- Revenue was $95.5 million in Q1
2021 vs $112.3 million in Q1
2020.
- Net loss improved to $3.3 million
in Q1 2021 vs a net loss of $16.0
million in Q1 2020.
- Free Cash Flow was negative $2.7
million in Q1 2021 vs positive Free Cash Flow of
$7.7 million in Q1 2020, partly due
to timing of distributions to non-controlling interests in the
current quarter.
- Adjusted EBITDA in Q1 2021 was $17.5
million vs $19.6 million in Q1
2020.
- Gross Margin improved to 45% from 44% in Q1 2020.
- WildBrain Spark revenue was $8.9
million in Q1 2021, a sequential improvement from
$6.5 million in the previous quarter.
This compared to $22.1 million in Q1
2020.
- WildBrain Spark continued to attract a highly engaged audience
watching 64.2 billion minutes of videos in Q1 2021, up 14% from Q1
2020. The average view time was up 27% to approximately six minutes
per view.
- Paid down $5.0 million on the
revolving facility in Q1 2021.
- Post quarter-end, announced expanded partnership with Apple TV+
for the largest production commitment in WildBrain's history for a
new slate of Peanuts originals and specials as well as licensing
the current Peanuts library of classic specials. Deal provides
significant multi-year production pipeline for our studio
business.
HALIFAX, NS, Nov. 10, 2020 /PRNewswire/ - WildBrain Ltd.
("WildBrain" or the "Company") (TSX: WILD), a global leader in kids
and family entertainment, today reported its Fiscal 2021 first
quarter results for the three-month period ended September 30, 2020 ("Q1 2021").
![WildBrain Logo (CNW Group/WildBrain Ltd.) WildBrain Logo (CNW Group/WildBrain Ltd.)](https://mma.prnewswire.com/media/1331386/WildBrain_Ltd__WildBrain_Reports_Q1_2021_Results.jpg)
Eric Ellenbogen, WildBrain CEO,
said: "We kicked off Fiscal 2021 with an expanded Apple TV+
partnership that will see a new generation of kids and families
enjoying a full slate of new Peanuts originals plus the
long-running classic specials on a leading global media platform.
This multi-year, worldwide agreement is the largest production
commitment in our company's history. It aligns with our
strategy of creating premium content in long-term deals that will
meaningfully grow our earnings base. We have and will
continue to line up a book of production business that you'll see
play out in our numbers in the coming quarters and years
ahead. This Peanuts deal illustrates how we're maximizing the
profitability of our key IP across the value chain by leveraging
new production to also secure high-value library sales and consumer
products opportunities. As we close more content deals and
switch on key brands, we'll continue to build momentum, driving
growth for years to come."
Ellenbogen continued: "In Q1, we delivered financial results
that reflected strong production revenue and resilience in our
consumer products and television businesses in the face of current
macro-economic headwinds. We're also encouraged by the
sequential improvement in Q1 revenue at WildBrain Spark.
We're in a great position to benefit from the secular movement of
advertising dollars to digital given our network scale, global
reach, data insights and kid-safe, premium programming. We
expect our direct advertising sales, as well as other initiatives
designed to monetize the huge audiences on our AVOD network to help
speed recovery and growth at WildBrain Spark as advertising demand
returns."
Aaron Ames, WildBrain CFO, added:
"During Q1, we continued to execute on our disciplined approach to
content investments while managing working capital and controlling
our costs. We also paid down $5.0
million on our revolving credit facility in Q1 and the
outstanding balance of $5.0 million
in October, subsequent to quarter-end. The recently expanded deal
with Apple TV+ will begin to add to our EBITDA in Fiscal 2022 and
is also a meaningful positive for our consumer products
business. While we expect our Total Net Leverage
Ratio2 to increase moderately in Q2 2021 due to
timing, based on our current expectations of how the pandemic will
play out, coupled with the enhanced visibility we now have around
our revenue, earnings and content pipeline over the next 18-plus
months, we expect our Total Net Leverage Ratio2 to be
comfortably in the mid-4x level, or below, by the end of Fiscal
2022."
Q1 2021 Performance - Executing on Priorities
PRIORITIES
|
HIGHLIGHTS
|
Monetizing our
Large
Audience on
WildBrain Spark
|
- WildBrain Spark
increased its audience engagement with 62.4 billion minutes of
videos watched on our AVOD network in Q1 2021, up 14% from 56.3
billion minutes in Q1 2020. The
average view time also rose by 27% to approximately six minutes per
view.
- WildBrain Spark
revenue was $8.9 million in Q1 2021 vs $22.1 million in Q1 2020,
due to policy changes on YouTube and ongoing industry-wide
pressures impacting advertising. Q1 2021 revenue reflected
sequential growth, up 37% from the previous quarter.
|
Grow Key
Brands
|
- Production is
underway on a second new Peanuts original series, The Snoopy
Show, to premiere globally in February 2021, exclusively on
Apple TV+
- Apple TV+ has
ordered a second season of Snoopy in Space - one of the most
popular shows viewed across multi-generations on their streaming
platform.
- Fresh Peanuts
content is supporting a robust licensing program with new deals for
apparel, housewares, appliances, collectibles, food and beverage,
publishing and more. Many of the international deals were
brokered by our licensing agency, WildBrain CPLG, highlighting the
collaboration realized across our business units.
- A round of new
global streaming and broadcast deals for the latest seasons of
Fireman Sam and Polly Pocket including US and
multi-territory rights to Netflix are driving exposure for these
partner brands with Mattel where we share in back-end merchandising
royalties.
|
Improve Cash Flow
and
Balance Sheet
|
- Paid down $5.0
million on our revolving credit facility in Q1 2021, as well as the
remaining $5.0 million in October, subsequent to quarter-end.
- The Total Net
Leverage Ratio2 was 5.70x at September 30, 2020 vs 5.66x
at September 30, 2019. While we expect our Total Net Leverage
Ratio2 to increase moderately in Q2 2021 due to timing,
based on our current expectations of how the pandemic will play out
coupled with the enhanced visibility we have around our revenue,
earnings and content pipeline over the next 18-plus months, we
expect our Total Net Leverage Ratio2 to be comfortably
in the mid-4x level, or below, by the end of Fiscal
2022.
|
Q1 2021 Financial Highlights
Financial
Highlights
(in million of
Cdn$)
|
Three Months
ended
September
30,
|
2020
|
2019
|
Revenue
|
$95.5
|
$112.3
|
Gross
Margin
|
$43.3
|
$49.4
|
Gross Margin
(%)
|
45%
|
44%
|
Adjusted EBITDA
attributable to WildBrain
|
$17.5
|
$19.6
|
Net Loss attributable
to WildBrain
|
$(3.3)
|
$(16.0)
|
Basic Loss per
Share
|
$(0.02)
|
$(0.12)
|
Free Cash
Flow
|
$(2.7)
|
$7.7
|
In Q1 2021, we reclassified our financial reporting to better
reflect our 360° approach to IP management and the characteristics
of the transactions that we are entering into with global streaming
services ("SVODs") and across other distribution
channels3. Growth in our production revenue
reflects global SVODs investing heavily to deliver high-quality,
exclusive programming. Under this model, typically the SVODs
pay for the cost of production inclusive of production fees, while
we retain ownership of the underlying IP as well as linear
distribution rights (after a holdback of approximately 24 to 36
months) and all consumer products revenues. This differs from
the traditional production/distribution model of covering
production costs from multiple linear broadcasters, with margins
realized over multi-year licensing cycles. Since our slate has
become a combination of both these models, we have revised our
reporting to aggregate production and distribution, which is
consistent not only with the integrated management of our business,
but also with industry practice.
Accordingly, we now report production and distribution in one
revenue line under "Content Production and Distribution". We
also consolidated reporting of all revenue streams related to
consumer products, including our licensing agency WildBrain CPLG,
under "Consumer Products". Our WildBrain Spark business,
which generates revenues primarily from advertising and
sponsorships, continues to be reported under "WildBrain
Spark". Collectively, the three preceding revenue lines will
now comprise our "Content Business" segment for reporting
purposes. For clarity, our Canadian television business has
been renamed "Canadian Television Broadcasting" and continues to be
reported separately.
In Q1 2021, revenue was $95.5
million compared with $112.3
million in the prior year quarter. This decrease was
primarily driven by WildBrain Spark, resulting from pressures on
global advertising due to COVID-19 and policy changes on YouTube
for "Made for Kids" content, partially offset by stability in our
other businesses.
Content Production and Distribution revenue increased to
$36.3 million in Q1 2021 vs.
$35.1 million in Q1 2020, due to
higher production revenue. Production revenue increased in Q1
2021, driven by premium proprietary projects including new Peanuts
originals such as The Snoopy Show, a number of family
specials and a second season of Snoopy in Space. The
increase was also driven by new seasons of Johnny Test, Fireman Sam, Polly Pocket and
Chip & Potato. The Peanuts library deal, which was
signed after quarter-end, will be reflected in second quarter
results.
While COVID-19 and YouTube's changes in targeted advertising
policies continued to negatively impact advertising sales at
WildBrain Spark, with revenue declining 60% to $8.9 million in Q1 2021 vs Q1 2020, we are
encouraged by the sequential growth in revenue. Revenue
improved sequentially month-over-month as we moved through the
quarter, reflecting an increase of 37% compared with $6.5 million in Q4 2020. This trend has continued
in October as digital advertising begins to show improvement and we
continue to implement initiatives to monetize the significant
viewership consuming content on our AVOD network. WildBrain
Spark has one of the largest and most engaged global audiences in
the kids and family space with 62.4 billion minutes of videos
watched this quarter, up 14% vs Q1 2020. On average, the
duration of each view amounted to approximately six minutes, an
increase of 27% from Q1 2020. Viewership remained strong at
10.7 billion views in Q1 2021.
Excluding the expiring MetLife contract which represented
$3.6 million in Q1 2020, Consumer
Products revenues were stable at $38.8
million in Q1 2021, reflecting the continuation of strong
licensing royalties from our Peanuts franchise and increased
commissions from our licensing agency WildBrain CPLG.
Gross Margin increased to 45% in Q1 2021 vs 44% in Q1 2020,
driven by growth in production revenue derived from a growing slate
of higher-margin premium projects in our studio.
Positive operating cash flow4 of $19.6 million in Q1 2021 vs $29.9 million in Q1 2020, due to timing of
settlement of working capital balances. Free Cash Flow for Q1
2021 was negative $2.7 million,
compared to positive Free Cash Flow of $7.7
million in Q1 2020, partly due to timing of distributions to
non-controlling interests in the current quarter vs no payments in
the prior year quarter.
Adjusted EBITDA was $17.5 million
in Q1 2021 compared with $19.6
million in Q1 2020, principally related to the weakness in
advertising revenue at WildBrain Spark.
Q1 2021 net loss was $3.3 million
vs a net loss of $16.0 million in the
same prior year quarter. This improvement was attributable to
lower SG&A, lower reorganization and development costs and a
higher non-cash foreign exchange gain in Q1 2021 compared to Q1
2020.
1.
|
Free Cash Flow,
Gross Margin, Adjusted EBITDA and Adjusted EBITDA attributable to
WildBrain are non-GAAP financial measures. Free Cash Flow is
defined as operating cash flow less distributions to
non-controlling interests, changes in interim production financing,
cash interest paid on our long-term debt, bank indebtedness and
lease liabilities and principal repayments on our lease
liabilities. 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,
reorganization and development expenses, impairments,
equity-settled share-based compensation expense, and adjustments
for other identified charges. Adjusted EBITDA attributable to
WildBrain means Adjusted EBITDA excluding the portion of Adjusted
EBITDA attributable to non-controlling interests. Further details
on the definitions of and reconciliation to Free Cash Flow, Gross
Margin, Adjusted EBITDA and Adjusted EBITDA attributable to
WildBrain can be found in the "Non-GAAP Financial Measures" section
of the Company's Q1 2021 MD&A.
|
|
|
2.
|
Net debt includes
long-term debt and bank indebtedness less cash and excludes interim
production financing. Net leverage ratio as discussed in this press
release is a reference to the Total Net Leverage Ratio as defined
in the Company's senior secured credit agreement available on SEDAR
at www.sedar.com.
|
|
|
3.
|
For more details,
refer to the "Revenue Model" section of WildBrain's Q1 2021
MD&A.
|
|
|
4.
|
In Q1 2021, we
reclassified cash interest paid on our long-term debt, bank
indebtedness, and lease liabilities that were previously included
as cash flows used in operating activities, to be reported in the
current quarter as part of cash flows used in financing activities
with a corresponding reclassification to Q1 2020, as these interest
charges do not form part of our ongoing operating activities,
performance and results. Refer to the "Liquidity and Capital
Resources" section of the Company's Q1 2021
MD&A.
|
Q1 2021 Conference Call
The Company will hold a conference call on November 11, 2020 at 10:00
a.m. ET to discuss the results.
To listen, call +1 (888) 231-8191 toll-free or +1 (647) 427-7450
internationally and reference conference ID 9703649. Please allow
10 minutes to be connected to the conference call. Replay
will be available after the call on +1 (855) 859-2056 toll free or
+1 (416) 849-0833, under passcode 9703649, until November 18, 2020.
The audio and transcript will also be archived on our website
approximately two days after the event.
For more information, please contact:
Investor Relations: Nancy Chan-Palmateer - Director,
Investor Relations, WildBrain
nancy.chanpalmateer@wildbrain.com
+1 416-977-7358
Media: Shaun Smith - Director,
Corporate & Trade Communications, WildBrain
shaun.smith@wildbrain.com
+1 416-977-7230
About WildBrain
At WildBrain we inspire imaginations to run wild, engaging kids
and families everywhere with great content across all media. With
approximately 13,000 half-hours of filmed entertainment in our
library - one of the world's most extensive - we are home to such
brands as Peanuts, Teletubbies, Strawberry
Shortcake, Caillou, Inspector Gadget, Johnny Test and Degrassi. At our
75,000-square-foot state-of-the-art animation studio in
Vancouver, BC, we produce such
fan-favourite series as Snoopy in Space, Chip
& Potato, Carmen
Sandiego and more. Our shows are enjoyed
worldwide in more than 150 countries on over 500 streaming
platforms and telecasters, and our AVOD business - WildBrain
Spark - offers one of the largest networks of kids' channels
on YouTube, garnering approximately four billion views per month
from over 200 million subscribers. We also license consumer
products and location-based entertainment in every major territory
for our own properties as well as for our clients and content
partners. Our television group owns and operates four family
entertainment channels that are among the most viewed in
Canada. WildBrain is headquartered
in Canada with offices worldwide
and trades on the Toronto Stock Exchange (TSX: WILD). Visit us
at www.wildbrain.com.
Forward-Looking Statements
This press release contains "forward-looking statements" under
applicable securities laws with respect to the Company including,
without limitation, statements regarding productions in
development, advertising rates and revenue of WildBrain Spark,
investments by the Company and expected benefits from such
investments, future growth and financial and operating performance
of WildBrain Spark, impacts of YouTube's changes to targeted
advertising, impacts of the Peanuts deal with Apple, the markets
and industries in which the Company and its subsidiaries operate,
impacts of COVID-19 on the Company, its business, the markets and
industries in which it operates, the future financial and operating
results of the Company (including leverage), changes to financial
reporting classifications, and the business strategies and
operational activities of the Company and its growth and long-term
prospects. 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 availability of investment
opportunities and at acceptable valuations, epidemics, pandemics or
other public health crises, including the current outbreak of
COVID-19, the magnitude and length of economic disruption as a
result of the worldwide COVID-19 outbreak, the reliance of the
Company on the Internet and other technologies to continue to
conduct its business, failure to meet covenants under the senior
credit facility of the Company, the ability of the Company to
execute on its business strategies and investment opportunities,
the ability of the Company to realize expected operating cost
savings, consumer preferences, market factors, conditions in the
AVOD, entertainment and brands industries, the ability of the
Company to execute on production and licensing arrangements, 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. 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 WildBrain Ltd.