Video delivery infrastructure provider ATEME announced third quarter 2018 revenue of €15.1 million, an increase of 36.6% versus the third quarter of 2017.  Highlighting the Q3 2018 year-over-year growth was a more than tripling of revenue in the Asia Pacific region in the quarter.

The strong Q3 2018 builds on the first six months of 2018 when revenue grew 20% on a year-over-year basis.  Driving ATEME’s revenue growth in 2018 has been the North American geography.  The USA / Canada region has experienced 52% year-over-year growth in the first nine months of 2018.

The first quarter of 2018 remains the lone, temporary blemish for ATEME since its IPO.  Other than Q1 2018, year-over-year growth has been uninterrupted.  The continual growth is illustrated in the below slide from ATEME’s investor presentation.

First Nine Month 2018 Revenue by Geography:

• Revenues for the EMEA region during the first nine months of 2018 were €12.6 million, a 8% increase over 9M 2017. As a percentage of total sales, EMEA was 32.8% of revenue during 9M 2018, which is down from a contribution percentage of 36.5% during 9M 2017.
• The USA / Canada region contributed revenue of €15.4 million, a 52% rise over the year-earlier period. USA / Canada was 40% percent of total sales in the year-to-date period versus 31.5% during 9M 2017.
• Latin America was responsible for €4.5 million of revenue during the first nine months, a decline of 26% versus 9M 2017. For 9M 2017, Latin America accounted for 11.6% of total sales, compared to 18.7% during 9M 2017.
• Asia Pacific accounted for €5.9 million of revenue, an increase of 41% versus the first nine months of 2017. The Asia Pacific region contributed 15.5% of total sales during 9M 2018, versus 13.1% during 9M 2017.

Management continues to attribute the 2018 year-over-year declines in Latin America to the strength of the precedent comparable period.  As noted above, Asia Pacific had an especially strong Q3 result.  The year-over-year growth in Q3 was 270% in the Asia Pacific region.

Financial Margins in 2018

Management indicated sales in the third quarter benefited from a more favorable product mix than the first half.  The first half of 2018 had weaker operating margins because of a larger percentage of hardware components.  This resulted in a drop of gross margin to 45% in 1H 2018, substantially lower than the 60% gross margins in 1H 2017.

Also adding to the net loss of €3.3 million in the 1H 2018 was a noticeable increase in operating expenses of 20% compared to the 1H 2017.  These are, however, investments in the service of growth.  Headcount, for example, has grown to 260 at the end of the third quarter from 220 at the start of the year.

ATEME’s management has communicated a 20% growth expectations for the next three years.

Business Outlook:

Commenting on the results, ATEME President Michel Artieres stated, “The first nine months of 2018 have been very positive in establishing ATEME’s reputation as a supplier to the world’s largest media and video distribution platforms. This is translating into a fast-growing volume of identified future revenues streams. This potential business is more concentrated on fewer and larger deals, which should contribute to creating a higher portion of recurring and predictable revenues over the longer term.”

© Devoncroft Partners 2009 – 2018. All Rights Reserved.