- Q1 2019 revenue rose 5.5% to $104.0
million up from $98.6 million
the year-ago quarter. Implementation of the IFRS 15 accounting
standard reduced revenue by $2.4
million1 in Q1 2019. Without this adjustment,
revenue would have been up 7.9%
- Q1 2019 adjusted EBITDA was $17.3
million compared to $22.8
million in the year-ago quarter. Adjusted EBITDA was reduced
by $1.0 million due to IFRS
151 and by $3.8 million
from the sale of a 39% minority stake in Peanuts2
- Net loss was $2.4 million vs net
income of $8.1 million in Q1
2018
- WildBrain revenue grew 49% to $16.2
million vs $10.9 million in
the year-ago quarter
- Net debt declined 31% to $502.9
million from the end of Fiscal 20183
- Net leverage ratio for covenant purposes was 5.35x, down from
6.07x at year-end4
HALIFAX, Nov. 13, 2018
/CNW/ - DHX Media (or the "Company") (TSX: DHX, NASDAQ: DHXM), a
global children's content and brands company, reports its Fiscal
2019 first quarter results for the period ended September 30, 2018 ("Q1 2019").
"We are pleased with the progress we are making to solidify our
operations, upgrade our management team and reduce our leverage,"
said Michael Donovan, Executive
Chair and CEO, DHX Media. "We are making the necessary investments
for sustainable organic growth. While it is still early days,
our pipeline of business on the content and consumer products side
is starting to build, laying the foundation for improving results
in the quarters and years ahead. Peanuts continued to perform
ahead of plan, contributing to 12% growth in our consumer
products-owned business from a year ago. WildBrain also
delivered another excellent quarter, with strong double-digit
growth in revenues and minutes watched. In the last three
months, 1/3 of the approximately 830 million children globally with
access to YouTube tuned into our WildBrain
network5. We believe this growing scale and the
quality of experience we offer will cement our position as the
go-to platform in the AVOD space for children, content owners and
advertisers. We are just beginning to scratch the surface of this
unique and strategic asset."
Mr. Donovan added: "As part of our Q4 2018 call, we laid out a
strategic plan to better leverage our core assets in distribution
and content – including WildBrain, our vast library, IP, and new
productions – to maximize the value of these assets in the
marketplace while simplifying our organization. The recent
agreement to sell our Halifax
animation studio is another important step on this path. This
sale will streamline our operations, allowing us to consolidate
production and focus our resources around our premium-content
strategy."
Q1 2019 Performance – Building Global Brands through
New Original Content
During Q1 2019, we began delivering on our strategic priorities
as noted in the following highlights:
|
|
PRIORITIES
|
Q1 2019
Highlights
|
|
|
Develop New,
and
Revitalize Classic
Brands with Content
on WildBrain
|
•
|
Building broader
awareness for the Teletubbies brand, we released new Tiddlytubbies
content on WildBrain, growing views on the channel by 139% to more
than 29 million and watch time by 127% to 98 million minutes versus
the prior three months.
|
|
•
|
Grew WildBrain
revenue by 49% to $16.2 million as we continued to monetize our and
others' libraries and brands on YouTube, growing the Wildbrain
network audience to more than 13 billion minutes of videos watched
monthly, up 66% from Q1 2018.
|
|
Develop
Premium
Kids' Content to Drive
Franchise Brands
|
•
|
Premiered Mega
Man: Fully Charged, a co-production between DHX Media and
Dentsu Entertainment USA, on Cartoon Network US, and launched a
YouTube channel on WildBrain. Consumer products set for spring
2019.
|
|
•
|
Initiated delivery of
Rev & Roll, a new original preschool series in
collaboration with Alpha Group, with global merchandising
potential.
|
|
•
|
Rolled out new
Polly Pocket content with 16 broadcasters internationally
under our Mattel partnership.
|
|
Improve Cash
Flow
and Balance Sheet
|
•
|
Reduced net
debt3 by 31% to $502.9 million from the end of Fiscal
2018.
|
|
•
|
Freed up $10 million
annually by suspending the quarterly dividend.
|
|
•
|
Grew ratings on our
Family channel by >20% this fall season as we added more of our
own content and changed the programming mix, which delivered
improved cash flow in our TV business.
|
|
•
|
Agreed, subsequent to
quarter-end, to sell the Halifax animation studio to streamline our
operations, allowing us to consolidate production and focus our
resources around our premium-content.
|
Q1 2019 Financial Highlights
Financial
Highlights6
(in millions of
Cdn$)
|
Three Months
ended
September
30,
|
2018
|
2017
|
Revenue
|
$104.0
|
$98.6
|
Gross
Margin
|
$42.8
|
$43.0
|
Gross Margin
(%)
|
41%
|
44%
|
Adjusted EBITDA
attributable to DHX Media2
|
$17.3
|
$22.8
|
Net Income
|
$3.3
|
$9.6
|
Net Income
attributable to DHX Media2
|
($2.4)
|
$8.1
|
1.
|
IFRS 15 – the IFRS
15 accounting standard was implemented in Q1 2019, which alters the
timing of how proprietary production revenue and consumer
products-owned revenue are recognized and also affects
earnings. See note 3 in the Q1 2019 financial
statements.
|
|
|
2.
|
Q1 2018 adjusted
EBITDA and net income attributable to DHX Media for the 3-months
ended September 2017 included the Company's 80% interest in Peanuts
Holdings LLC ("Peanuts"). In Q1 2019, the Company sold a 39%
minority stake in Peanuts to Sony Music Entertainment (Japan) Inc.
("Sony"). Accordingly, Q1 2019 adjusted EBITDA and net income
attributable to DHX Media for the 3-months ended September 30, 2018
reflected the Company's 41% interest in Peanuts.
|
|
|
3.
|
Net debt includes
long-term debt and obligations under finance leases plus bank
indebtedness less cash, and excludes interim production
financing. See note 15 in the Q1 2019 financial
statements.
|
|
|
4.
|
The net leverage
ratio calculation is based on the definition in the Company's
senior secured credit agreement available on SEDAR at
www.sedar.com.
|
|
|
5.
|
Source:
World Bank, United Nation, YouTube Analytics – based on monthly
unique users on WildBrain's top 200 channels (July to September
2018).
|
|
|
6.
|
Gross Margin means
revenue less direct production costs and expense of film and
television programs produced (per the financial statements).
Adjusted EBITDA represents income of the Company before
amortization, finance income (expense), taxes, development
expenses, impairments, share-based compensation expense,
acquisition costs and adjustments for other identified charges. The
definitions of Gross Margin and Adjusted EBITDA are included in the
"Non-GAAP Financial Measures" section of the Company's Q1 2019
Management Discussion and Analysis.
|
Q1 2019 revenue of $104.0 million
was up 5.5% over the same prior-year quarter. The increase was
driven by continued strong performance in WildBrain, higher
consumer products royalties derived from our owned IP, and higher
production service revenue. This was partially offset by
declines in other business segments. The implementation of
the IFRS 15 accounting standard reduced revenue by $2.4 million in Q1 20191. This
revenue is expected to be recognized during the remainder of Fiscal
2019.
Gross margin was 41% in Q1 2019 compared with 44% in Q1
2018. The decline was largely attributed to a higher
proportion of service revenue in our studios, and increasing share
of revenue derived from WildBrain. These factors were partially
offset by higher margins in the television business, as we
benefited from improved ratings and using our large library to
control content programming costs.
For Q1 2019, adjusted EBITDA was $17.3, compared with $22.8
million in Q1 2018. Adjusted EBITDA in Q1 2019 was reduced
by $1.0 million due to the
implementation of IFRS 151 and by $3.8 million related to the sale of the minority
stake in Peanuts2.
Q1 2019 recorded a net loss of $2.4
million versus net income of $8.1
million in the prior year quarter. The decline was in
part due to a larger non-controlling interest in Peanuts due to the
Sony transaction and a non-cash write-down in deferred financing
charges related to the debt repayment.
During Q1 2019, net debt3 declined by 31% to
$502.9 million from the end of Fiscal
2018, as the net proceeds from the Sony transaction were used to
pay down a portion of our term loan.
Subsequent to quarter-end, we reached an agreement to sell the
Halifax animation studio, which is
expected to close on or about December
31, 2018. The transaction is in line with our focus on
developing premium content, streamlining animation production and
realizing operating efficiencies.
Other Business Highlights
We continued to see strong demand for our library shows.
Amazon Prime Video recently licensed, non-exclusively, 10 of our
kids' shows in Spanish for its streaming service in the
US.
Seasons 1 and 2 of the live action preschool series, Waffle
the Wonderdog, was picked up by Germany's national public broadcasters, ZDF
and KiKA, and also by 12 other broadcasters internationally.
The Peanuts franchise continues to expand internationally and to
broaden its demographic reach. UK retailer Mothercare
recently introduced a Peanuts baby line with more baby collections
targeted for spring 2019, as a result of initiatives to increase
penetration in the Baby category. In Brazil, the first Peanuts Café opened in
Sao Paulo, with more planned in
the coming months.
CPLG continued to expand its third-party representation by
securing rights to Archie Comics, the Dr. Seuss franchise, and
Asian social media brand Line Friends in Europe. CPLG also
agreed to extend its footprint into Russia with a 49% stake in Moscow-based Pullman Licensing. As well, CPLG
agreed to renew its representation of Nickelodeon for a further
five years for all Nickelodeon's brands, adding Russia to our existing
network.
Analyst and Investor Webcast and Conference Call
DHX Media Management will hold a live webcast and presentation
with slides for analysts and investors on November 13, 2018 at 8:00
a.m. ET, at the following address:
https://event.on24.com/wcc/r/1871180/0A5B488CDD2FB7514ECFC1907820E6E6.
To listen by phone, please call +1 (888) 231-8191 toll-free or
+1 (647) 427-7450 internationally and reference conference ID
7071559. Please allow 10 minutes to be connected to the conference
call. The presentation for the call will also be posted to the
Investor Relations section of our website, at:
http://www.dhxmedia.com/investors/.
Instant replay will be available after the call on +1 (855)
859-2056 toll free, under passcode 7071559, until 11:59 p.m. ET, November
20, 2018.
About DHX Media
DHX Media Ltd. (TSX: DHX, NASDAQ: DHXM) is a global children's
content and brands company, recognized for such high-profile
properties as Peanuts, Teletubbies, Strawberry Shortcake,
Caillou, Inspector Gadget, and the acclaimed Degrassi
franchise. One of the world's foremost producers of children's
shows, DHX Media owns the world's largest independent library of
children's content, at 13,000 half-hours. It licenses its content
to broadcasters and streaming services worldwide and generates
royalties through its global consumer products program. Through its
subsidiary, WildBrain, DHX Media operates one of the largest
networks of children's channels on YouTube. Headquartered in
Canada, DHX Media has offices
worldwide. Visit us at www.dhxmedia.com.
Disclaimer
This press release contains
"forward-looking statements" under applicable securities laws with
respect to DHX Media including, without limitation, statements
regarding progress on the Company's strategic priorities, the
effectiveness of the Company's management team, the sustainability
of the Company's organic growth, the expected growth of WildBrain,
expected use of available cash, cost rationalization initiatives
and expected results therefrom, the markets and industries in which
the Company operates, the business strategies, key priorities and
objectives, and operational activities of the Company and results
therefrom, and the future financial and operating performance of
the Company. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, such
statements involve risks and uncertainties and are based on
information currently available to the Company. Actual results or
events may differ materially from those expressed or implied by
such forward-looking statements. Factors that could cause actual
results or events to differ materially from current expectations,
among other things, include the ability of the Company to execute
on its business strategies, the ability of the Company to realize
expected operating savings, consumer preferences, market factors,
and risk factors discussed in materials filed with applicable
securities regulatory authorities from time to time including
matters discussed under "Risk Factors" in the Company's most recent
Annual Information Form and annual Management Discussion and
Analysis, which also form part of the Company's annual report on
Form 40-F filed with the U.S. Securities and Exchange Commission.
These forward-looking statements are made as of the date hereof,
and the Company assumes no obligation to update or revise them to
reflect new events or circumstances, except as required by law.
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SOURCE DHX Media Ltd.