DHX Media reports first-quarter results - Improved Gross Margin and Cash
Flows on Lower Q1 Revenues

    TSX: DHX

HALIFAX, Nov. 16 /CNW/ - DHX Media Ltd. ("DHX Media" or the "Company") (TSX ticker: "DHX"), a leading independent international producer and distributor of mainly children's entertainment content, is pleased to announce the release of its unaudited consolidated financial results for the quarter ended September 30, 2009.

    Highlights of Q1 2010 Results:
    (All amounts in Canadian dollars)

         - Revenues decreased 23% to $12.95 million, down from $16.87 million
           in Q1 2009;

         - Gross Margin increased to 36%, up from 30% in Q1 2009;

         - Gross profit decreased 7% to $4.66 million, down from $4.99
           million in Q1 2009;

         - EBITDA(1) decreased 18% to $1.51 million, down from $1.85 million
           for Q1 2009;

         - Net income was $0.01 million, down from $0.52 million for Q1 2009;

         - Cash provided by Adjusted Operating Activities(2) was $1.12
           million, up from negative $0.98 million in Q1 2009; and

         - Deliveries of television productions for which the company holds
           rights totaled 99 half-hours, a decrease of 8% from 107.5 in Q1
           2009. (See "Revenues" section of the Company's Q1 2010 MD&A for
           further detail.)

    (1) EBITDA represents net income of the Company before amortization,
        interest and other income (expense), taxes, non-controlling interest,
        equity income, development expenses, stock-based compensation
        expense, costs associated with abandoned transactions, and impairment
        in value of certain investment in film and television programs.
    (2) Adjusted Operating Activities is a non-GAAP measure of cash inflows
        and outflows from operating activities adjusted for increases and
        decreases in interim production financing.

Michael Donovan, Chairman and CEO, DHX Media commented, "While we continue to deliver on our strategy of content creation and exploitation, the effects of last winter's economic slowdown appear in this quarter's financial results. However, we are pleased with the delivery of 99 half-hours of programming, in line with management expectations, and the recent announcements of new and renewed commissions by our customers. In addition, several new significant distribution deals with foreign buyers were announced during the quarter. These distribution sales helped to buffer our gross margin and contributed toward the $614,000 added to our cash balance in the quarter, which now stands at $11.5 million."

    Consolidated Statements of Income and Comprehensive Income Data
                                     Three Months Ended  Three Months Ended
                                     September 30, 2009  September 30, 2008
                                                  ($000)              ($000)
                                            (except per         (except per
                                             share data)         share data)

    Consolidated Statements of Income
     and Comprehensive Income Data:

    Revenues                                     12,948              16,871
    Direct production costs and
     amortization of film and television
     produced                                     8,287              11,878
    Gross margin                                  4,661               4,993
    Selling, general, and administrative          3,452               3,338
    Impairment in value of certain
     investment in film and television
     programs                                       159                   -
    Income before the following and
     discontinued operations                        738               1,506
    Income (loss) from strategic
     investments                                    (53)                 72
    Costs associated with abandoned
     transactions                                     -                   -
    Provision for income taxes                       92                 345
    Net income and comprehensive income
     before discontinued operations                   9                 610
    Discontinued operations, net of
     income tax                                       -                 (80)
    Net income and comprehensive income               9                 530
    Basic earnings before discontinued
     operations per common share                   0.00                0.01
    Diluted earnings before discontinued
     operations per common share                   0.00                0.01
    Basic earnings per common share                0.00                0.01
    Diluted earnings per common share              0.00                0.01
    Weighted average common shares
      Basic                                      44,335              42,783
      Diluted                                    44,513              42,783

                                     As at September 30,      As at June 30,
                                                   2009                2009
                                                  ($000)              ($000)

    Consolidated Balance Sheet Data:

    Cash, restricted cash and short-term
     investments                                 11,500              11,086
    Investment in film and television
     programs                                    31,058              35,827
    Total assets                                138,548             148,803
    Total liabilites                             77,800              88,253
    Shareholders' equity                         60,748              60,550


Revenues for Q1 2010 were $12.95 million, down 23% from $16.87 million for Q1 2009. The decrease in Q1 2010 was generally due to lower deliveries of proprietary programs versus Q1 2009. Proprietary deliveries are seasonal and Q1 2009 was a more robust quarter for deliveries than compared to Q1 2010. The slowdown in advertising dollars for some of our broadcast customers has translated into a slowdown of production revenue for Q1 2010 versus Q1 2009 as broadcasters have not been committing to new shows as quickly.

Proprietary production revenues for Q1 2010 of $5.59 million were down 60% compared to $14.11 million for Q1 2009. For Q1 2010 the Company recognized 59.0 half-hours of proprietary film and television program production revenue, a 26% decrease versus the 79.5 half-hours for Q1 2009, where the programs have been delivered and the license periods have commenced.

In addition, for Q1 2010 the Company delivered 40 half-hours of productions where the Company has Canadian rights and other minority participation rights, which are being accounted for using the percentage of completion method, and shown in producer and service fee revenues. This represents a 60% increase over 25 half-hours for Q1 2009.

For Q1 2010 distribution revenues were up 157% to $3.75 million from $1.46 million for Q1 2009, and slightly above Management's expectations. For Q1 2010 the Company recognized revenue on several contracts throughout its existing library and delivered episodes of newer titles. Some of the more significant sales were on the following titles: The Latest Buzz Seasons I, II, and III, Animal Mechanicals Seasons I and II, Franny's Feet Seasons I, II, and III, Super Why Season I, Kid vs. Kat Season I, Poppets Town Season I, and Martha Speaks Season I. Management was very pleased with the Q1 2010 distribution revenues given the downturn in the economy and believe it speaks to the quality of the content in the Company's library.

For Q1 2010 the Company earned $2.87 million for producer and service fee revenues (including Canadian and limited rights proprietary television), an increase of 181% over Q1 2009. For Q1 2010 music and royalty revenues increased 5% to $0.21 million (Q1 2009-$0.20 million). New media revenues increased in Q1 2010 to $0.35 million (Q1 2009-$0.03 million).

Gross Margin

Gross margin for Q1 2010 was $4.66 million, a decrease in absolute dollars of 7% compared to $4.99 million for Q1 2009. The overall margin at 36% of revenue for Q1 2010 was at the high end of Management's expectations.

Operating Expenses

Operating expenses for Q1 2010 were $3.92 million compared to $3.48 million for Q1 2009, an increase of 13%. The increase for Q1 2010 was due to net increases over Q1 2009 in the following categories: $0.15 million increase in amortization of acquired library due to production mix, a $0.16 million increase in impairment in value of certain investment in film, and a $0.11 million increase in non-cash stock based compensation expense. SG&A costs excluding stock based compensation were flat at $3.15 million. Management continues to target SG&A reductions of 5% for the remainder of 2010.


In Q1 2010 EBITDA was $1.51 million, an 18% decrease as compared to $1.85 million for Q1 2009. For Q1 2010 this was generally due to the decrease in gross margin dollars of $0.33 million.

Net Income and Comprehensive Income

Net income and comprehensive income for Q1 2010 was $0.01 million, compared to income of $0.53 million for Q1 2009, a decrease of $0.52 million in absolute dollars.

DHX Media's complete financial statements are available at www.dhxmedia.com or on www.sedar.com.

About DHX Media Ltd.

DHX Media Ltd. is a leading international producer and distributor of television programming and interactive content with an emphasis on children, family and youth markets. DHX Media Ltd. shares are listed on the TSX, the Toronto Stock Exchange. DHX Media's production companies, Decode Entertainment, Halifax Film, Studio B Productions and imX Communications, are the producers or co-producers of 16 original television series and theatrical releases currently commissioned for production and maintain a growing library of over 2,400 half-hours of mostly children and youth-oriented television productions. www.dhxmedia.com


This press release contains forward looking statements with respect to 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 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, customer contract interpretation, 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 November 7, 2007 and in the Company's Amended Annual Information Form incorporated by reference therein. 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.

%SEDAR: 00023380E


For further information: For further information: David A. Regan - EVP, Corporate Development & IR, DHX Media Ltd, (902) 423-0260

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