Vista’s Group’s outlook: Barbenheimer boom vs Hollywood strike fallout

The "Barbenheimer" boom saw July box office receipts top pre-Covid levels for the first time since the pandemic. But Vista also faces downstream effects from the Hollywood writers and actors strike. Photos / Getty, AP

Vista Group still says it’ll be back in the black next year.

But what looked like a guaranteed Hollywood ending, as the cinema industry finally put Covid behind it, is now a little less certain.

A plot twist, in the form of the writers’ and actors’ strike, is a “potential headwind”, Vista said this morning.

Shares were down 12.3 per cent to $1.64 in early afternoon trading as the stock gave up a chunk of its recent gains.

The Auckland-based firm, which dominates the global market for software for running movie theatres and marketing their wares, narrowed its first-half net loss to $8.7 million from the year-ago $17.8m.

Revenue rose 12 per cent to $69.7m for the six months to June 30.

It guided to full-year revenue of $142-$147m and reiterated it is on track to be free cashflow positive by the fourth quarter of FY2024. No earnings guidance was given.

Even casual observers will know about the detonation that hit on July 21, as both Barbie and Oppenheimer opened on the same day, and a PR at movie chain AMC penned a release noting that 20,000 people had bought a ticket to both - kicking off the “Barbenheimer” phenomenon that has seen the two films generate box office receipts of US$2.2 billion ($3.7b) and counting.

“Outside of the first half [which closed June 30], you can’t escape the fever of the Barbenheimer opening weekend and the subsequent successes. For our clients, the last month has been nothing short of phenomenal,” new Vista chief executive Stuart Dickinson told analysts on a conference call.

The Hollywood actor and writer strike "could not have come at a more inopportune time for a recovering industry", Vista Group CEO Stuart Dickinson says.

“Barbie in particular brought back infrequent moviegoers who had not seen a film all year,” Dickinson said.

That helped drive the US domestic box office to 105 per cent of pre-Covid levels.

CFO Matt Cawte told analysts receivables were down. With finances normalising and stabilising, it would be the last period that incorporated pandemic accounting.

He said a restructuring to streamline the company - including a reduction in staff and a streamlined structure - was on track and would deliver cost savings in FY2024. Dickinson later told the Herald the total headcount was now around 720 (as the pandemic hit, Vista had around 840 staff) but that the key motivation was to more efficiently integrate the various business units, some of which had been acquisitions. Ridgewell said the restructure should improve margins, which he said were a little softer than expected in the first half.

But then of course, there’s that plot twist.

“What could not have come at a more inopportune time for a recovering industry has been the writers’ and actors’ strikes. This additional uncertainty, particularly for short-term uncertainly, particularly for TV and streaming releases, does impact theatrical releases because of the lack of actors available to promote new openings,” Dickinson said.

On the analyst call, UBS’s Phil Campbell noted that Sony pushing back releases could have a US$300m impact on the US box office alone.

“While we are not tied directly to box office success, our clients are,” Dickinson said.

“There have been some changes to move release schedules so far - and to be fair, there are many reasons for this, but it does add to the pressure of launching content internationally. Vista Group has limited exposure to box office performance, but for our clients, this presents a more significant pressure. We’re continuing to monitor for any impact later this year and into 2024.”

Craigs Investment Partners head of research Stephen Ridgewell told the Herald after the call: “There may be some impact on box office in the second half but we are yet to see significant deferrals of releases, and the issue may well be resolved prior to the key upcoming box office launches.

“That said, the outcome remains uncertain and it is an issue we continue to monitor.”

Large customer flirts with rival

On the conference call, UBS’s Campbell also flagged that while Vista’s number of direct sites was flat (it added 62 and lost 62) to stay at 4984 at the end of the half, a Latin American cinema operator - the Mexico-based Cinemex - was experimenting with a rival’s product.

Dickinson said he was “very comfortable with Vista’s position” as Cinemex, which has around 300 sites running on the Kiwi firm’s software, trialled an alternative at two.

The CEO later told the Herald the rival software was “on-premise”, while Vista had an ongoing push to move all of its products to the cloud.

“Cloud technology is where all IT is going,” Dickinson said.

Craigs’ Ridgewell said, “It’s still early days for Vista’s cloud transition, with the first major customer going live in the fourth quarter,” but that the shift to the cloud, and the boost to recurring revenue it would bring, was “the key reason to own the shares”.

Dickinson has been in the CEO role for just four months, after replacing longtime chief executive Kimbal Riley, who retired. He came from an executive role with DXC Technology, a multinational IT services provider.

While he played down the Hollywood strike’s potential to undermine the Barbenheimer boost, the newcomer was also philosophical.

“As a relative newcomer to the industry, I’ve learned that both wearing sunglasses and carrying an umbrella is required at all times,” he said.

Vista shares took a hit on Friday after closing at $1.87 on Thursday.

The stock had recently rallied but is still well off its pre-pandemic high of $5.84.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.