Scala actively pursues two acquisitions in Europe

Chris Riegel could not attend ISE in person this week. Therefore, invidis spoke by phone with the best-known digital signage leader on the sidelines of the world’s leading trade fair for digital signage about the current business situation, consolidation in the industry and Scala sales rumours.

In faraway Dayton / Ohio, industry thought-leader and disruptor Chris Riegel follows ISE news closely. The Stratacache CEO is well informed about the course of the show. Not surprisingly als Stratacache is represented by its global brand Scala and X2O at ISE, the teams are extremely satisfied with the ISE premiere in Barcelona.

„Scala is not for sale“

The hottest rumor on the ISE show floor in Barcelona is revolving around a possible sale of Scala to Asian investors. On Thursday evening, invidis spoke with Stratacache CEO Chris Riegel, and the answer was clear: „Scala is not for sale.“ Since Stratacache acquired Scala in 2016, Scala has more than quadrupled its global revenue. According to Chris Riegel, even during the pandemic, Scala’s business performed well. Similar to other large fully integrated digital signage providers, Scala was able to rely on monthly recurring software revenue and ongoing service contracts during the crisis. For the current year, CEO Chris Riegel expects Scala to break the €100 million revenue mark worldwide for the first time.

Increasing demand in Europe

Since the beginning of the year, Scala has also seen an increase in demand in Europe. Scala’s European digital signage business will be profitable again this year, even major scaling effects as in North America have not yet been achieved in Europe yet. In the US, Stratacache/Scala counts major customers such as Burger King and McDonalds with tens of thousands of digital signage installations among its customers – in Europe, by contrast, digital signage networks are generally smaller.

Competition is also more intense in Europe – resulting in low CMS subscription prices. Riegel sees the reason for lower market rates in Europe in the large number of smaller CMS providers with an outdate tech stack and providers of modern platforms that could collect vast amounts of PE invests before the crisis. „The oversupply of cheap CMS subscriptions will soon reduce, as it becomes more difficult for CMS-suppliers to find new investments in the current economic environment.“ Riegel believes Scala is well positioned to benefit from the changing market environment.

Acquisitions in Germany and France

Stratacache has not been actively involved in European market consolidation in recent years. After a very active period with acquisitions in the UK, Finland and Belgium, it had become somewhat quiet on Stratacache’s European M&A front. In Chris Riegel’s familiar unambiguous manner, the message at the time was „there is nothing interesting to buy in Europe“. The M&A shifted to the North American home market. Stratacache acquired CMS provider X2O from Barco, made spectacular investments in a former chip factory in Oregon, and took over huge NOC/call centers in the US-Midwest.

Now Stratacache’s appetite for acquisitions in the European market has returned. „We are currently very active on two acquisitions in Germany and France.“ Chris Riegel sees Stratacache in a strong role as a „net acquirer“ in a consolidating market.

Supply chains fairly well under control – but costs rising

Stratacache is also experiencing interruptions in supply chains especially from China. According to Riegel the group is well positioned compared to many other digital signage providers with its own hardware manufacturing. In China, Scala produces its own small-format touchscreens and media players. With its own manufacturing base, Riegel considers itself well positioned against influences in the supply chain, even if it can still be a bit jerky from time to time.  However, costs have risen considerably.

With NCR, Stratacache has agreed to a global service partnership that allows the digital signage provider to offer on-site services worldwide through thousands of NCR service experts. Access to a worldwide service network helps Stratacache service digital signage installations faster and more cost-effectively than the competition.

Stratacache plans 15-20% growth in 2022

Chris Riegel sees the far-flung Stratacache group on a good path. „We are back to pre-crisis levels and planning 15-20% growth this year.“ On the one hand, Stratacache wants to benefit from further market consolidation and sees itself well positioned with its broad digital signage complementary offering. „Our business is the development and operation of technically complex digital solutions. With five global NOCs with 1,600 seats, we are well positioned.“