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

[Audio Gap] FY '24. [Operator Instructions] Okay. So just a quick introduction for those who are new to the story. I'm Stuart Green, I'm the CEO. I'm a co-founder of the business, I became CEO in 2006. I'm a large shareholder, having invested my own capital in the company over the course of the last 10 plus years.

I'm Phil Bundle, I'm the CFO. I've been with the business now for 5.5 years. Prior to that, I had a number of CFO roles, going back to 1999 with a listed technology businesses.

Okay. So just a very quick thumbnail sketch of ZOO for those who are new to the story. We are a tech-enabled service provider to the entertainment industry. We work for streaming companies and large producers of feature films and TV series, and we take their finished programs, and we do as necessary to get those programs on to streaming services, so that they can be enjoyed by audiences globally. And that involves localization, so subtitling and dubbing is a big part of what we do as well as a whole series of technical services that we provide to make sure that these programs play properly when they go on to a Netflix or a Disney+. And as I say, we're tech-enabled, it's actually the technology that is a key differentiator for the ZOO business. So the [indiscernible] recovering here, the first half of our FY '24 has obviously been a period with -- where we've seen in the industry some significant disruption. We've had, what you might think of actually as an industry-wide, a black swan event. We -- earlier in the year, we saw our customers refocusing on their business from the perspective of reaching profitability sooner. So large streaming providers have been really looking at how they transition more quickly to this new world of streaming. But the events -- and as a consequence of that, we saw some slowdown in work but then that's been overshadowed by the Hollywood strikes that have been taking place over several months that brought the whole industry to a halt. But fortunately, the strikes -- the loss of the strikes came to an end at the beginning of this month and the recovery of the industry has now begun and obviously, will take place over a number of months. And the key thing, I think, for everyone to remember, of course, is that the music -- sorry, the media entertainment industry is as viable, is as important on a global basis as ever, and this industry will normalize. It has gone through this extraordinary period of disruption but the industry will get back to where it was before. And despite the difficulties that the industry has faced and that we as a business have faced over this period, we expect to emerge stronger when we come out of the other side. So I'll just say a few things just to give a little bit more detail on the strikes, what's happened in our industry, the disruption we've seen and how we expect things to play out from here. As I mentioned, this disruption that we saw begin in February when our customers, all the major studios and streaming providers, began strategic reviews of their businesses. And those are prompted by the shifting economics of the media entertainment industry more broadly. And what we saw -- what they have been seeing is a decline in the traditional sources of revenue, which come largely from network television. We've seen, subsequent to that, the first joint strike of writers and actors in over 60 years. Those began in May and lasted 6 months, and during that period, productions came to a halt. And that's not just a production in the U.S., even though these are U.S. unions but productions in many companies -- in many countries, other countries too. Obviously, that's a pretty major impact on those productions and the volumes coming out of the industry, and that has had a knock-on effect on the ZOO business, since most of our work relates to that kind of content. So the strikes ended in November. As I said, the industry is going to return to normal. And that recovery has begun but it will take a little while for projects to start up again. We think probably it will be January, before most of those projects are back in full swing. So our expectation is that the ZOO business will rebuild throughout the second half of our year, and it will accelerate as we move into our FY '25. So now I'll ask Phil to just take you through the key points of our first half results of FY '24.

Thank you, Stuart. So as Stuart's already mentioned, unprecedented types for the industry, and that's reflected in our revenues. They dropped by 58% in the half to $21.4 million. That really is a result of very few productions, having a huge hit on our dubbing service, and with no international launches because there's been no content, also having a significant impact on our Metadata service as well. We weren't aware of how long these strikes would last. The Board took the decision that we would maintain capacity, because our customers said that once the strike ended, that we would become a more strategic partner with 3 or 4 of them, and then we would need the capacity to be able to handle the work they were going to give to us. And that is sort of reflected in the loss in the period of $7.1 million compared to the profit in the period last year. So -- but from a cash position, the business has remained very strong. We went into the half with $12 million. We obviously did the fund raise in April, May, which was another $50 million. And for those with the calculator, you can work out that we spent about $10 million of cash. Half of that was on the operating losses but the other half, we maintained our strategic intent to grow the business. So spending $1.4 million on CapEx, spending another $1.5 million in R&D and expanding our international network with strategic investments in Spain and in Korea of just over $1.1 million.

Okay. Thanks, Phil. So operationally then, just a few key things to pick out that come to the period in the review. Just to clarify that the service lines are 2 key areas, our localization of media services, and they've both been impacted in pretty much the same way through the period. The work we have been doing has consisted -- are the combination of some titles that were completed before the strikes began. And in fact, customers have sort of slow roll those out into the market. So they've had a -- whilst the strikes has been ongoing, they've been able to provide new in titles on an ongoing basis, albeit not with the same frequency as they would have done previously. We've also worked on some international products as well. We have not seen much work relating to that catalogs. And clearly, that was always an option for our customers to take some of their older content and move it on to the streaming services. But we've not seen any evidence of that yet but there is still the potential that, that may happen in the future. We've continued with international investments, and these are key to aligning the ZOO business with the -- with what's important to our customers. So in the period, we've made investments in Korea, in Turkey, in Spain and in Chennai, in Southern India. Overall, we've invested about $4.8 million in the half, through a combination of CapEx, R&D and in these investments in our partners. ZOOstudio, which is a very specialized ERP-type system that we provide to our customers, remains an important differentiator for the ZOO business. We continue to do work to embed that more broadly and more deeply within the operations of our major customers over the period. And then it's worth noting that as a provider of these services to the customers that we serve, quality is all important. It's the most important thing for our customers to ensure that the quality of these localized materials is just as good as the quality of the original program itself. And in this regard, we continue to deliver fantastic quality to our customers, despite all this disruption. And one point I can give you on that is that we were appointed the Netflix preferred fulfillment partner of the year for the APAC region, which is all attributed to the quality of services that we've delivered to that customer.

Right. So looking forward, it became quite clear by the end of August that the strikes were not going to end in the near future. And obviously, the cash burn that we were having to absorb was getting too much. So we had a fundamental review of our business, and we started to take out about $800,000 per month of fixed costs. That's a combination of staff in the production department and also staff who are in the SG&A area of the business. With the objective of making sure that our breakeven point was reduced significantly from where it was. So now our EBITDA breakeven is around $4.4 million of revenues, and our cash breakeven is about $4.8 million. In addition to looking at operating activities, we've also looked very closely at our investing activities. And just before I go through this bullet, just to say that when we raised the money in April, May for the Japan acquisition, we were obviously not burning cash at that point. We're still talking to the vendor. We're still looking at acquiring that business. They understand that we are burning cash still at the moment. They're being very patient. It is a strategic acquisition for us, so our plan is to make sure that we are back on track, generating cash, and then we'll look to close that transaction, which probably will be in the spring of next year. Meanwhile, we've reduced our R&D spend by about 15% to $300,000 a month. Our CapEx, which was reasonably high in the first half of the year, was to fit out the Chennai office. We see that's a big opportunity for us to reduce our costs -- unit costs, by moving more and more work from the U.K. and the U.S. to India. That's now complete. So our CapEx in the second half of the year will be reduced significantly. And our target is to make sure that our cash burn is less than $1 million by January, and that we will get to EBITDA breakeven and reduce our cash burn to nil by April. That means that we'll leave the financial year with between $6 million and $7 million in the bank. And for those who don't know us, we have no debt. So we will be still in a very strong position to capitalize on the opportunities coming next year.

Thanks, Phil. I'll just spend just a few more minutes covering off sort of an update on the market, and again, how we think things will play out for us from here. So obviously, these strikes and the strategic reviews of our customers have created an unprecedented period of disruption but obviously, someone said, never let a crisis go to waste. So I just reassure you that we've been using this time constructively. We've been focusing on organizational design and how we -- where we place resources across our now global network of operations. We've been developing further our international operations. We've talked a little bit about that already. We've been taking this opportunity to cross-train staff across different service lines, and also importantly, to develop a whole series of internal training courses to deal with specifically the services that we provide to our customers. So these are all equipping us well so that as the work returns, we will be able to address that work in a more efficient way. Looking at our customers, as I've said, they've gone through strategic reviews and they've implemented a whole range of changes. So let me just take you through some of those changes and the impact that we expect they will have on the ZOO business. Firstly, they've reduced the headcount, so they have smaller internal teams. One of the consequences of that then, of course, is that it's not really practical for them to manage relationships with a large number of third-party vendors. So what we've seen them all do is to contract their vendor panels. The -- those partners like to that they work with on certain service lines. So there's one customer, for example, that has told us that they -- before this period, they had around 15 vendors for these services, and they've reduced that to 5. ZOO is one of those that smaller number. And in the -- as the consequence of making that change into choosing to work with a small number of vendors, out of necessity perhaps, that inevitably leads those organizations when choosing which vendors to work with, to select those that have an end-to-end capability. And what I mean by that is that companies like ZOO that can do all of the services that are needed to take a finished product and deliver it on multiple streaming services in any language. So that embraces the media services we deliver, the subtitling and the dubbing. So there are very few companies in our industry that have that true -- the true breadth of that capability, to serve those customers who are now looking to work with a small number of vendors and therefore, need that end-to-end type of service. So clearly, ZOO is great advantage by that. And those players who can't offer that full end-to-end service will increasingly find it challenging in this market. We've also seen a resurgence of the licensing of content. So through the -- through streaming, the streaming period to date, large media companies have chosen rather than to license content out to other distributors that they've always did in the past, instead to retain the right to that content and to deliver exclusively on their own platform, in order to give a point of difference. But in making that decision, they're obviously foregoing the opportunities to generate licensing income through deals that they would have done in the past. And therefore, we've seen many of these companies to change their approach and to start to license materials. So when they do that, there is work that needs to be done to adapt the materials that they have, so that they will work on other streaming services or on TV networks for that matter. So this actually creates the introduction of more licensing, creates greater demand for the services that we provide. And in fact, in our Q3, which is where we are now, we're actually seeing a good uplift in demand for services that are related to licensing deals that are now starting to come through. So we think there will be more of that in the future. Advertising as a source of revenue is -- has emerged now, because of the last year or so, as an important component of the streaming services, operations and business models. So -- but Netflix and Disney have introduced and supported tiers to their offerings, their subscription video-on-demand offerings, which means that, in fact, all of the leading streaming services offering some form and advertising as part as a component of their proposition. In addition, many of these companies producers are using fast channels, which stands for free ad-supported streaming television as an incremental way of generating further routes to market and then further revenues off the back of the revenue share on advertising. So across the board, these changes create an advantageous situation for ZOO. And because of these changes, we expect that as we come through this period of industry recovery, ZOO will emerge competitively stronger than when we entered the period. Obviously, what sets ZOO apart in a market and that is key to our recovery and growth beyond that is our focus on tech enablement, which delivers us and our customers' efficiency, scalability and accuracy of the services that we provide. So just to cover off and what -- where we're going to be focusing our efforts in the second half of the year, well, as Phil has explained, we've reduced our cost base now. And those changes that we've made ran through until November. So we'll still see the benefits of those cost reductions in our second half. And our focus is on achieving breakeven in our final quarter. So that's where we're heading in the short term, and obviously looking to growth beyond that as the industry really picks up again. Through this period of disruption, we've been staying very close to our customers and continuous dialogue with them. We haven't received from them yet, any firm commitments on work volumes. But that's because they're still working through their schedules as they get productions back running again but all the indications are that we've received anecdotally that we can expect a stronger fourth quarter. There are some global streaming services, which have launched in the U.S. but have not yet reached international audiences at scale. And our understanding is that the major services will push forward with those in 2024. We are in dialogue with those companies, and we expect to be part of the solution for preparing that content for global distribution. We're continuing to deploy ZOOstudio, of course, and have discussions underway with other customers about further installation of that platform, which is clearly a strategic differentiator for ZOO. In Chennai, as we've mentioned, we established a facility there and we're going to be building out the capacity in that facility for Indian language services. So we see, there are many languages spoken in India and Chennai is a great location for us to operate the Southern Indian languages. Also, we'll be building our teams there to deliver media services, not just for customers and for servicing in the region but in other parts of the world, too. And lastly, we will be continuing to make strategic investments in some key locations to establish hubs, particularly to provide dubbing capability and capacity, and also to provide an opportunity for regional ingest. So being close to where content is being produced so that we can digitize, get that into our systems and process. And this is all to do with aligning the ZOO business with the aspirations of our customers. So in summary then, and just as a quick outlook. Obviously, it has been a very challenging period this first half but the strike now has come to an end and the productions in Hollywood in the U.K. and elsewhere actually are now resuming, and we can expect them to be continuing to ramp up over the coming months. We're expecting progressively stronger performance for ZOO as we go into -- as we work away through our current third quarter but also into our fourth quarter, but with strong growth expected to start to really come through and traction to kick in from the beginning of our FY '25. We expect that we will continue to work as a valued partner to our major clients, all of whom are continuing to work with us and therefore, we will be a beneficiary as production resumes, and we're in a great position to be able to pick up that work. And then finally, as I said, the Board of ZOO is focused on achieving EBITDA breakeven in our final quarter and returning to profitable growth in our FY '25. Thank you very much.

So what I'd like to now do is turn to the questions, which have been coming in as we've been speaking. As I say, you can continue to ask questions as we go through here, and we'll get to as many as we can. So the first one on my screen is when you discuss EBITDA and cash breakeven being $4.4 million and $4.8 million, respectively, over what revenue period is this? This is a per month revenue number?

Yes. That's correct.

So over what revenue period?

So what we're saying is that's just -- it is 1 month. So when we get to that number, we have not disclosed. And given the visibility on our orders, it would be impossible for me to say what month we will hit the $4.4 million or the $4.8 million of revenue. Obviously, we're hoping that's going to happen in our Q4, which is between January and March next year.

Thanks, Phil. So next question for David is, are you widening your customer base, as I understand it has been concentrated -- sorry so concentrated on a few customers. So that is true. We have had significant revenue concentration. And that is partly because our largest customer is one that decided to go ahead and roll out a streaming service globally in what was a very short period of time, and that creates enormous amount of work that we were very fortunate to win. But at that same time, other major U.S. media companies who had launched streaming services in North America, decided to wait before they would proceed with their global rollout. So what in fact for them and was that they were actually spending less on these services, at a time when our major customers were spending a lot on these services. So that had a created sort of [ perfect ] storm and we move to a situation where we had a high concentration with one particular account. However, things have been improved in our first half, and we're now seeing other players getting ready to push ahead with their global rollout. So we think in calendar '25, I think through that period, we'll see more activity on global streaming players launching in other countries, and we expect to be a part of providing that solution. And that will yield a great contribution from other customers and a greater diversification of our revenue streams. Okay. The next question from Oliver. You mentioned you're looking into India more. How else are you expanding into the markets? I'll take -- we'll take that first -- the first part of that question. There's the further part, which I'll come second so what I should clarify is that at the moment, the ZOO's major customers are U.S. -- in the main U.S. media companies, that are creating and distributing content on a global basis. So for ZOO, what that means is that we have a customer in North America, and that customer is commissioning us to create different language versions in up to 80 different languages. So for us, when -- so your question, how else are you expanding into other markets. For us, market expansion, the reason that we have established a presence in India and Korea and Spain so on, is not primarily to win business from customers in those regions, although, of course, we will seek to do that as well. The primary reason for doing that is to have resources with our skill sets in locations where -- to assist us in delivering the language adaptations of these programs into the language spoken in these different countries. So India actually serves 2 -- actually, it's 2 different things for us. One, having a base in India, firstly in Mumbai, enables us to actually deliver services for our customers in the languages spoken in the Indian subcontinent, and having a second operation in Chennai puts us closer to the Southern Indian languages, which just puts us in a stronger place to be able to deliver services across all of the languages that are being ordered by our customers for India. But what also we had there is 2 facilities in 2 entertainment centers within India, from which we can actually build capacity to fulfill services for our global customers and global operations. So in other countries, such as, for example, what we've been doing in Turkey and in Spain, what we're doing now is actually making investments in partners to give us the capabilities we need, the experience and so on, and in the languages of those countries, which are, of course, are important. And then the second part of Oliver's question was. American strikes may happen again, how will you stop this impacting as much as it has? Well, to be honest, if this were to happen again, then I think we, along with the rest of the entertainment industry, would be impacted in just the same way. And it's -- the only thing that we could do will be to diversify into completely other markets, which we feel is something that in due course we may look at but it's premature at the moment. So the -- it's estimated that the impact on the economy of the state California of the strike, it's been about $6 billion and 45,000 people have been out of work as a result. So clearly, this is something that's not specific to ZOO, this is not even specific to our market segment and our competitors, it's the entire media and entertainment industry that's been affected. So I think the [ comfort ] we can perhaps get there is that as part of the negotiations with the studios and the unions have gone through in arriving at the settlements that they have, what they've agreed to do -- and this is particularly in light of the fast pace at which AI technology is developing. What they've agreed to do is to actually meet and discuss every 6 months. So the contracts will be up for renewal again in 3 years' time, but their intention is to meet every 6 months and to obviously anticipate changes. So that when the time comes for that next renegotiation they will at least have had the opportunity to debate, discuss, to get on the table, concerns, issues so that, hopefully, there won't be a repeat of this extraordinary situation, which has not happened for 60-plus years. Yes, there's -- I should say, there's something about the way that the system works, so the new questions appear at the top and those are the ones I see first. So I'm going to try and get to the early questions that I posed so they are not disadvantaged. This is from Deepika. Did you lose any major accounts in '23 and why? Has it in vendor consolidation? Also, what's the approximate number of customers that average life spend with ZOO? Great questions. So we did not lose any major accounts in '23. There is a KPI that we publish, which is a retained sales KPI. So retained sales for this period, the first half of the year, is 99.5%. So what that tells you is our customers are delighted with what we do for them, and they keep coming back. So our customer turnover is negligible. So, if the customers will to start with us, they tend to continue with us. Question from William. You said you expect ZOO to more stronger. Can you please give some evidence supporting this view? Hopefully, I covered that off in the presentation. But in summary, the scaling back of internal resources and costs within our studios -- our studio customers has caused them to inevitably focus on working with a smaller number of vendors. If you're only working with a small number of vendors, you need to work with those who can cover all the services. We think there are only 5 companies in the world that can do that, and ZOO is one of them. And therefore, we think that they will -- what will be happening here is there'll be greater concentration on that smaller number of very capable vendors, and a shift to that end-to-end model of engagement that I described previously. Next one from Deepika. Can you please remind us of what price the money was raised earlier this year? And now you're planning to raise funds again or put all acquisition planning on hold 'til you regain profitability?

So the fund raise was done at GBP 1.60. Any large acquisition is on hold until we get to cash neutral and are generating operating cash again. However, some very small infills, we've just completed one in Italy, where the consideration is less than $1 million, where we feel it's strategically important, we are closing those investments.

Another question from Deepika. Can you provide an approximate split of revenues? And so including own versus freelance, software versus services by region and a view of booked revenues for FY '23, '24.

So we don't break out our revenue between own and freelancer, because every project we do involves work from ZOO people like project managers, QA experts, English scripts writers as well as the freelancers. So unfortunately, in the first part of your question, we just don't break the revenue out that way because it isn't built that way. It's all ZOO revenue. Software versus services is in the statement. So in the half year, we did $20.5 million of service work, and we did $900,000 of software work. And we don't break out by region a view of book revenue. I'm afraid so comments [indiscernible].

Okay. Thanks, Phil. Jackson asks, do you expect revenues to increase sequentially month-to-month, each month of FY '25?

We don't know yet. But what we do know is that we expect the industry to grow, actually go back to business as usual. And because of the contract wins we made earlier in the year, with 1 or 2 of the big Hollywood studios, we would expect that our revenues will grow on a quarter-quarter basis next year.

Thank you. David asks, how big a risk or opportunity is AI to our business? Okay? So that's quite a good question. I could talk for quite a long time on that topic. And I'm sure it's -- well, we know that it is a concern amongst our shareholders and investors that is AI going to come and steal our lunch? Is our studio is going to just use a bit of software to do their dubbing and their subtitling? The answer to that is we absolutely believe that is not the case. Although superficially, I think some of the AI developments are quite phenomenal and it's amazing to see some of the outputs. But what we -- it's important to really think about what we're doing with here. So we're working with content that our customers spend millions, in some cases, hundreds of millions of dollars producing. And in order to get a return on the investment that they've made in creating that content, they need to get it in front of as many people as possible. And of course, the most cost-effective way to do that is to adapt it into different languages so that you can deliver it to people in different countries, who speak different languages and therefore, can enjoy it. When you do that, we -- I think I suspect that many of the people on this call are based in the U.K. or even based in the U.S. And I think in those 2 countries, we're very small in the -- historically, most of the contents that we tend to watch is in English. So we don't necessarily appreciate the importance of the quality of a different language adaptation of [indiscernible]. And if you look and watch a foreign language program, subtitle or [indiscernible], you may well have had opinions about whether you thought the translations were not particularly well. The fact is that for our customers, it's important the quality of the localized version of a show in a particular country is just as good, is done to just the same standard as the program itself. Because clearly, it would be -- it will be very subsiding for them to try and do the, say, subtitling of the cheap to deliver subtitles into a country that are inferior, and the audience there just say, oh, this is terrible. This subtitle is terrible. I'm not going to -- I don't recommend you watch this program. So certainly, there have been instances, historically, of companies spending a lot of money making a movie, for example, releasing into a particular country and just doing a poor job at the subtitling and the dubbing, and it being slated by critics and being unsuccessful in those countries. So what that tells you is that producing subtitles to a very high standard is really important to our customers, and that's certainly the experience that we have with them. And therefore, whilst, of course, if they can get those services at a lower cost, they'll be interested to explore that. They won't want to do that at the cost of quality. And this technology, although it looks great, and I'm sure you can find lots of examples of both subtitling and dubbing done through AI online, what I can tell you is that those technologies at the moment certainly are not at the point where they could -- they're in sight to being able to displace human nature [indiscernible]. However, we recognize that these technologies have a part to play, and we are indeed actively involved in AI and happy for some years. There are instances where we do use it. But our approach is to do it in a way that essentially adds value, not just to the ZOO business but to our customers and to our partners as well. So our intention is not to displace human resources but is to make those specialists, much more productive, much more able to get this right at time to produce great quality and so on. So the short answer to the question is that we see AI as an opportunity. And I guess my last words on this are that there are a lot of players in our sector, but ZOO is by far the most technologically progressive. And indeed, this company started out as a tech company. So we are the innovator in the sector, and we are well placed to be able to explore and understand these technologies, how the can help, where they can end up and make the right strategic decisions. Jackson asked, are the long-term target is still relevant? So just a quick reminder, a couple of years ago at the Capital Markets Day, we sort of painted a long-term picture of how we saw us getting to a $400 million revenue number and a [ $200 million ] EBIT number. So Phil, maybe you just want to cover off?

Well, the very short answer is, yes, nothing has fundamentally changed in the last 6 months, to the industry or to the way that our customers intend to procure these services. They are all looking to rationalize their vendors. They're all looking to move to 4 or 5 end-to-end vendors such as ZOO. And as the ones with the best quality record and with the best technology to deliver those services, we remain in a very strong position. We're still well capitalized even after the losses in this half. So it may not happen quite as quickly as was portrayed 2 years ago, but I think the way to look at it is that nothing has fundamentally changed. Hollywood studios will continue to pump out billions of dollars' worth of content, which to get their money back, will have to be localized across the globe, and we are here -- there to service that need.

Thank you. I have 2 questions from Nicholas. The first one is, are you seeing any pushback on pricing from clients, given the AI narrative that has emerged in the past year? Phil, do you want to give the general pricing first?

Yes. No. Our customers are still very much focused on quality. Yes, pricing is sharp but they want a level playing field. So the way that they look at it is that it has to be a price where the big 4 or 5 companies can deliver high-quality assets in a very quick time and at short notice. So the transparency of pricing is very clear. They are not trying to reduce the costs significantly. Let's not forget the localization is about 3% of the budget of a film or a TV show. They really are desperate to save money, you've got the other 97% to go at. So we are not seeing any pushback on pricing currently.

Thanks. And the second part of Nicholas' question is, it's an AI question again but just a slightly different perspective. What are the implications that you see from the AI clauses in the writers and actors' strike agreements? So for the benefit those who haven't followed this too closely, I'm sure you know that there have been some strikes in Hollywood of writers and actors to take industrial action. And the issues that they have had, firstly [indiscernible] compensation, but secondly, around AI, because under the terms of the previous agreements -- the contracts, it was actually legally permissible for a studio to hire an actor for a day to film them, to record their voice. And then the intellectual property rights in those images and recordings would transfer to the production company or film studio who will be free to use that in whatever they chose. So clearly, one way in which you choose to do that today is to train an AI system. And therefore, in theory, from an actor coming to a studio for a day, the production company could have the right to be able to use that actors likeness and voice, as much as they like, in perpetuity, without having to compensate that actor in anyway at all. So what I described here, it's actually a what would have been allowable under the old contract. And of course, given certainly the pace at which AI is developing and the new technologies that emerge over the time frame of that agreement, the unions have come forward and say, well, obviously, that's not fair. That's not right, and we need to agree some way in which the technological development can progress and can be useful in our industry, but without creating an existential threat to our professions. So in the agreements that they have reached, they have incorporated what [indiscernible] of it was guardrails, essentially, constraints and guidance on the way in which AI can be used. And when it's used, how the talent is credited, is compensated? And what say the talent and the unions have in how that can play out. So that's -- so essentially, it's like there's some regulation that's now coming into play within the industry. That means that, that possibility that I outlined that could have taken place in the old agreement, can't take place of the new. If a production company does want to hire an actor to capture their likeness or voice, then the actor has to know that that's their intention, and they have to come to some agreements around it. So we think that's a great thing. It's -- it provides a framework and an understanding about what's fair and reasonable within this sector. And maybe just sort of last thing to say on AI is that I think there are some really quite compelling use cases for some of the technologies that we're talking about here but they are in other vertical markets. So things like -- if you imagine things like corporate videos or in advertising or in news and sports, a whole range of areas where the kind of technologies that are emerging now could work actually pretty well. But for entertainment, where the authenticity of characterization of portrayal of a real of a person in a drama or something like that is all important, then it's -- at the moment, this technology doesn't really come close to being able to come up with a comprehensive solution for that. And for the foreseeable future, therefore, we expect that humans will continue to play a leading part in that. The question from Deepika. So the question is, what's your competitive edge? A freelance network, software, price, and is there a risk of delivering from India or other locations in terms of quality? So I guess 2 questions there. So well, the competitive -- so fundamentally, we are a service provider but one that is differentiated through the technology that we have. As a service provider, particularly in our sector and for the customers we're serving, quality is all important. So we don't even get to play unless we can deliver an outstanding quality in service. So quality is a given. But the way in which we can deliver that quality and the way in which we operate is differentiated by the technology that we have that makes it very efficient, very scalable. It brings lots of benefits to our customers. So for example, we can -- when it comes to dubbing and casting voices to different characters, we have access to a much more diverse talent pool to do that, because of the way that we work and the way that we leverage cloud technologies, than a typical traditional player within our industry. So the competitive edge comes from the technology itself, and an important manifestation of that is in the ZOOstudio platform that I mentioned. So that's a very clear differentiator where we've created this system for our customers to use to make them very efficient in the way in which they work and of course, becoming more efficient is very much part of what they're going through at the moment. But by delivering that system to them, we can embed ourselves within their operations in a way that delivers to us strategic value. So those are the key things that sets you apart in the market. And then a question from Aldo. So in an environment where clients are concentrating contracts to few providers and a possible risk of commoditization of the sector in general, what do you see as the biggest competitive advantage for ZOO moving forward, compared to other providers perhaps also able to provide end-to-end service? Well, yes, on that latter point. So as I said, there are -- we think there are about 5 companies in the world that can offer a true end-to-end service in our sector. And we think that those 5 will continue to do very well in this industry. And that will be to the detriment of those other players who are not able to provide that breadth of capability. So in terms of a possible risk of commoditization in the sector, we don't see that. We see that for the media and entertainment specifically, the skills needed to do this work well are very specialized. They're quite niche. Yet this is a big market. If you just look at the spend, the global spend on media localization alone, so that you remember that's part of our business. There are other things we do as well but are not included in the figure I have to tell you. But their global spend is about $3 billion currently. And we believe it was growing until it strikes, and we think it will return to growth in due course. Of that $3 billion, when we think about $1.5 billion is addressable by ZOO. So it's very niche specialized. It's still sizable, and it's high value. I would not describe it as being commoditized. So the biggest competitive advantage then to, let's go to other question, is stems from that technological progressiveness within the ZOO business, the way which we embrace technologies to bring about change, but in a way that is gainful and viable to not only ZOO but to our collaborators like the freelance, linguists and actors that we work with but also with our customers. So a question from David. Clearly, decision-making is easier with the vendor of hindsight but do you regret the raise of $12.5 million as [ $0.20 ] discount to the share price? So well, so -- just again, for those new to the story, just to recap on this. So earlier in the year, we -- as we said, there are a number of locations in the world, a number of territories, countries where we feel we have to have a presence because they are important either as -- in the entertainment industry either as a source of original content. So for example, Turkey is an example of that. All as a destination for content. So Japan actually falls into both camps. There's a lot of original content, which [ anime ] that comes out of Japan exported globally but also Japan is the second biggest market in Southeast Asia that is quite important to our customers. So Japan is a country that we've been seeking to get established presence in. We've been looking for 2, 3 years, and we identified a target business, a partner of ours to acquire in the country. So earlier this year, we raised capital so that we could pay [indiscernible] amount of cash so that we could create cash for that deal. But that came, we closed on that fundraise before strikes had started. So the big disruption taking place in our industry actually didn't -- they get trigger until after we raise that money. But before we had completed on acquisition. So with hindsight, today David's question, actually having that capital, having that cash to strengthen our balance sheet, has given us so much more flexibility and allowed us to operate much more strategically in this period than we would have had to do had we not raise that capital. Now obviously, we didn't raise the capital for this purpose. It's just for us, fortuitous that we've had that capital in order to be able to act as a buffer. And maybe, if we maybe just touch on the Japan acquisition?

Yes. Well, I mentioned a bit earlier but just to confirm that the acquisition is still on. We're still in negotiations with the sellers and we hope that once we get back to generating cash, that deal will close at some point in FY '25 or late calendar '24. So it is a strategic market, and we want to be in it and it's a very good acquisition. So hopefully, we -- it will close next year.

Thanks, Phil. A question from William. You've mentioned big 5 several times, where are you ranked by turnover in the big 5? So if -- I think that's a reference to the end-to-end vendors who operate in the space, and we are the smallest of the 5 currently but obviously have been growing rapidly strikes notwithstanding. Another question from Jackson. Given the $1.5 billion total addressable market you laid out accessible to ZOO, is the right way to think about it over the longer term that there are 5 major companies competing for that $1.5 billion in spend? So over time, if you can win your fair share, that is how you get to $300 million plus a year in revenues.

I would just make 2 points. I mean it's right what you're saying. One is that 1 of those 5 companies is not really playing in the $1.5 billion TAM market. They're playing in a lower end market to us. So they're not really a vendor to Disney and Paramount and others. So really, it's about 4 major companies competing over that $1.5 billion. And the assumption we made 2 years ago was that the market was growing by 7.5% per annum. That might be the assumption that we have to revisit once the businesses get back to normal, and we understand what the longer-term plans are of our customers. So -- but you would expect the market to grow over the long term, even if it's just by inflation. So it's certainly how we get to the $300 million but it also explains how we get to $400 million.

Thank you, Phil. We have just come to the end of our questions, which is quite timely. We're just coming up to the hour. So I'd just like to thank everyone for taking the time to join us on this call. I really appreciate it. I hope this has been helpful to you and hope to see you next time. Thank you.

Thank you.