DHX Media Ltd. announces its unaudited financial results for the first quarter of fiscal 2024, ended September 30, 2024.
Highlights of Q1 2024:
(All amounts in Canadian dollars)
- Revenues: up 48% to $63.9 million, from $43.0 million for Q1 2024;
- Adjusted EBITDA1: up 34% to $18.4 million, from $13.7 million for Q1 2024; and
- Net Income1: up to $7.5 million ($0.06/share), from a loss of $7.7 million ($0.06/share) for Q1 2024, and adjusted net income up 51% to $8.3 million ($0.07/share), from $5.5 million ($0.05/share) for Q1 2024.
1Adjusted EBITDA represents income of the Company before amortization, finance income (expense), taxes, development expenses and any impairments, share-based compensation expense, and adjustments for other identified charges. Adjusted Net Income adjusts net income (loss) for certain identified charges, net of the tax effect. (See the complete definition of Adjusted EBITDA and Adjusted Net Income in the Company's Management Discussion and Analysis for Q1 2024 for full details).
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Dana Landry, CEO of DHX Media, commented: "We continued to generate double- and triple-digit growth across key metrics this quarter, including strong organic growth. The streaming market is expanding globally into new territories such as China, and our scale and integrated platform of production, distribution, broadcast and licensing allows us to leverage key opportunities across this evolving media landscape. As our business units rise to meet the growing demand for DHX's brands, this has translated into solid results."
Dividend Declaration
On November 12, 2024 the board of directors approved a dividend for the quarter of $0.015, on each common voting share and variable voting share outstanding to the shareholders of record at the close of business December 4, 2024 to be paid December 29, 2024.
Consolidated Statements of Income and Comprehensive Income Data
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Three Months Ended
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Three Months Ended
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September 30, 2024
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September 30, 2024
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($000, except per share data)
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Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) Data:
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Revenues...................................................................................................................................................
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63,910
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43,031
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Direct production costs and expense of film and television produced..........................................
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(28,249)
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(17,083)
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Expense of book value of acquired libraries.......................................................................................
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(1,104)
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(874)
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Gross margin............................................................................................................................................
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34,557
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25,074
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Selling, general, and administrative.....................................................................................................
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(17,276)
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(11,953)
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Amortization, finance and other expenses, net...................................................................................
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(8,390)
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(23,252)
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Provision for income taxes.....................................................................................................................
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(1,367)
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2,398
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Net income (loss)....................................................................................................................................
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7,524
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(7,733)
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Cumulative translation adjustment
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(3,830)
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(2,893)
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Comprehensive income (loss)..............................................................................................................
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3,694
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(10,626)
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Basic earnings (loss) per common share..........................................................................................
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0.06
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(0.06)
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Diluted earnings (loss) per common share........................................................................................
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0.06
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(0.06)
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Weighted average common shares outstanding (expressed in thousands)...............................
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Basic.................................................................................................................................................
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123,987
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119,894
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Diluted for net income (loss).......................................................................................................
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126,290
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119,894
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Diluted for normalized net income..............................................................................................
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126,290
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122,969
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Normalized net income...........................................................................................................................
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8,321
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5,535
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Basic normalized earnings per common share.................................................................................
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0.07
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0.05
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Diluted normalized earnings per common share..............................................................................
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0.07
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0.05
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Q1 2024 Results
Revenues
Revenues for Q1 2024 were $63.91 million, up 48% from $43.04 million for Q1 2024. The increase in Q1 2024 was generally due to increases in distribution, which accounted for 19% of the growth (98% organic, 2% acquisitive), new media, producer and service fee revenue, which accounted for 37% of the growth (75% organic, 25% acquisitive), M&L-represented, which accounted for 18% of the growth (all organic growth), and acquisitive growth for DHX Television, which accounted for 23%.
Proprietary production revenues: Proprietary production revenues for Q1 2024 were $4.10 million, a decrease of 26% compared to $5.56 million for Q1 2024. For Q1 2024, the Company added 39.0 proprietary half-hours to the library up 26% versus 31.0 proprietary half-hours for Q1 2024. The proprietary production revenue was within Management's range for quarterly pacing provided in the 2024 Annual MD&A. The number of half-hours delivered was consistent with Management's expectations. The lower per half-hour proprietary production revenue was as expected as certain of the scheduled Q1 2024 proprietary production deliveries were for pre-sales for the Teletubbies and will be recognized when the license window opens, factoring in these pre-sales would bring the per half-hour proprietary production revenue in-line with historical norms. For Q1 2024, the Company added 30.0 half-hours for shows in intellectual property ("IP") rights for third party produced titles (Q1 2024-nil).
Distribution revenues: For Q1 2024, distribution revenues were up 40% to $14.03 million (1% acquisitive and 39% organic), from $9.99 million for Q1 2024, primarily due to the continuing growth of new digital customers, platforms, and territories and was at the midpoint of Management's quarterly pacing expectations. The results continued to benefit somewhat from the tail winds created by the weakening Canadian dollar relative to USD and GBP. For Q1 2024, amongst other key distribution deals for both linear and digital platforms, the Company closed a significant and previously announced deal with Zhejiang Tmall Network Co., Ltd (Alibaba). Also included in these figures are certain digital revenues such as advertising and subscription video on demand ("VOD") revenues, from multiple platforms including Amazon and YouTube. The net cash contribution from Google (Youtube.com) relationship for Q1 2024 was $1.93 million (gross revenue-$3.52 million), up 34% versus Q1 2024 of $1.44 million (gross revenue-$2.62 million).
Television revenues: For Q1 2024, television revenues were $18.82 million (Q1 2024-$13.99 million), which was at the high end of Management's quarterly expectations for DHX Television. DHX Television was owned for all of Q1 2024 (92 days versus 62 days of Q1 2024) accounting for the absolute increase. On a per day basis, this amounted to a 9% decrease, in-line, but at the high end of Management's expectations as per its revised strategy. Approximately 89% or $16.78 million of the television revenues were subscriber revenues, while advertising, promotion, and digital revenues accounted for a combined 11% or $2.04 million of the total television revenues.
M&L-owned (including music and royalties): For Q1 2024, the M&L-owned was $4.71 million, up 55% (32% acquisitive and 23% organic) as compared to $3.04 million for Q1 2024, as the Company continued to recognize revenues related to non-refundable minimum guarantees associated with Teletubbies and Twirlywoos M&L deals and also recognized revenues of $1.23 million associated with the 2024 Big Ticket Concert tour. M&L-owned revenues were below the low end of Management's quarterly expectations based on timing of recognition of certain minimum guarantees. Management expects to make this up in Q2 and Q3 2024 and be on track with annual expectations.
M&L-represented revenues: For Q1 2024, M&L-represented revenues were up $3.73 million to $6.71 million compared to Q1 2024 at $2.98 million, and were well above the high end of Management's Q1 2024 expectations, driven mainly by an exceptional performance of our represented brands Despicable Me and Minions in several territories; the results also benefited from tail winds created by the weakening Canadian dollar compared to the GBP.
Producer and service fee revenues: For Q1 2024, the Company earned $14.30 million for producer and service fee revenues, an increase of 115% (29% acquisitive and 86% organic) versus the $6.64 million from Q1 2024, well above the high end of Management's expectations. This increase was a result of a combination of the acquisition of Nerd Corps, and continued strong global demand for children's content.
New media revenues: For Q1 2024, new media revenues were up $0.39 million or 47% (9% acquisitive and 38% organic) to $1.23 million (Q1 2024-$0.84 million) based primarily on apps, games, and final UMIGO deliverables.
Gross Margin
Gross margin for Q1 2024 was $34.56 million, an increase in absolute dollars of $9.49 million or 38% compared to $25.07 million for Q1 2024. The overall gross margin for Q1 2024 at 54% of revenue was at the lower end of Management's quarterly expectations and was the result of slightly lower than expected margins for digital distribution deals and producer and service fee margins that were at the lower end of Management's quarterly expectations. Gross margins for DHX Television were 53% or $10.06 million, calculated as revenue of $18.82 million, less programming costs, third party fees, and other direct creative costs of $8.76 million and do not yet reflect the inventory cost savings expected as a result of the Company's rebranding efforts and new strategy. Gross margin for Q1 2024, including DHX Television, was calculated as revenues of $63.91 million, less direct production costs and expense of investment in film of $28.25 million and $1.10 million expense of book value of acquired libraries, (Q1 2024-$43.03 million less $17.08 million and less $0.87 million, respectively).
Operating Expenses (Income)
SG&A
SG&A costs for Q1 2024 increased 45% to $17.28 million compared to $11.95 million for Q1 2024. For Q1 2024, SG&A includes all of the SG&A associated with the DHX Television, Echo Bridge, and Nerd Corps acquisitions. SG&A also reflects increased levels of SG&A within DHX Brands and DHX Distribution as Management has continued to add resources in these areas to take advantage of the M&L opportunities associated with Teletubbies and Twirlywoos and the global expansion of digital distribution platforms. SG&A includes $1.09 million (Q1 2024-$0.61 million) in non-cash share-based compensation. When adjusted, cash SG&A at $16.19 million was just above the midpoint of Management's quarterly SG&A expectations.
Adjusted EBITDA
For Q1 2024, Adjusted EBITDA was $18.37 million, up $4.65 million or 34% over $13.73 million for Q1 2024. Please see the "Use of Non-GAAP Financial Measures" and "Reconciliation of Historical Results to Adjusted EBITDA" sections of the MD&A for the definition and calculation of Adjusted EBITDA.
Please see DHX Media's Q1 MD&A for fiscal 2024 for further details, available at www.dhxmedia.com or on www.sedar.com or www.sec.gov/edgar.
DHX Media's complete financial statements are available at www.dhxmedia.com or on www.sedar.com. Unless noted otherwise, all dollar amounts included herein are stated in Canadian dollars.
SOURCE DHX Media Ltd.