FinnCap said that ZOO Digital’s (LON:ZOO) recent contract win from a large Hollywood studio diversified the risk from current customer dependence and gave the company further upside, given its track record of cross selling once the logic of its cost saving products is adopted by a studio, as was evident with the recent Blu-Ray and TMS announcements.
Earlier in the month the company announced that a major Hollywood film studio adopted its recently launched automated authoring software for the Blu-Ray disc format, which enables entertainment products to be created more efficiently for multiple languages and territories.
Yesterday, ZOO Digital reported another contract win from a second major Hollywood studio, this time for its media collaboration platform. Zoo said that the film studio, which was not named for contractual purposes, was one of Hollywood's largest studios and the deal represented a very significant development for the company.
“The media collaboration platform, which includes the Media Adaptation Tool for rapid generation of localised data, legal and commercial, speeds up the potential distribution of home entertainment products and is encouraging in its adoption of the platform as opposed to specific products: it will be used across multiple formats including online, printed and optical disc media, across the customers entire home entertainment business,” FinnCap said in its note.
Also this month, the company licensed its highly successful Media Adaptation Tool (MAT) to HudsonYards, the creative pre-media division of privately-held visual communication and marketing services company The CAPS Group, opening up what it called a new and unexpected area of business.
ZOO Digital highlighted that its products are being used increasingly to centralise studio functions and drive efficiencies with each new product providing incremental recurring revenue potential from existing and new customers.
The company undertakes a two-pronged approach to its business, with two distinct business lines. It licenses-out its software, primarily charged with a SaaS (Software as a Service) style per-use structure. Separately, the company has its own production facility, utilising the same propriety software from which it provides a full-service creative and production service.
FinnCap said that ZOO’s preliminary results, which are due to be released late this month, would clarify “the shape of forecasts,” providing more details on “outperformance” highlighted in a trading update released in April.
“...but this is clearly continuing strongly positive momentum for ZOO,” concluded FinnCap.
ZOO reaffirmed in an April trading statement that it would meet market expectations and would end the year with cash balances of some £2 million, which boosted its shares by 72%. The company further added that it continued to strengthen and grow its sales team, and had seen an increase in interest for its products.
Shares in the company added a further 9% in late morning trade today.