Kartoon Studios (NYSE American: TOON) today
provided a business update for the fourth quarter and year ended
December 31, 2023.
Andy Heyward, Chairman & CEO of Kartoon Studios, stated,
“2023 was a transformative year for the Company as we laid the
foundation for long-term growth and sustainable profitability.
Under the strict discipline of our new CFO, Brian Parisi, a former
unit CFO of the NFL, we have dramatically reduced our expenses by
driving operational efficiencies, while having already identified
an additional $3.5 million of annualized cost savings expected to
be realized by the Company beginning in 2024. Specifically, under
Brian’s leadership, we have cut direct operating costs in Q4 2023
by over 70% compared to the same period last year, and sequentially
by more than 54% versus the third quarter of 2023. The entire media
industry experienced disruptions in 2023, from the writers and
actors strikes, as well as a major reset among streaming companies.
Nevertheless, we are confident we are now back on a growth
trajectory, as evidenced by the traction we’re gaining in each of
our subsidiaries. Specifically, newly greenlit projects are
projected to generate over $40 million of revenue within our
Canadian production arm, Mainframe Studios, while the sales
pipeline is growing rapidly. At the same time, Kartoon Channel!’s
paid subscriber base continues to grow, providing us with high
margin recurring revenue. Importantly, Kartoon Channel! achieved
break-even operating income at the end of 2023, and growth has
continued as we move into 2024 with anticipated improvement going
forward. We are especially proud of this accomplishment given the
short time since we launched this business in 2020 and the fact
that many of the leading streaming services are still operating
with significant losses. Moreover, our Beacon Media Group
subsidiary has resumed solid growth and, in Q4 2023, achieved its
highest quarter revenue since 2021. Lastly, we look forward to
unveiling key initiatives underway that we believe will propel the
growth of the Stan Lee Universe, as well as the implementation of
AI across our organization to drive revenues and enhance operating
efficiency.”
Mr. Heyward added: “Having reached break-even, we are extremely
encouraged by the outlook for Kartoon Channel!, as
we have cut our customer acquisition costs by approximately half
from the first to the second half of 2023, enhancing our margins
through better media efficiency and a strategic approach to
content. In 2023, we also saw our paid subscriber base expand by
19% over the previous year, outperforming many streaming services
that have faced declines. Notably, ‘free trials’—which are a
critical predictor of our future growth—more than doubled in the
fourth quarter of 2023 compared to the same period in 2022. We
attribute our success to the high quality of our child safe content
and, crucially, to our leadership team's direction, led
domestically by Todd Steinman, President of Toon Media Networks who
brings formidable experience and expertise in this industry, having
held leadership positions at The Walt Disney Company and Warner
Brothers. Kartoon Channel! has evolved into a leading destination
for children's entertainment, offering thousands of episodes of
meticulously curated, safe and family-friendly content. We believe
our streaming services, bolstered by strong market reach, and the
high quality of our service—as evidenced by our consistent 4.9 out
of 5 stars rating on the Apple app store, are poised to be a
significant driver of Kartoon Studios' growth strategy moving
forward. We continue to be the highest-ranked streaming service in
the Apple app store amongst our key competitors, including Netflix,
Disney+, PBS Kids and Cartoon Network. Kartoon Channel
International, under the leadership of former Disney Channel
Worldwide Managing Director, Paul Robinson, has also enjoyed
growth, as it continuously expands its global footprint around the
world.
“Our Mainframe Studios affiliate has seen a
robust recovery and an influx of new projects following the
resolution of the Writers Guild of America (WGA) and Screen Actors
Guild (SAG) disputes in late Q3 and early Q4 of 2023. Despite
Kartoon Studios and its affiliates not being members of the WGA or
SAG, the strikes had a pronounced effect on the entire industry,
leading to a reduction in spending and new content orders. Now,
with the industry beginning to order new content, the Company is
seizing this opportunity and Mainframe Studios has secured
contracts for a substantial number of new content series, already
in our production pipeline. These contracts, extending across the
lifespan of the respective projects, are anticipated to begin
contributing to our revenue in 2024, with further recognition in
subsequent years. Importantly, our sales pipeline is more robust
than ever, and with our streamlined operating structure, as well as
additional initiatives underway to reduce costs through strategic
implementation of new production technologies, we believe we are
well positioned to further increase margins. Animation, a
consistent and sought-after genre for broadcasters and streamers,
remains a cornerstone of the Company’s strategy. Towards this end,
Mainframe has established itself as a leading provider of content
to major platforms like Netflix, Disney+, and YouTube, as well as
to companies like Moonbug, Sony Kids, Mattel, and Spin Master,
among others. In fact, Netflix reports over 315 million views of
the studio’s productions on their streaming platform. The fact is,
Mainframe Studios produces hits, which is evident
by the success of titles, including CoComelon, the most-subscribed
animation channel on YouTube and the most popular global animation
show on Netflix; numerous Barbie movies and series, the #1
performing toy series on Netflix; Unicorn Academy, which hit the
Netflix Global Top 10 across three weeks; Octonauts: Above &
Beyond, the latest entry in the popular long-running series; and
SuperKitties for Disney Junior, which I’m pleased to report begins
its second season this month. The premier reputation of Mainframe
Studios underscores our confidence in its ongoing success and its
pivotal role in our future growth, as it continues to deliver for
leading and high-performing brands,” continued Mr. Heyward.
"Our kids and family media agency, Beacon Media
Group, performed well in 2023, as a result of strategic
initiatives that led to growth in both billed commissions and
billed media. As an illustration of our progress, we achieved our
strongest quarterly revenue since 2021, a 16% increase compared to
the fourth quarter of the previous year. We are optimistic that
this upward trajectory will carry into 2024, bolstered by strong
advertiser enthusiasm for our upcoming pre-Easter and spring
campaigns. Under the leadership of Cindy Kelly, President of Beacon
Media Group, the Company has broadened its horizons by welcoming
six new advertisers and pushing the boundaries with innovative
marketing campaigns. Cindy has been instrumental not only in
driving business growth amidst a challenging market but also in
forging valuable synergies between Beacon Media, Kartoon Channel!,
and our Mainframe Studios subsidiary in Canada. Her efforts have
positioned Beacon Media Group as a leader in the kids and family
media and marketing space, and today represents more toy companies
than any other media agency. Our adoption of innovative strategies,
such as self-serve programmatic campaigns, dynamic influencer
content and marketing, and innovative social commerce techniques,
led to notable improvements in cost-per-thousand impressions (CPMs)
and customer acquisition metrics. Throughout the year, our clients
saw exceptional performance in generating awareness and engagement,
while optimizing customer acquisition costs."
Brian Parisi, Chief Financial Officer of Kartoon Studios,
commented, "Kartoon Studios remains steadfast in its commitment to
maximizing our operational efficiency and implementing stringent
cost management practices, all with the goal of achieving
sustained, long-term, profitable growth. We are actively pursuing a
detailed plan aimed at lowering operational costs throughout the
organization while growing revenue alongside the recovery of the
overall industry. Our efforts are bearing fruit, as evidenced by
the decline in our loss from operations in Q4 2023, net of
impairment, by 39% from Q4 2022 and 48% from Q3 2023. In my first
five months at the Company, we have already identified more than
$3.5 million of additional annual cost savings across the business
which we believe will further reduce our loss from operations and
pave the way to achieve our goal of sustainable and growing
profitability, as our key brands begin to grow and flourish. From
my time as a unit CFO in the NFL, it was apparent that it is
important to focus on blocking and tackling, in addition to the big
plays. We are doing that because we know, in the long run, it wins
games. I also saw how important it is to put together a winning
roster. The team of players now inside Kartoon Studios brings
extraordinary playing records at Disney, Warner Brothers, Hasbro,
and other leading organizations. I am very excited about our future
and what it holds.”
Kartoon Studios reported revenue of $8.8 million and $44.1
million, for the quarter and year ended December 31, 2023,
respectively. As of December 31, 2023, the Company had current
assets of $57.1 million, working capital of $11.5 million, and
total stockholders’ equity of $53.3 million.
Complete details of Kartoon Studios’ financial results for the
fourth quarter and year ended December 31, 2023, are available in
the Company’s Form 10-K, which has been filed with the Securities
& Exchange Commission and is available on the Company’s
website.
About Kartoon Channel!Available everywhere and
anywhere kids are today, Kartoon Studios’ Kartoon Channel! is a
family entertainment destination that delivers 1000s of episodes of
carefully curated and safe family-friendly content. The channel
features original content, including Stan Lee’s Superhero
Kindergarten, starring Arnold Schwarzenegger, Rainbow Rangers, and
Shaq’s Garage, starring Shaquille O’Neal and Rob “Gronk”
Gronkowski. Kartoon Channel! also delivers animated classics for
little kids, such as Peppa Pig Shorts, Mother Goose Club, Barney
and Friends, Om Nom Stories, as well as content for bigger kids,
like Angry Birds, Talking Tom & Friends and Yu-Gi-Oh! Kartoon
Channel! also offers STEM-based content through its Kartoon
Classroom, including Baby Genius and more, as well as a Spanish
language collection on the platform, KC En Espanol.
Kartoon Channel! is available across multiple platforms,
including iOS, Android Mobile, Web, Amazon Prime Video, Apple TV,
Amazon Fire, Roku, Pluto TV, Comcast, Cox, Dish, Sling TV, Android
TV, Tubi, Xumo, Samsung and LG Smart TVs.
Internationally, Kartoon Channel! is currently available in key
territories around the world, including Africa and Sub-Sahara
Africa (StarTimes), Australia and New Zealand (Samsung TV Plus),
Germany (Waipu), Philippines (Tapp Digital) and Maldives
(Dhiraagu). Kartoon Channel! Branded blocks are also currently
available daily in 69 countries across the Middle East, Africa,
Latin America, and Europe.
About Kartoon Studios Kartoon Studios (NYSE
AMERICAN: TOON) is a global end-to-end creator, producer,
distributor, marketer, and licensor of entertainment brands. The
Company’s IP portfolio includes original animated content,
including the Stan Lee brand, Stan Lee’s Superhero Kindergarten,
starring Arnold Schwarzenegger, on Kartoon Channel! and Ameba;
Shaq’s Garage, starring Shaquille O’Neal, on Kartoon Channel!;
Rainbow Rangers on Kartoon Channel! and Ameba; the Netflix
Original, Llama Llama, starring Jennifer Garner, and more.
In 2022, Kartoon Studios acquired Canada’s WOW! Unlimited Media
and made a strategic investment becoming the largest shareholder in
Germany’s Your Family Entertainment AG (FRA:RTV), one of Europe’s
leading distributors and broadcasters of high-quality programs for
children and families.
Toon Media Networks, the Company’s wholly owned digital
distribution network, consists of Kartoon Channel!, Frederator
Network, and Ameba. Kartoon Channel! is a globally distributed
entertainment platform with near full penetration of the U.S.
market. Kartoon Channel! and Ameba are available across multiple
platforms, including iOS, Android Mobile, Web, Amazon Prime Video,
Apple TV, Amazon Fire, Roku, Pluto TV, Comcast, Cox, Dish, Sling
TV, Android TV, Tubi, Xumo, and Samsung and LG Smart TVs.
Frederator Network owns and operates one of the largest global
animation networks on YouTube, with channels featuring over 2000
exclusive creators and influencers, garnering billions of views
annually.
For additional information, please
visit www.kartoonstudios.com
Forward-Looking Statements: Certain statements
in this press release constitute "forward-looking statements"
within the meaning of the federal securities laws. Words such as
"may," "might," "will," "should," "believe," "expect,"
"anticipate," "estimate," "continue," "predict," "forecast,"
"project," "plan," "intend" or similar expressions, or statements
regarding intent, belief, or current expectations, are
forward-looking statements. While the Company believes these
forward-looking statements are reasonable, undue reliance should
not be placed on any such forward-looking statements, which are
based on information available to us on the date of this release.
These forward looking statements are based upon current estimates
and assumptions and are subject to various risks and uncertainties,
including without limitation, our ability to generate revenue or
achieve profitability; our ability to obtain additional financing
on acceptable terms, if at all; the potential issuance of a
significant number of shares, which will dilute our equity holders;
fluctuations in the results of our operations from period to
period; general economic and financial conditions; our ability to
anticipate changes in popular culture, media and movies, fashion
and technology; competitive pressure from other distributors of
content and within the retail market; our reliance on and
relationships with third-party production and animation studios;
our ability to market and advertise our products; our reliance on
third-parties to promote our products; our ability to keep pace
with technological advances; our ability to protect our
intellectual property and those other risk factors set forth in the
“Risk Factors” section of the Company’s most recent Annual Report
on Form 10-K and in the Company's subsequent filings with the
Securities and Exchange Commission (the "SEC"). Thus, actual
results could be materially different. The Company expressly
disclaims any obligation to update or alter statements whether as a
result of new information, future events or otherwise, except as
required by law.
MEDIA
CONTACT:pr@kartoonstudios.com
INVESTOR RELATIONS
CONTACT:ir@kartoonstudios.com
An image accompanying this announcement is available at
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