Leading the future ZOOdigital.com of media localisation ZOO DIGITAL GROUP PLC Annual report and accounts 2020 1112_ZOO Digital - Annual Report 2020 CMYK S19.indd 1-1 31/07/2020 15:03 LeadingLeadingLeading the the futurethe future future of ofmedia ofmedia media localisation localisation localisation ZOOZOO ZOODIGITAL DIGITAL DIGITAL GROUP GROUP GROUP PLC PLC PLC PagePage 2Page 2 2 AnnualAnnualAnnual report report report and and accounts and accounts accounts 2020 2020 2020 ZOOZOOZOO Digital DigitalDigital is isis a aa leading leadingleading innovatorinnovatorinnovator in inin media mediamedia localisation localisationlocalisation servicesservicesservices and andand technologies. technologies.technologies. UniqueUniqueUnique in in ourin our our approach, approach, approach, we we we combine combine combine a aproprietary aproprietary proprietary cloud-basedcloud-basedcloud-based ecosystem ecosystem ecosystem and and and end-to-end end-to-end end-to-end global global global mediamediamedia services services services to to enableto enable enable Hollywood Hollywood Hollywood studios studios studios and and and internationalinternationalinternational streaming streaming streaming services services services to to deliverto deliver deliver content content content toto audiencesto audiences audiences everywhere. everywhere. everywhere. 1112_ZOO1112_ZOO1112_ZOO Digital Digital - AnnualDigital - Annual -Report Annual Report 2020 Report 2020 CMYK 2020 CMYK S19.indd CMYK S19.indd S19.indd 2-3 2-3 2-3 31/07/202031/07/202031/07/2020 15:03 15:03 15:03 Leading the future of media localisation ZOO DIGITAL GROUP PLC Page 4 Annual report and accounts 2020 Contents Financial KPIs Performance Further ZOOdubs adoption including increased remote 4 Financial KPIs and Operational KPIs and Operational Highlights recording and collaboration 5 Performance Highlights in response to the COVID-19 KPIs ZOO’s Year in Review: 6 ZOO at a Glance pandemic Innovation and 8 Our Market Collaboration 9 Our Customers Revenues 10 Strategy 12 ZOO’s COVID-19 Response: Business as Usual $29.8m 14 Our Investment Case (2019: $28.8m) 16 Chairman’s Statement 17 Strategic Report EBITDA margin* 22 Financial Review 25 Corporate Governance Statement 7.0% 34 Advisers (2019: 1.4%) 35 Directors’ Report 37 Directors’ Remuneration Report 46 Consolidated Statement of Comprehensive Income Operating expenses as a percentage of revenues 47 Consolidated Statement of Financial Position ZOOstudio receives Product of Continued expansion of London the Year award at the National operations; including new 48 Company Statement of Financial Position 36% Association of Broadcasters cloud dubbing booths and 49 Consolidated Statement of Changes in Equity (2019: 37%) (NAB) Show 2019 appointment of new Head of 50 Company Statement of Changes in Equity Dubbing and Media Services, 51 Consolidated Statement of Cash Flows ex-Disney Katie Young 52 Company Statement of Cash Flows Number of freelancers† ZOO awarded Broadcast Tech Innovation Award 2019 for 53 Notes to the Financial Statements ‘Excellence in Localisation Strategic end-to-end 85 Group Directory 7,184 For a Global TV Project’ vendor and technology (2019: 6,556) provider for newly launched global direct-to-consumer streaming service Retained sales‡ 97% (2019: 88%) * Adjusted for share-based payments; stated FY20 figure reflects reclassification of operating leases as prescribed by IFRS 16 † The number of active freelance workers in ZOO’s systems who are engaged directly ‡ Proportion of client revenues retained from one year to the next 1112_ZOO Digital - Annual Report 2020 CMYK S19.indd 4-5 31/07/2020 15:03 Leading the future of media localisation ZOO DIGITAL GROUP PLC Page 6 Annual report and accounts 2020 ZOO at a Glance Our mission is to provide services for ZOO in Numbers fast and cost-effective localisation 4 facilities and digital distribution of media in Los Angeles, London, Dubai and Sheffield, UK content through the power of our world-class cloud technology. 83 languages offered as part of ZOO’s dubbing Our Business Model Our Services Our Technology and subtitling services While the traditional industry approach ZOO provides the end-to-end language Our in-house R&D team of 32 software is built on the utilisation of international translation and media processing services specialists has developed an unrivalled networks of owned-and-operated required to adapt original content for cloud-based Localisation Ecosystem. production facilities, ZOO operates using different languages, regions and cultures. It consists of interconnected workflow 234 Team a flexible, scalable and cost-efficient Through localisation, content owners and management platforms that our base. Centralised management facilities, can extend the reach and financial production teams use to seamlessly ZOO-enabled dubbing studios, freelance opportunities for their new and existing deliver ZOO’s differentiated services. ZOO staff talent and affiliate partners give ZOO entertainment content. global servicing coverage – with all parties ZOO Localisation Ecosystem working collaboratively and securely ZOO’s services include: in ZOO’s award-winning ecosystem • Subtitling: A textual, on-screen Localisation management platform 32 in-house of proprietary cloud-based software translation of the dialogue in other platforms. This approach offers greater languages Workflow manager levels of security, scalability and flexibility R&D specialists • Dubbing: An audio adaptation of the to our clients. Resource planner dialogue in other languages scripts We have always believed this model is the • Captioning: A textual, on-screen Scripting platform most effective approach for today’s digital representation of the dialogue and other media entertainment industry, and this has sounds for the deaf and hard of hearing Subtitling platform 7,184 freelance been further enhanced by ZOO’s ability translators, actors, directors and mixers • Audio description: A spoken narration to respond swiftly and effectively to the Dubbing and VO capture platform of on-screen visual content for the blind recent pandemic. and partially sighted Asset storage and file analysis system • Digital packaging: Preparing TV and movie content in the right technical Metadata localisation tool 360 million formats for each streaming service such subtitles and captions created as Netflix, Disney+ and Prime Video Secure screening platform and stored in ZOOsubs to date 1112_ZOO Digital - Annual Report 2020 CMYK S19.indd 6-7 31/07/2020 15:03 Leading the future of media localisation ZOO DIGITAL GROUP PLC Page 8 Annual report and accounts 2020 Our Market Our Customers Estimated to be worth $2.4bn, media ZOO is trusted by localisation is currently the fastest the biggest names growing end-customer vertical in in global media and the language services market1. entertainment. The rapid growth of the global home The launch of these new platforms, A challenge of this growth is the entertainment industry continued with alongside continuing growth from market ability for localisation service added momentum this year, thanks in leaders such as Netflix and Amazon, providers to deliver the scale and no small part to the launch of highly has created greater demand for media capacity to service this content3. anticipated new direct-to-consumer localisation and associated services for Thanks to a business model that streaming services from Disney and premium entertainment content. The offers both scalability and access Apple. These over-the-top (OTT) global market for media localisation streaming services provide audiences to sustainable capacity, ZOO is well (not including access services and with a combination of original and placed to meet this challenge as other digital packaging) is an estimated $2.4 back-catalogue content. They have incumbent vendors struggle to adapt billion, representing 9.8% of the global gained significant subscription numbers to the market evolution. localisation services market. since launch, compounded by the increased demand for content from audiences during the lockdown period. All are expected to develop a sizable subscription base in the coming years, in particular Disney+ which is predicted $120 81% to increase its subscription numbers to 202 million by 20252. billion increase spent on original content by in global SVOD subscriptions US media and entertainment between 2019 and 2025 to companies in 20194 1,161 million subscribers5 1 Slator 2020 Language Industry Market Report 2 https://www.hollywoodreporter.com/news/disney-reach-202-million-subscribers-by-2025-analyst-forecasts-1294125 3 The 2020 Nimdzi 100 report. Pg 37 4 Variety Intelligence Platform https://variety.com/2020/biz/news/2019-original-content-spend-121-billion-1203457940/ 5 Digital TV Research https://www.digitaltveurope.com/2020/05/11/coronavirus-accelerates-global-svod-growth/ 1112_ZOO Digital - Annual Report 2020 CMYK S19.indd 8-9 31/07/2020 15:03 Leading the future of media localisation ZOO DIGITAL GROUP PLC Page 10 Annual report and accounts 2020 Strategy ZOO has a four-pillar strategy to deliver long-term revenue growth and increased market share. ZOO recognises the immediate challenges for the entertainment industry. Our strategy for growth is around delivering the much-needed sustainable capacity, operating efficiency and oversight for our content owner clients, and is expressed in the following pillars: INNOVATION CUSTOMERS CREATE VALUE-ADDING SECURE PREFERRED PARTNER SOFTWARE TECHNOLOGY STATUS WITH LEADING BUYERS to deliver significant