service all of those markets currently, but all of them are working towards adding more markets. And so there becomes a natural opportunity for us to grow over time also as other markets get added. So we're -- as we said in the presentation, we're right at the beginning of this, but it's exciting to get out there to be able to have the conversation. As I said, we've already started talking to some clients that I'm really encouraged about the feedback we're getting.

Excellent. And just the last one for me. I don't want to sort of hold the call, but we've focused a lot here on pulling forward revenue, meeting the demand from your client base. Could I just ask a question around when you add this additional cost, you bring in this sort of onboarding capability, how does that change now your perspective perspective around the risk of the strategy here that you're executing and the confidence now that these extra heads will have to really ensuring that you're going to deliver great outcomes for your customers over the next couple of years?

Yes. That's a great question. So from my perspective, this is all about derisking this process. My view is that the faster we can get our clients on Vista Cloud platform, the more value we can deliver for them in the short, medium and longer term. And so as we've talked about previously, we know that as we go through this process, we create churn opportunities. That's what happens when you move from on-premise to cloud software, the client gets an opportunity to look, reassess. And so our view is the faster we can get through this work with the more capacity we've got to do that, the more we can derisk the journey for them and for Vista Group as well. So I only see this as a good thing.

Excellent and well done. Congratulations with fully supportive.

Thanks, Jules.

Next question is Owen Humphries from Canaccord.