DHX Media reports results for Fiscal 2018, concluding the strategic review

DHX Media reports its fourth quarter and year-end results for the period ended 30 June 2018. “Revenue in Fiscal 2018 increased by 45 per cent to $434.4 million, primarily driven by Peanuts and Strawberry Shortcake and continued strong growth in WildBrain,” said DHX Media executive chair and CEO Michael Donovan. Q4 2018 revenue grew 11 per cent to $97.4 million over the prior-year periods. Excluding acquisitions, revenue for Fiscal 2018 of $288.9 million was down by approximately three per cent, compared to Fiscal 2017, with Q4 2018 revenue at $63.8 million, versus $87.6 million for the prior-year quarter. The declines in organic revenue were primarily due to a decline in distribution (excluding WildBrain) revenue in Q4 2018. “During the course of the last year, we made great progress in realizing operational efficiencies and refocusing our production business. As the company exits the strategic review and internal review, also announced today, we have realigned our strategy to capitalise on key macro trends in the industry. These trends include the rising demand from the global streaming market for premium original programming, and the increasing popularity of kids’ content on YouTube, which is driving rapid growth in our WildBrain platform. We believe this significant refocusing of our strategy and efforts will allow us to deliver growth, while generating free cash flow to pay down debt,” Donovan added. Excluding approximately $24.4 million in fees and refinancing payments related to the Peanuts and Strawberry Shortcake acquisition, operating cash flow for the year ended June 30, 2018 would have been approximately $37.8 million. Subsequent to year-end, the Company closed the sale of a minority stake in Peanuts to Sony Music Entertainment (Japan) Inc., of which the net proceeds of US$161.3 million ($210.0 million) 3 were used to repay a portion of the Company’s term loan. DHX Media CFO Doug Lamb said, “Reducing leverage is one of our key priorities. The Sony transaction was a significant step in that direction and ensures we have the financial flexibility to maintain investment in growth. Our operations are providing improving free cash flow. In combination with cash savings from the quarterly dividend suspension, that provides additional funds for debt repayment.” WildBrain continued to emerge as a highly strategic platform with strong growth in revenue, which increased by 68 per cent to $57.3 million in Fiscal 2018 compared with a year ago. During Fiscal 2018, more than 129 billion minutes of videos were watched on WildBrain, from over 25 billion views, up 136 per cent and 130 per cent respectively versus the prior year, reflecting the company’s expertise in developing kids’ content and brands on YouTube. Third-party brands, including Chuggington, Popeye, StoryBots and BEYBLADE, contracted WildBrain to manage their YouTube channels and produce new original content. DHX Media will continue to invest in their rapidly-growing WildBrain business, which capitalises on the increasing consumption of kids’ content on YouTube. The company is also expanding the Peanuts franchise globally with a multi-year partnership signed between Peanuts and NASA that will feature all-new and original content starring Astronaut Snoopy plus STEM-based education materials to extend the brand to the next generation of kids and families. The Peanuts Global Artist Collective (PGAC) unveiled Peanuts-inspired public art in seven cities worldwide. A renewed agreement was signed to extend Cedar Fair’s exclusive use of Peanuts throughout its 11 amusement parks in North America, across attractions, entertainment and sports, food and beverage, lodging and retail operations, until 2025. Peanuts continued to extend into new immersive opportunities including the first-ever, Peanuts hotel in Kobe Japan, and the opening of the 29th SnoopyTown retail store, also in Kobe. DHX Media signed the largest deal with Amazon Prime Video for 13 of our kids’ shows, covering more than 200 countries and 15 languages. Netflix picked up worldwide streaming rights for Creeped Out, a new live-action thriller anthology series, as well as for a yet-to-be-announced new animated preschool production. Tencent licensed 450 half-hours of the company’s kids’ content for its streaming services.
Creeped Out
DHX Media’s other business highlights includes the licensing agency, CPLG, being appointed to represent the Ugly Dolls franchise in Europe, Middle East and Africa, and is building positive momentum signing over 30 licensees to date ahead of the brand’s first feature film release in 2019. The Family TV channels delivered steady cash flow and consistent gross margins at 60 per cent in Fiscal 2018. Subscriber revenue continued to account for approximately 93 per cent of revenue. The Company has outlined a disciplined strategy aimed at delivering strong organic growth, increasing cash flow and de-levering the balance sheet and expects Fiscal 2019 to begin to show the benefits of the changes they have made and to better demonstrate the value of their strong and unique portfolio of assets, focusing on developing new brands with content on Wildbrain, develop premium content to drive franchise brands, improve cash flow and balance sheet.