- Revenue grew 4% to $122.1 million
in Q2 2020 and grew 6% to $234.4
million in H1 2020.
- Cash flow from operations of $46.6
million in Q2 2020 vs $11.6
million in Q2 2019. H1 2020 operating cash flow of
$65.3 million vs $1.6 million a year ago.
- Positive free cash flow of $13.3
million in Q2 2020 vs free cash flow of $12.9 million in Q2 2019. H1 2020 positive
free cash flow of $20.9 million vs
free cash flow of $7.4 million in the
year prior.
- Adjusted EBITDA was $25.6 million
compared to $22.0 million in Q2
2019. H1 2020 adjusted EBITDA of $45.2
million vs $39.3 million in H1
2019.
- Net loss of $2.3 million vs a net
loss of $17.9 million in Q2 2019. H1
2020 net loss of $18.3 million vs a
net loss of $20.3 million in H1
2019.
- WildBrain Spark views grew 36% to over 9.9 billion in Q2 2020
and grew 51% to 22.0 billion views in H1 2020.
- Paid down $50.2 million on the
term loan in Q2 2020 from proceeds of the rights offering. In
H1 2020, paid down $57.8 million on
the term loan.
- Net leverage ratio of 5.09x as at December 31, 2019 vs 5.92x at year-ending
June 30, 2019.
HALIFAX, Feb. 13, 2020 /CNW/ - WildBrain Ltd.
("WildBrain" or the "Company") (TSX: WILD), a global leader in kids
and family entertainment, today reported its Fiscal 2020 second
quarter (Q2 2020) and first six-month (H1 2020) results for the
periods ended December 31, 2019.
Eric Ellenbogen, WildBrain CEO,
said: "With double-digit growth in viewership this quarter,
WildBrain Spark continues to be a valuable platform for our own IP
and partner brands. We're committed to growing views and building
WildBrain Spark as an integral part of the overall WildBrain
offering of content production, distribution and licensing. We're
also capitalizing on the demand for original kids' shows with more
Peanuts content for Apple TV+ and a global exclusive for a second
season of the preschool series, Chip & Potato, for
Netflix. Our improving financial position allows us to execute on
our plans, focusing on creative development, our AVOD business and
IP and brands, all of which will contribute to long-term
growth."
In January 2020, YouTube
introduced new rules and policies regarding targeted advertising on
kids' content. Absent WildBrain's own initiatives in direct
advertising sales and any mitigating actions by YouTube, we expect
there would be a negative impact on revenue at WildBrain Spark in
the back half of Fiscal 2020. Initially, in the first few
weeks following the change, WildBrain Spark experienced a revenue
decline of approximately 40%, compared with the same period last
year.
Ellenbogen added, "We're taking actions to address the changes
made by YouTube and continue to see significant value in our large
and growing user base. We believe these changes will result in a
more positive and curated environment for kids, and ultimately,
improved monetization that will reward quality content. We're
ideally positioned to benefit from this move over the long
term."
Q2 2020 Performance - Executing on Priorities
PRIORITIES
|
HIGHLIGHTS
|
Grow Brands and
Build Awareness on WildBrain Spark
|
• WildBrain
Spark's online audience up by 36% to over 9.9 billion views in the
quarter vs a year ago. This amounted to more than 52.0
billion minutes of videos watched, up 36% from Q2 2019.
|
Create Premium
Kids' Content to Drive Franchise Brands
|
• More new
Peanuts content in production as part of our agreement with Apple
TV+.
• Pre-production
on Season 2 of original preschool series Chip & Potato
underway for Netflix.
|
Improve Cash Flow
and Balance Sheet
|
• Generated
$46.6 million in positive operating cash flow for Q2 2020 vs $11.6
million in Q2 2019.
• Generated
$13.3 million in positive free cash flow for Q2 2020 vs free cash
flow of $12.9 million in Q2 2019.
• Paid down
$50.2 million on the term loan from proceeds of the rights
offering. In H1 2020, $57.8 million was paid down on the term
loan.
|
Financial Highlights
Financial
Highlights
(in millions of
Cdn$)
|
Three Months
ended
December
31,
|
Six Months
ended
December
31,
|
2019
|
2018
|
2019
|
2018
|
Revenue
|
$122.1
|
$117.0
|
$234.4
|
$221.1
|
Gross
Margin
|
$54.5
|
$48.8
|
$103.9
|
$91.6
|
Gross Margin
(%)
|
45%
|
42%
|
44%
|
41%
|
Adjusted EBITDA
attributable to WildBrain
|
$25.6
|
$22.0
|
$45.2
|
$39.3
|
Net Loss attributable
to WildBrain
|
$(2.3)
|
$(17.9)
|
$(18.3)
|
$(20.3)
|
Basic Loss per
Share
|
$(0.02)
|
$(0.13)
|
$(0.13)
|
$(0.15)
|
Q2 2020 revenue rose 4% to $122.1
million and was up 6% to $234.4
million in the first-half of Fiscal 2020 compared with the
prior year periods. Higher revenue for the quarter and the
six-month periods were driven by our non-WildBrain Spark
distribution, WildBrain Spark ad-based video-on-demand ("AVOD") and
consumer products-owned businesses.
In Q2 2020, non-WildBrain Spark distribution revenue rose 7% to
$14.6 million compared with a year
ago, benefiting from several large library deals, which
demonstrates the variability in revenue by quarter depending on
timing of deals.
WildBrain Spark revenue grew 21% to $24.2
million in Q2 2020, fueled by growing viewership on our AVOD
network. Views rose 36% to over 9.9 billion in Q2 2020.
This amounted to more than 52.0 billion of minutes of videos
watched on WildBrain Spark, up 36% from the same prior year
quarter. In H1 2020, WildBrain Spark revenue rose 28% to
$46.3 million.
Our consumer products-owned revenue rose by 9% to $47.3 million in Q2 2020 vs $43.4 million in Q2 2019, reflecting the enduring
appeal of the Peanuts franchise and the launch on Apple TV+ of new
content produced in our Vancouver
studio.
Gross margin increased to 45% and 44% in Q2 2020 and H1 2020,
respectively. This compared with 42% and 41% for each of the
same prior year periods in Fiscal 2019. The increases were
largely due to higher non-WildBrain Spark distribution revenue and
the impact of IFRS 16.
As part of our previously stated reorganization initiatives in
which we expect to incur one-time cash charges in the range of
$10.0 to $12.0
million, approximately $8.4
million was expensed in H1 2020. These initiatives are
progressing on track and are expected to be completed by the end of
this fiscal year. A portion of the estimated $10.0 million in annual savings is being
redeployed back into growth areas, including creative, our AVOD
business and brands.
Adjusted EBITDA rose to $25.6
million in Q2 2020 and to $45.2
million in H1 2020. This compared with $22.0 million in Q2 2019 and $39.3 million in H1 2019. The adoption of
the IFRS 16 accounting standard for leases positively impacted
adjusted EBITDA by $2.3 million in Q2
2020. Normalizing for the IFRS 16 impact, adjusted EBITDA was
up $1.3 million in Q2 2020. In
H1 2020, IFRS 16 positively impacted adjusted EBITDA by $4.1
million while the first quarter of Fiscal 2019 included an
incremental $1.3 million related to a
higher ownership stake in Peanuts for part of last year's
quarter4. Normalizing for these items, adjusted
EBITDA rose by $3.0 million in the
first half of Fiscal 2020.
Q2 2020 saw a net loss of $2.3
million vs a net loss of $17.9
million in the same quarter last year. This
improvement was partly due to a net positive impact of non-cash,
unrealized foreign exchange gain of $22.4
million and higher gross margins of $5.7 million in the current quarter. In H1
2020, net loss was $18.3 million
compared with a net loss of $20.3
million in the same period a year ago. The improvement
in the first half of the year was due in part to a positive change
in non-cash, unrealized foreign exchange gain of $14.7 million and higher gross margins of
$12.3 million in the current period,
offset by a higher write-down of $4.8
million for certain investments in film and television
titles determined in the context of current market conditions.
As part of our commitment to reduce debt, we paid down
$50.2 million on our term loan from
the net proceeds of the rights offering that closed during the
quarter. As a result, our net leverage ratio was 5.09x at
December 31, 2019 compared to 5.92x
at year-ending June 30, 2019.
Concurrent with the debt repayment, our net leverage ratio covenant
requirement under the term loan was fixed at 6.75x with no step
downs for the remainder of the term through to December 2023.
1.
|
Free Cash Flow,
Gross Margin and Adjusted EBITDA 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, and repayments of 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, development
expenses, impairments, equity-settled share-based compensation
expense, and adjustments for other identified charges. Further
details on the definitions of and reconciliation to Free Cash Flow,
Gross Margin and Adjusted EBITDA can be found in the "Non-GAAP
Financial Measures" section of the Company's Q2 2020
MD&A.
|
2.
|
Net debt includes
long-term debt, lease liabilities 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.
|
The Company
implemented the IFRS 16 accounting standard in Q1 2020, which
introduced a single accounting model and eliminated the distinction
between operating and finance leases for lessees. The adoption of
IFRS 16 affected adjusted EBITDA and net income. See note 3
in the Q2 2020 interim consolidated financial
statements.
|
4.
|
On July 23, 2018,
we sold a stake in Peanuts, reducing our ownership from 80% to 41%
in the franchise. As a result of the sale, Q1 2019 adjusted EBITDA
attributable to WildBrain included 23 days of our 80% ownership and
69 days of our 41% stake.
|
Q2 2020 Conference Call
The Company will hold a conference call on February 13, 2020 at 8:00
a.m. ET to discuss Q2 2020 results.
To listen, call +1 (888) 231-8191 toll-free or +1 (647) 427-7450
internationally and reference conference ID 5462579. 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,
under passcode 5462579, until 11:59 p.m.
ET, February 20, 2020.
The audio and transcript will also be archived on the Company's
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 make great content for kids and families. 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 and
Degrassi. Our shows are seen in more than 150 countries on
over 500 telecasters and streaming platforms. Our AVOD business -
WildBrain Spark - offers one of the largest networks of
kids' channels on YouTube, with over 145 million subscribers. We
also license consumer products and location-based entertainment in
every major territory for our own properties as well 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 (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 the expected future
financial and operating performance of WildBrain Spark, YouTube's
introduction of new rules and policies regarding targeted
advertising on kids' content and resulting changes, the Company's
production pipeline, the strategic priorities of the Company, the
management and business reorganization of the Company, charges and
cost savings associated with such reorganization, use of funds
available from such reorganization, and timing to complete, the
business strategies and operational activities of the Company, and
the future growth and 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 and cost savings, consumer preferences, market
factors, 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, 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 WildBrain Ltd.