ZOO Digital Group plc (ZOO) Earnings Call Transcript & Summary

Good afternoon. You've tuned into ZOO Digital Group's presentation for our final results of FY '23. [Operator Instructions] So thanks very much for joining us. So for those who haven't met us before, I'm Stuart Green, I'm the CEO. I'm a co-founder of the business. I'm also a large shareholder having invested my own capital in the company over the course of the last few years.

Hi, Phil Blundell, I'm the CFO, and I've been with ZOO for 5 years now. Prior to that, I've had finance and operational roles at a number of AIM listed technology businesses.

So ZOO provide services to the entertainment industry and those services are all around preparing media for distribution, primarily through streaming services. This period marks our fourth year of revenue growth with improved margins and profits. So we've delivered 34% CAGR since 2016. We're a premium provider to the global streaming companies, the biggest players in this industry. And we continue to be differentiated by the tech enablement that we have in our proposition. So we've invested in technology that sets us apart, because its competitive advantage makes us efficient and scalable. We've been strengthening our proposition over the course of last year, more of this to come in a moment through some international operations in some strategic locations. And just a short while ago, back in April, May, we raised capital for an acquisition in Japan, and we'll be giving you an update on where we are with that in a few moments. And I should say that, of course, that these results have been overshadowed somewhat by this temporary industry slowdown that's been leading to, for us, a weak first half and more of that in a second. But we're very confident that the medium- to long-term fundamentals for ZOO remain very strong. So let me take you through the short-term industry, these challenges that we're facing at the moment, not just ZOO, but the industry more widely. And they fall into 2 areas. Firstly, since the beginning of this year, almost all of the major U.S. streaming companies have been going through strategic reviews. They've all been looking to make changes to make -- to bring their services to profitability more quickly. And what's happened since over this period is that the industry has paused for breath as they reconsider their business models, their strategies for content acquisition and many other considerations. And that has led to some quite significant changes amongst our customers. We've seen the restructuring. We've seen head count reductions and a whole range of initiatives to reduce costs and also to get to that point of profitability sooner. Clearly, that situation, which has been ongoing for some months, has been compared to more recently by the strikes that have been taking place in Hollywood. It started in May with writers' strike and have continued with the [ actors' ] strike just a few weeks ago. And this is the first time in 60 years that both of those unions representing those creatives have been -- taken industrial action simultaneously. The dispute that they have is over pay and in many ways, it's symptomatic of an industry in transition to move away from linear TV to streaming. But also they're concerned about artificial intelligence and the impact that, that will have on their livelihood. So there's some quite significant issues there that these parties need to resolve. Let me just take you through sort of what we know at the moment and how things stand. So these 2 factors have created this hiatus in the industry. It is industry-wide, and it is still ongoing. But it is temporary, and it's important to recognize that because, of course, the consumer demand for media and entertainment is undiminished and it is growing and will continue to grow. Of course, the strikes means it's not possible to produce new productions in the U.S. at the moment. But if they are prolonged, then, of course, our customers have always the option to migrate more of their back catalogs and those back catalogs, by the way, are enormous. And there is so much content out there that could be made available on streaming platforms if they were to choose to do that. When they're looking at content, put up by their platform, one of their aims is to have content that attracts large audiences, of course, -- and of course, a great way to do that is to make that content available in many countries. So finding content that's attractive in different countries and cultures is important. But in turn, that implies that the localization is key and will remain central to the strategies of these companies going forward. So let just now take you through our expectations of how things will play out from here. So currently, I have to say that we have very limited visibility of business whilst these disruptions are ongoing. That makes obviously planning and forecasting very difficult. Whilst the short term is unclear, we are confident that work will normalize in the medium to long term. One of the things that is happening is a consequence of some of the changes that have been made in reducing costs in our customer organizations is that they inevitably will lead to a shift -- a greater shift or an accelerated move to the adoption of what's been termed the end-to-end model. So that's say, working with vendors like who can deliver all of these services that are required for global distribution of content. In this regard, ZOO, is obviously a key supplier. We have our ZOOstudio platform, which has been adopted now by a number of studios, and that gives stickiness to our proposition and it gives us a competitive advantage. Our cost base is flexible because of the fact that so much of our costs are related to freelancers. So we have a good flexibility at the moment. I'll just mention AI briefly now, but I'll return to it in more detail in a moment. AI is something that we see as an opportunity. And we think that customers will trust us to evaluate AI type options as they emerge. So we don't see AI as a threat to our business. We have net cash. We'll take you through that situation and all in a second. And we think that we will be in a stronger position after this disruption has settled because of the changes that we made within our customer organizations. So our long-term strategy and our trajectory remains intact. So we'll now move on to our FY '23 results, and Phil will take you through them.

Thank you very much, Stuart. So obviously, our final results for the year ending March '23 record results with revenues up to 28%, that growth has been driven by a near 70% increase in dubbing, which is very pleasing. I'll take you through the split in a later slide. The other key takeaway, I think, from the financial highlights is our profitability across the board has increased significantly, and this has been driven by our margins. So we set some long-term goals by the different services, subtitling, dubbing and media services. And in this particular year, we've seen all 3 of them improved significantly. Primarily being the dubbing, which was loss-making in FY '22 and have now gone into margins -- gross margins after internal production costs up over 25%. So we're very pleased that our model is now starting to work. We're still investing quite heavily in OpEx, and I'll take you through that a bit later on. It was pleasing aspect, which is more to do with the weighting of half 1 and half 2 sales is that our net cash flow operation has doubled or tripled should, should I say, to over $15 million. And that left us in a very strong position at the end of the year with net cash, no borrowings of just under $12 million. But it wasn't just about a super financial result. We also made some big strides on our long-term strategy from an operational point of view. Key here was the adoption of ZOOstudio by another large Hollywood Studio. That contract was signed in Q4. It is now integrated -- and whilst the disruption in Hollywood is over, we would expect us to start -- we'll start to see large orders being placed with that customer. It's not as big as our largest customer, but we can expect something in the region of 1/3 of those revenues going forward from a very, very low base. Second thing I'd make a comment on is we had a full year's contribution from our mastering division. This is now generating over $10 million a year of revenue. It has a reasonably high margins, and it's a service that we can now start to offer to other clients. And is a foothold into other services. So we're very pleased that we've successfully got that service up and running. And then the third large success in terms of our operational highlights is the integration of our international businesses. We bought a company in India in March '22, that's fully integrated. We have upgraded all their systems to be able to support the quality that Hollywood expect. We've also opened a second office in Chennai. And we're now in the process of moving significant amounts of production work from the U.S. and the U.K. to India where we can deliver the same quality but at a reduced price so that we can maintain or improve our margins going forward. To support our dubbing initiative, we bought a stake in Spain, and we will have further progress on other similar acquisitions in the course of this year. And we took the remaining 49% that we didn't own in South Korea. And we're building that house as a regional hub for the far east. These are all very important regional hubs for our customers, and they will support our long-term growth ambitions. Just reflecting on our KPIs, which we measure our success. Obviously, with revenue we've already talked about OpEx as a percentage of revenue is supposed to go down. It went up in the year as we continue to invest in our operations. The main cost drivers there being increased property and increased IT spend so that we have a business that's ready for the next phase of growth once this hiatus is over. There is actually a sort of noncash accounting item within OpEx, which is the share-based payments, which actually had a full 1 percentage point impact on these -- so without that, it was actually 28%. Operationally, number of freelancers went up. It actually went up by even more because we purchased the database to get rid of inactive freelancers, but the key message here is that from a capacity point of view, we've been able to add extra capacity, again, ready for the search that will come once the strikes and the budgets are set in Hollywood. And then from a quality point of view, our customers are very happy, and we increased the measure of customer satisfaction over the course of the year. Moving on to our P&L. As I say, the localization, which includes dubbing and subtitling was up 34% in total. The big driver there being dubbing -- that's due to the size of the internal department that we put in place in FY '22 being able now to convince customers that we can deliver to the same quality as our competitors. So that's a really pleasing set us on the road for dubbing becoming our largest service over the course of the next 5 years. Media Services was also up. Again, as I mentioned earlier, due to the performance of our Mastering department. And Software Solutions fell in the period, but that's support maintenance contracts, which we've highlighted in the past will, over time, diminish to zero. A key highlight I want to get across is our gross profit moving up to 37% in the year, which is significantly ahead of our estimates, up from 30% the year before, driven by that significant improvement in the dubbing business, which is very pleasing and also improvements in our Media Services and a slight improvement in our subtitling. Operating expenses, as you can see, up over the year, property and the IT being the 2 big drivers. And obviously, our investment in R&D is absolutely critical that we continue to invest heavily in our IP and building those systems that attract those large Hollywood studios to adopt ZOOstudio as we get forward. And then when we're looking at the profit for the period, the other big kicker for us compared to the prior year is that we didn't have the loan notes and the and the cost provision that we had to put in for the loan notes in the prior year. So that again helped our profitability. Just moving on to the profitability by those services. So Localization, last year was only 21% weighed down by the dubbing being a loss maker as we built up our internal team. This year at 33%, we set as our long-term goal that it would move up into the high 30s. So we're on track much quicker than we thought. Media Services, the mix of sales with less Metadata and more Mastering. So that Service Division moved from 55% to 60% -- and again, I think there's more to come from that division. And it's very pleasing that overall, our margins were over 37% versus 30% last year. And I think that's one of the few trends that we can take forward into our business once we see business as usual from our customers. And finally from me, in terms of the balance sheet. I mean the key message here is that it's a very strong balance sheet. It was strong last year, but it's even stronger this year. We've invested in our R&D team. We've invested in our CapEx at $4.8 million, being our international operations up to scratch so that they can support our customers across the globe. We had a good cash inflow, as I mentioned right at the beginning. That's due to the weighting of sales between half 1 and half 2, but it leaves us in a really strong position to ride out this mini-storm that we're going through. We have no borrowings -- and yes, we're sitting on at the end of March, $11.8 million of cash. And after the recent fundraise, we're currently sitting on $23 million of cash. So -- so the foundations fully on our long-term growth.

So with so much coverage in the media at the moment about what's happening with the short-term disruption. I think it's quite easy to lose sight of the big picture here and what's happening over the long term in our industry. So we have a few charts here that will take you through that will hopefully put a little bit of color on that big picture. So starting with the chart on the left here, it shows what we all know really, that consumers are transitioning from traditional TV to streaming, of course. And in that regard, 2022 is obviously a landmark year because in the U.S., at least consumers transitioned such that most of their viewing time is now on streaming rather than on traditional TV. Streaming obviously represents the future of home entertainment. And this current disruption is related to media companies really making this transition and adjusting their business model so that that's suited to this new way of working. In the middle chart here, this highlights a key challenge for streamers. I think something worth highlighting, namely user churn. Frankly, streaming is a fabulous proposition for consumers. It's replaced expensive bundles with low-cost packages. And this flexible month-to-month billing is a great thing for us as watches of this content. But it's actually a very challenging thing to manage for the operators. So what I think what we'll see -- one of the things we'll see going forward to provide us developing strategies to minimize the effect of that churn, which is a very challenging thing in that business. The right chart here shows the investment that's been made in content production. And as you can see, it's grown with the exception of 2020, which, of course, was a pandemic year when productions were on hold, it has grown year-on-year. And we're not aware of any forecast or who expects it to decline. It's -- some have said they it might do some plateau at least for a little while. But we can assume that the [ $138 ] billion that was spent in content in 2022 is not going to change that much despite the noises that some big players are making about driving content budgets. On into the next chart. So here on the chart on the left shows the global dominance of a small number of streaming companies. There are actually hundreds of companies in the world that provide streaming services, but only a handful but do so on a global basis. And these, of course, are the ones shown in chart and other ones that ZOO is targeting. So you'll see that they're predominantly U.S.-based and have traditionally been subscription video-on-demand type services. The next 2 charts really give a feel for some alternative ways of monetizing streaming content. So while subscription video on demand has been popular, what we're seeing is increasingly popular advertising-based approaches. So AVOD, advertising video on demand where consumers pay either a small amount or nothing at all to watch content with [ the divestments ] or FAST, which is free ad-supported streaming television, which is a sort of the over-the-top version of traditional TV. In both of these areas, we're seeing growth in terms of subscriber numbers and advertising spend and that's set to continue. These present additional opportunities for us because, of course, it requires companies like us to purposely material so that they work on those type of platforms. So in the course of about year or so, some new practices have emerged to focus on profitability. On the left, just some illustrations of some platform consolidation that's been happening -- of course, what -- when you consolidate platforms, one of the things that does is enable you to pull content so you can offer a broader offering. And of course, these services are trying to appeal to all people, their general entertainment platforms. It's necessary for them to have a significant quantity of content and to be adding to that content base on a month-to-month basis. Another thing that we've seen is that we're over this period of streaming to date, content producers have generally taken the approach that they should retain exclusively the content on their own platforms to give them differentiation. We're now hearing a number of major players who are entertaining the idea of licensing potentially to their competitors. So that's a key change in the game is all part of the initiatives that have been taken to bring these services to profitability. The middle chart highlights the rise of international content on streaming services. And I'm sure we're all aware of the fact that we're seeing more and more foreign programs on screens. One of the motivations for this, of course, is the lower acquisition cost of that content. Generally, it's cheaper to produce content in other countries than in North America and in the U.K. We've seen streaming services investing heavily in non-English original content, so greater proportions of their budgets have been dedicated to that. And as you can see from the chart, the demand for Asian titles sold, particularly in Japanese and Korea, which we've -- as we've already mentioned, we see assist 2 key territories and indeed have been the focus of investments that we've made and are making. So again, what this does is really just highlight the importance of localization for these businesses. And then on the right, really just a few headlines illustrating the cost cutting that's being made by some of the major streamers. And this is all to do with this, the decline in revenues from linear TV. It's caused them to take place a greater emphasis on stream profitability and to accelerate the point to profitability. And one of the things that these organizations are doing is trimming down their internal teams. Having a smaller team to manage these operations means that there is place greater reliance on their vendors like to. So we think these changes will be advantageous for us. And then just a last few words on the size of our market. Obviously, we are providing these services on a professional capacity. The charts are showing trends in our target markets, particularly localization. One of the ways in which you can sort of get a crude idea of how localization spend might track is to look at content spend because typically 1% to 3% will be spent on localization of the budget that's spent on content. But of course, actually, for us, it's not really the spend on content that's important at all. It's actually how much content is produced. Well, the chart on the left shows is the size of this global market, which has been growing year-on-year, again, just with the exception of the pandemic year. We expect that to continue to grow in line with content. It's sized at about $3 billion currently by Slator, which is a market commentator. The right chart shows some data from Nimdzi, another market commentator, which shows the increasing proportion of media localization spend that is with large suppliers like ZOO. But also the fact that the number of large suppliers has been declining recently. So this is -- again, this is a trend of an indication that it's very favorable. And it really illustrates the point that we've made, which is that increasingly the big guys in the industry and moving towards working with end-to-end vendors like ZOO that can do everything for them. And that clearly is a trend that's very favorable for us. So just reflecting on these, I guess, these changes that have taken place, particularly, the recent ones. Could you just elaborate on how we see them impacting the ZOO business. So despite this current hiatus, as I said, there are no forecasts to expect the long-term content spend to decline. We are hearing about certain players trimming their content budgets, that doesn't -- it's what's reflected for second on recognizing that, that doesn't necessarily mean that the volume of content will diminish because something else that these buyers are looking at is potentially reallocating their content budgets. Just to kind of illustrate how significant that can be. If you think about an average feature film lasting 90 minutes or so, a typical spend to produce such a thing will be $100 million to $200 million. In contrast to create a scripted TV show will cost sort of $2 million to $3 million typically on average. And to create some unscripted content, like Realty TV will cost somewhere between $100,000 and $0.5 million per episode. So clearly, there's a huge range of spend to create content. And at the end of the day, from ZOO's perspective, it doesn't really matter how much they spent to creating that content. We are paid based on its duration. And therefore, as -- one of the things we think will happen is that the buyers of this content will be more discerning perhaps than they have in the past in the decisions about which content they bet to invest in. As I mentioned, the streamlining of studio operations will favor end to end vendors like ZOO. So that's a very positive development as far as we're concerned. The fact that there are potentially more exploitation channels, so appetite video on-demand, fast channels and so on, again, creates more opportunities for us as does the content licensing that they are contemplating to now. Given as I said the typical spend on localization is only 1% to 3% of content budget. That's a very small incremental spend to give reach to a potentially enormous additional market of viewers. And for that reason, our expectation is that localization of media will continue to be absolutely fundamental to the way in which this industry exploits content. And then finally, on the industrial action, clearly, it will resolve at some point. It's ongoing at the moment. But clearly, once it does, then productions will normalize and we'll see once again that throughput of new productions. I said I'd say a few words on artificial intelligence and really just pick on the point I made that we see this as an opportunity rather than a threat. It's actually an area where we've been active in our R&D efforts for a number of years. So for example, speech to text technology, which is a form of AI is something that we already use in some of our workflows. What I would say about localization, though is that the vertical market that is media localization is especially challenging for automated approaches. And that's because of the contextual nature of dialogue as opposed to the written mode. So many technologies that kind of look superficially like they could potentially displace aspects of our business, which is subtitling. In reality, for the kinds of content that we work with, that's not practical. And the way we see AI being deployed effectively is as a supporting technology alongside traditional practices. So that's the approach that we're taking. As obviously, as a trusted partner to our customers. We expect that we will be collaborating with them to explore these new opportunities as they emerge. And we think that they will need to incremental services rather than erode existing services and indeed potentially improve margin as they enhance existing services that we offer. So just a few words about the progress of the strategic plan. For those who are new to the story, our strategic plan consists of these 5 pillars. And we've made good inroads in all areas over the course of the year. I think this is something we have Phil particularly covered earlier. So I don't propose to cover this in any more detail at the moment. But I think it is worth us just spending a few moments on Japan.

Thank you, Stuart. Yes. So we announced in March that we had the opportunity to buy one of our partners. It's parent decided it was noncore and put it up for sale. We reached an agreement on the price. But we obviously didn't have the funds to pay for it. So we had a fundraise in May, which ran the necessary funds. We said at the time of that placing that we would expect to close the deal in late August, the beginning of September. And the due diligence and the legal documents process has all gone very well. We're just about completed that phase of the project. But what has happened over the course of the last few months is obviously the strikes and the disruption to the industry. And as such, we have gone back to the parent company and said that we need to do 2 things here. The first one is we want to negotiate the price. And secondly, we need to push out the closure date until a date when the uncertainty in the industry has gone away. They have understood that [ predicament ] and they have agreed that we will work on that basis. So we're still in prime position to close that deal probably before the end of the calendar year. But just to make it quite clear that we are committed to this deal. Japan is a strategic market for us as Stuart has identified in those -- in the charts. Our customers are very active in Japan. They want more and more content. And it's not often you get a chance to acquire a business at this scale and this expertise. And so we're committed to it. We've ring-fenced the money and we will hopefully be able to give you a further update with our interims in a few months.

Thanks Phil. So moving now on to the outlook. So clearly, this current hiatus has had an impact on our first half. However, we expect things to resolve by the medium term and for orders to normalize in due course, but exactly when that will be, but we're confident that, that will be the case. Throughout this period, as I said, there are changes that are being made within our client organizations that we -- that provide opportunities to ZOO, and those opportunities will materialize over the medium to long term. In the meantime, as Phil explained, we have cash, and we are making some cost savings at the moment whilst we -- whilst the duration of this hiatus is unfair. But we're very, very confident of growth returning in due course. So I'll just leave you with a couple of more charts just to summarize the investment thesis. We're operating in a specialist market, which has just delivered historically strong growth, and we expect that growth to continue. We're one of the leading end-to-end vendors in our industry with differentiated by technology, and we're increasingly in demand. And currently, we -- our market share is low, and therefore, there is enormous opportunity for us to expand by growing market share. We've delivered 34% CAGR since 2016, and we expect to grow that growth to resume once the industry has settled. So thank you very much. So we can move now to questions. I say we have a few already.

Okay. So we take these in order that they've arrived. So the first comes from Simon. Are there still plenty of back catalogs that need updating? Yes, that may come as a surprise. You kind of think, well, streaming has been around for a long time now, surely, everything has been migrated. But actually, the back catalogs out there that are still to be -- that still not come on to streaming are absolutely huge. There is years and years of work to migrate. So -- there's no -- if our customers choose to focus on that whilst the strikes continuing, that there is -- believe me, there is plenty of work opportunity in relation to that. Next question also from Simon. The strikers can stay irrational longer than you can stay solvent. Perhaps.

I think that's probably unlikely. I don't think people who are living from writing scripts or acting are going to stay out on strike forever. I'm sure there is a compromise that we reached with the bigger Hollywood studios. But as Stuart has already mentioned, if they do decide stay out for much longer than the large Hollywood Studios will return to their back catalog to top up or they will start to license more international content because this strike is localized in the U.S. currently, it's not affecting production in even in the U.K., but certainly Europe or Asia. So they've got an engine they need to feed Netflix and Disney need to put new content up, they will find a way to do it, and it will need to be localized. So our revenue hasn't disappeared altogether. It just isn't at the same level as it was 12 months ago.

Next question comes from Charles. You mentioned you've adjusted the cost base. Does this mean you will be cash flow positive even if revenues remain skewed?

The simple answer to that is no. What we will do is we'll reduce the cash burn. We do need the revenues to pick up from where they are today, even after we have adjusted cost base. But obviously, the cash burn will be a lot lower -- and as I said, we expect that from October onwards, we will see that our main customers will start to be placing more orders than they are at the minute. And they're giving us every indication now that will happen.

So the next one comes from Mark. Bear in mind, you're seeing growth in Asian content. Is there a possibility that this writer/actors strike will cause a permanent shift in content in Europe and Asia? How would this impact too? I mean, I don't think that there would be a permanent shift. I think what's happening is that great -- great content can come from anywhere in the world. It's not exclusive to any one particular country or location. And I think what streaming has done has made content, but otherwise, we would not have seen access for -- and consequently, it's been sourced for a might in the chart I showed you a Japanese content is the most at least in the period of that analysis of the most highly watched of non-English original content on Netflix. Although certainly because of the attractiveness of animation, [ anime ] in particular, so I think it will be -- continue to be the case that content will be sourced from other locations. In motivation, as I mentioned, is that the -- those commissioning new content, obviously are eager to produce that content is the best economic cost they can. And there are certain locations such as Turkey that have a fantastic tradition of very good quality, high production value program making and that is being tapped by many [indiscernible] streamers. And of course, that means it's going to be produced in Turkish, and therefore, it will need to be localized to lots of other target languages. So I don't imagine that the strike will give some right to any kind of profound long lasting shift. I think that just increasingly over the time we would see more global non-English original content on our screens. Next question from Stephen. Is AI threat or an opportunity? Well, hopefully, we've covered that, but the short answer is an opportunity -- and the reason I say that is because in our very specialist market, for the client's client that we work for and the content that they are producing, it's necessary to do things to a very high standard and to create outputs that are authentic and resonate with target audiences in a way that really requires human intervention, that mostly say that AI can't play a part, indeed we think it will play a part, but not to displace traditional passes, but actually to support them and potentially enhance them. So we don't see it as a threat. We don't see new entrants with these kind of technologies as fundamentally threatening our proposition in our markets. Next question is from Freddie. Are you getting material cash flow assistance from the not -- in consumable cash pile, given the direction of interest rates?

I think what that means is our money on deposits. And the simple answer that is -- it is, as I say, the whole lot of the fund money is on deposits. I think in the U.S., we get a rate of 2.5% to 3% on instant access, which is what it's on. So we are getting some money, but obviously, it's only $15 million at the end of the pleasant day. It's not going to offset our OpEx expenditure. But yes, thank -- we're getting something.

Another question from Simon. Are you going to keep hold of the Japanese placing money and play safe until the medium to long term has arrived?

Well as I would say, we expect this hiatus to end in the not-too-distant future. I'm not quite sure you'd be by medium to long term. Obviously, with regard medium to long term, we're talking 3 to 5 years. I don't think this market is going to be closed or semi-closed or anywhere near the period of time. But I think the real question you're asking is, until this uncertainty ends, will you close the Japanese deal? And the answer is no.

Another question from Simon. Why haven't you been able to grow the business much beyond Disney. A few years ago, I thought you were starting to do so, but this has not really been the case. This is a big vulnerability? Okay. So I guess what I would say in response to that is that the -- there's clearly been a big effort by major media companies in the U.S. to launch their own direct-to-consumer services. What Disney chose to do was launch in the U.S. and very quickly follow with an international rollout. We were selected by Disney at the very beginning of that process as 1 of 3 end-to-end vendors. And it's the consequence of which we have [ processing ] amount to work for that client over the period. There are 3 other major direct-to-consumer propositions that have launched in the U.S., but are yet to really push ahead with a major international rollout other than perhaps in English-speaking countries. And those are Peacock from NBC Universal, which is part of Comcast, MAX from Warner Bros Discovery and Paramount plus from Paramount Global. So we signed up one of those three. We haven't disclosed which one we signed up one of the three earlier in the year. That company, we have now deployed ZOOstudio within that organization. And we understand that organization tends to go ahead with an international rollout of their service, but has been -- that has been delayed by the hiatus that we've spent quite a bit of time covering off in this call. The other 2 companies have not yet have moved forward with the international rollout either. They are in the process of selecting vendors we dialogue with both of them. So we believe that we will see significant revenue diversification as a consequence of being part of the [ vendor pool ] for these major players as they press ahead with the international rollouts for their streaming services. Another question from Simon, what is the medium to long term? I guess -- well, we've said that a few times here, I suppose. I mean, we're thinking in the short term, there's a few months. So the medium term is many more months to up to a small number of years -- and then long term is several years.

And that's probably our it's our attention.

A question from David. How do you view the risk of the large customer concentration? Well, we view it as something that strategically is a high priority to diversify -- but because of the dynamics in the market and the fact that the other bigger players essentially held back on their international rollouts, and we now think that they are poised to move ahead in the coming months. That has sort of given -- that's accentuated that concentration situation. So it is very much our intention to diversify our revenue risk, and we believe that we can be successful in doing that. Another question from Charles. Is there any evidence of increasing spending on back-catalog yet? There are a few questions in there, so I'll take that one first. If your question is have we received orders for -- significant orders for process back catalogs recently. The answer is no. But we know that our customers are exploring that. And in fact, in a recent quarterly revolve from one of the majors they talked about their back catalog and how this is a source of [ grain ] resources of content that can be migrated on to streaming. Partly in response to the hiatus caused by the strikes in Hollywood. Next part of Charles' question is why are you confident that spend will increase before the end of the year? It's unlikely that once cost-cutting starts, it doesn't bounce back after 6 months. Well, I guess we are working a little bit on institution and on what we learned from just keeping close to our customers and talking with them and hearing what they have to say, what their expectations are. At the moment, the real thing is the strikes. And of course, presumably no one today knows exactly when that situation will be resolved. I think both sides have set out where things having need to move, and there's not been a meeting of minds yet. But as Phil says, you're talking about the likelihoods of mostly freelance individuals who need to earn a living. And I think that just the practicalities of their situation, combined with the fact that the studios need to produce new content will lead to a resolution of this situation before too long. I don't think it's going to go on for months and months. Our expectation is that it will reach some sensible resolution soonish. So to say that we're confident of that is not quite capturing our feeling of it. I think we are -- logically, we feel that it is sensible to assume that, that will be the case. And -- and this cost cutting to be happening in our customers has been happening over a period of several months now. I mean, it is -- there is still ongoing efforts there. But we think that once those until organizations then have stabilized, that things could actually pick up very quickly. Okay. One for the question from Simon. Is the Japanese deal made in yen, which is currently a very cheap currency, which occurred quite a lot is that venture?

No, it's in U.S. dollars.

It's the easiest question to answer. Our supply questions has just dried up. If you have any more questions, please fire them now. Otherwise all covered today. Okay. I think that's all. Thank you so much for listening. I appreciate your time, and hopefully, you'll join us next time. Thank you.

Good evening. Bye.