Rebounding RRsat Looking To Make New Acquisition

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PARIS — Satellite video services provider RRsat Global Communications on May 10 said its business environment has substantially improved with the reviving economies in Europe and the United States, and that the company is again on the hunt for an acquisition.

In a conference call with investors, Omer, Israel-based RRsat said it has appointed investment advisers to seek out acquisition targets. RRsat Chief Executive David Rivel said the company has “more options today than before, and with even better prices,” as it reviews possible targets.

RRsat leases satellite capacity on several dozen satellites worldwide and resells the capacity to customers as part of a bundled package of video-related services including distribution. The company had a difficult 2009 as the recession caused potential startup television channels to delay investment.

In one case in late 2009, RRsat was forced to terminate a contract for nonpayment by a customer.

But so far in 2010, the environment appears much more favorable, Rivel said. RRsat, whose stock is traded on the U.S. Nasdaq exchange, reported a record $25.9 million in revenue for the three months ending March 31. Net profit, at $4.3 million, was also a record.

Backlog stood at $165.2 million on March 31, down slightly from where it was Dec. 31, in part because the nonpaying customer’s future business was removed and because of the euro’s weakness against the U.S. dollar. RRsat reports its revenue in U.S. dollars but nearly half its customers so far in 2010 have been from Europe. About one-quarter of its customers are in the United States.

Rivel said RRsat signed 14 new contracts for television broadcast distribution in the first three months of 2010 — eight with existing customers and six with new customers.

RRsat Chief Financial Officer Gil Efron said the company is sticking with earlier forecasts that its 2010 revenue would be between $107 million and $110 million, which would be a 15.8 percent increase over 2009.

Efron said the company continues to invest for growth — internally through sales and marketing in addition to the hoped-for acquisition — and that the gross profit margin for 2010 would be 28 percent to 30 percent, with operating profit to be at 14.5 percent to 15.5 percent as a result.

RRsat’s growth strategy features increasing its base of small television programmers that need RRsat’s distribution and production services while attracting larger broadcasters that would prefer to outsource these services.

“The atmosphere is much better now,” Rivel said of the climate in RRsat’s core market of small broadcasters. “New [television] channels are finding investment to begin operations, and this is why we are seeing more customers.”

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