DHX Media reports 2nd quarter results and institutes dividend
INITIAL QUARTER WITH COOKIE JAR RESULTS - GROSS MARGIN UP 82%, ADJUSTED EBITDA INCREASES 90%
HALIFAX, Feb. 14, 2013 /CNW/ - DHX Media Ltd. ("DHX Media" or the "Company") (TSX: DHX), a leading independent international producer, distributor and licensor of mainly children's entertainment content, is pleased to announce its financial results for the quarter ended December 31, 2012 and its first ever quarterly dividend.
Highlights of Q2 2013 Results:
(All amounts in Canadian dollars)
- Revenues of $26.36 million, up 7% from $24.68 million for Q2 2012, due to the contribution of the Cookie Jar, generally driven by distribution revenue growth and offset by timing shift of Yo Gabba Gabba live tour;
- Gross margin increased to $13.98 million (53% of revenues), up 82% from $7.69 million for Q2 2012 (31% of revenues);
- Adjusted EBITDA1 of $6.87 million, an increase of 90% from $3.62 million in EBITDA for Q2 2012;
- One-time charges of $3.43 million ($2.23 million after-tax) for acquisition-related costs associated with the Cookie Jar transaction;
- Normalized net income of $2.52 million (up 38% over Q2 2012-$1.83 million), or $0.03 per share, after adding back one-time Cookie Jar acquisition-related costs. Q2 2013 reported net income was $0.29 million, or $0.00 per share, down from a net income of $1.83 million, or $0.03 per share, a decrease of 84%, from Q2 2012; and
- Cost synergy target from Cookie Jar acquisition up 25% to $10 million from previous target of $8 million.
1 EBITDA represents income of the Company before amortization, finance income (expense), taxes, share of loss of associates, development expenses and any impairments, share-based compensation expense, and Adjusted EBITDA includes adjustments for other one-time charges. (See Q2 2013 MD&A definition of EBITDA and Adjusted EBITDA for full details).
The board of directors has declared a dividend of $0.0075 on each common share outstanding, payable on March 15, 2013 to the shareholders of record at the close of business February 25, 2013. The board of directors will regularly assess the quarterly dividend payout level.
Michael Donovan, CEO, DHX Media commented, "We are very pleased to announce our initial quarterly results including a contribution from our Cookie Jar acquisition which closed on October 22, as well as the initiation of a regular dividend of $0.0075 per common share for the quarter. This acquisition has delivered a significant increase in our gross margin, adjusted EBITDA and adjusted net income. We are also pleased to raise the target for our cost synergy run-rate by 25% to $10 million, the majority of which will be achieved by our June 30th year end."
Analyst call details
The Company will hold a conference call for analysts to discuss its Q2 2013 financial results on Thursday, February 14th at 10:00 am EST, following the release of its financial results. Media and others may access this call on a listen-in basis. Conference call details are as follows:
To access the call, please dial +1(888)231-8191 toll-free or +1(647)427-7450 internationally. Please allow 10 minutes to be connected to the conference call.
Replay: Instant replay will be available beginning approximately one hour after the call on +1(855)859-2056 toll free or +1(416)849-0833, and passcode 93149281, until midnight EST Thursday, February 21st.
Consolidated Statements of Income and Comprehensive Income Data
|Three Months Ended||Three Months Ended|
|December 31, 2012||December 31, 2011|
|(except per share data)||(except per share data)|
|Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Data:|
|Direct production costs and amortization of film and television produced||(10,900)||(16,990)|
|Amortization of book value of acquired DHX Cookie Jar library||(1,474)||-|
|Selling, general, and administrative||(9,346)||(4,140)|
|Impairment in value of investment in film and television programs||-||-|
|Share of loss of associates||(56)||(7)|
|Amortization, finance and other expenses, net||(3,834)||(1,001)|
|Provision for income taxes||(461)||(702)|
|Cumulative translation adjustment||130||(352)|
|Realized loss on available for sale investments||29||-|
|Change in fair value of available-for-sale investments, net of tax||(228)||55|
|Comprehensive income (loss)||218||1,538|
|Basic earnings per common share||0.00||0.03|
|Diluted earnings per common share||0.00||0.03|
|Weighted average common shares outstanding (expressed in thousands)|
Revenues for Q2 2013 were $26.36 million, up 7% from $24.68 million for Q2 2012. The increase in Q2 2013 was generally due to a significant increase in distribution revenue driven by a proliferation of new digital buyers and the acquisition of DHX Cookie Jar and offset generally by a reduction in producer and service fee revenue (driven by Management's decision to wind down lower margin service work in its LA studio) and scheduled timing of Yo Gabba Gabba! Live! shows.
Proprietary production revenues: Proprietary production revenues for Q2 2013 were $3.66 million, a decrease of 26% compared to $4.92 million for Q2 2012. The overall decrease was mainly due to scheduled timing of deliveries and in particular no activity in Q2 2013 for DHX Cookie Jar.
For Q2 2013, the Company added 21.0 half-hours to the library. The breakdown for Q2 2013 is 14.0 half-hours - $3.66 million of proprietary film and television program production revenue versus the 31.0 half-hours for Q2 2012, where the programs have been delivered and the license periods have commenced for consolidated entities and 7.0 half-hours in intellectual property ("IP") rights for third party produced titles (1.0 half-hours in Q2 2012). Q2 2013 proprietary deliveries were in line with scheduled deliveries and Management's expectations.
DHX continued to strategically target third party produced titles for IP rights. As noted above, for Q2 2013, the Company added to the library 7.0 half-hours for Rastamouse. For Q2 2012, the Company added 1.0 half-hours for Rastamouse.
Producer and service fee revenues: For Q2 2013, the Company earned $5.82 million for producer and service fee revenues, a decrease of 41% versus the $9.85 million for Q2 2012. This was due to Management's decision, coming out of its integration with DHX Cookie Jar, to lower SG&A on lower margin parts of the business, to wind down its lower margin LA service studio and focus on its higher margin animation studios in Canada. Also, it was further due to the delay in scheduling of two productions (approximately representing $2-3 million in revenue). Management expects service production revenue to generally be caught up in Q3 and Q4 2013.
Distribution revenues: For Q2 2013, Management is pleased to report distribution revenues were up 417% to $9.26 million from $1.79 million for Q2 2012, primarily due to the proliferation of new digital customers and the addition of DHX Cookie Jar. For the Q2 2013, the Company closed significant deals, among others previously announced, as follows: Gaiam Vivendi Entertainment, Dish Network LLC, Viacom Media Networks, PBS, Daily Motion, and Turner Broadcasting System Europe.
M&L-owned (including music and other royalty revenues): For Q2 2013, M&L-owned decreased 40% to $4.19 million (Q2 2012-$7.01 million). For Q2 2013, there were 13 scheduled Yo Gabba Gabba! Live! shows generating $2.28 million (representing approximately 25% of expected revenue for the 2013 fiscal year tour) as compared to Q2 2012 of several tour stops representing $5.15 million in revenue. For Q2 2013, other Yo Gabba Gabba! M&L was $0.94 million, down 14% from $1.09 million for Q2 2012. The remaining M&L-owned was $0.82 million, up 8% as compared to $0.76 million for Q2 2012.
M&L-represented revenues: For Q2 2013, M&L-represented revenue was $2.10 million from CPLG (Q2 2012-nil) which only included 70 days of activity and was acquired as part of the acquisition of DHX Cookie Jar.
New Media and Rental revenues: For Q2 2013, new media revenues increased 20% to $1.26 million (Q2 2012-$1.05 million) based primarily on scheduled timing of certain UMIGO deliverables. For Q2 2013, rental revenues were $0.07 million, up 17% from Q2 2012 of $0.06 million, as a result of rental revenues of studio and office facilities to third parties of the Company's Toronto office.
Gross margin for Q2 2013 was $13.99 million, an increase in absolute dollars of 82% compared to $7.69 million for Q2 2012. DHX is pleased to report the overall gross margin for Q2 2013 at 53% of revenue was above the high end of Management's expectations, driven by a strong quarter for margins on new digital distribution deals, production, and M&L revenues. Gross margin for Q2 2013 was calculated as revenues of $26.36 million less direct production costs and amortization of investment in film of $10.90 million and less $1.47 million amortization of the acquired DHX Cookie Jar library (Q2 2012-$24.68 million less $16.99 million and less nil, respectively).
Operating expenses for Q2 2013 were $13.24 million compared to $5.15 million for Q2 2012, an increase of 157%.
SG&A costs for Q2 2013 were up 126% at $9.35 million compared to $4.14 million for Q2 2012. The increase in SG&A in Q2 2013 is due to the inclusion of $2.84 million (Q2 2012-nil) for DHX Cookie Jar which was acquired on October 22, 2012 and $2.00 million (Q2 2012-nil) for severance and workforce harmonization costs related to the integration of DHX Cookie Jar.
EBITDA and Adjusted EBITDA
For Q2 2013, EBITDA was $3.45 million, down $0.17 million or 5% versus $3.62 million for Q2 2012. For Q2 2013, Adjusted EBITDA was $6.87 million, up $3.25 million or 90% over $3.62 million for Q2 2012. For Q2 2013, Adjusted EBITDA includes add backs for one-time charges, noted herein, relating to the Cookie Jar Acquisition totalling $3.43 million, consisting of $2.00 million, shown in salaries and employee benefits in SG&A, for severance costs, and $0.57 million for terminated development contracts, shown in development expenses and other, and $0.86 million for acquisition costs.
About DHX Media Ltd.:
DHX Media (www.dhxmedia.com) is a leader in the creation, production and licensing of family entertainment rights. DHX Media owns, markets and distributes over 8,500 half hours of children's entertainment content, and exploits owned properties through its consumer products licensing business. DHX Media is recognized for brands such as Caillou, Richard Scarry's Busytown Mysteries, Inspector Gadget, Johnny Test, Animal Mechanicals, Kid vs. Kat, Super WHY!, Rastamouse, and Yo Gabba Gabba!. The company also provides programming for Cookie Jar TV, the weekend morning block on CBS. DHX Media's full-service international licensing agency, Copyright Promotions Licensing Group, (CPLG), represents numerous entertainment, sport and design brands. DHX Media has offices in Toronto, Los Angeles, Vancouver, Halifax, London, Paris, Barcelona, Lisbon, Milan, Munich, Netherlands and is listed on the Toronto Stock Exchange.
This press release contains forward looking statements with respect to the Company, including statements about the value of the substantial issuer bid to the Company's remaining shareholders and its effects on the Company's earnings per share. 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 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 risks related to market factors, including changing popularity of the titles in the Company's production library, application of accounting policies and principles, and production related risks, and other factors discussed in materials filed with applicable securities regulatory authorities from time to time including matters discussed under "Risk Factors" in the Company's short form prospectus dated September 25, 2012. 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.
SOURCE: DHX MEDIA LTD.For further information:
David A. Regan - EVP, Corporate Development & IR +1 902-423-0260