- Revenue was $92.9 million in Q4
2020 vs $108.8 million in Q4 2019.
Fiscal 2020 revenue was $425.6
million vs $439.8 million in
Fiscal 2019.
- Net income of $4.0 million in Q4
2020 vs a net loss of $62.8 million
in Q4 2019. Fiscal 2020 net loss of $236.0
million vs a net loss of $101.5
million in Fiscal 2019, due largely to a non-cash goodwill
impairment taken in Q3 2020, resulting from advertising pressures
due to changes at YouTube and from COVID-191.
- Positive Free Cash Flow increased to $9.3 million in Q4 2020 vs $4.1 million in Q4 2019. Fiscal 2020 positive
Free Cash Flow increased to $27.1
million vs $10.4 million in
Fiscal in 2019.
- Adjusted EBITDA in Q4 2020 was $18.7
million vs $20.2 million in Q4
20192. Fiscal 2020 adjusted EBITDA of $81.8 million vs $79.6
million in Fiscal 20192.
- WildBrain Spark views grew 24% to over 11.6 billion in Q4 2020.
F2020 views grew 35% to 43.9 billion.
- Net leverage ratio3 of 5.40x as at June 30, 2020 vs 5.92x at June 30, 2019.
HALIFAX, NS, Sept. 22, 2020 /PRNewswire/ - WildBrain Ltd.
("WildBrain" or the "Company") (TSX: WILD), a global leader in kids
and family entertainment, today reported its fourth quarter ("Q4
2020") and year-end results ("Fiscal 2020") for the period ended
June 30, 2020.
Eric Ellenbogen, WildBrain CEO
and Vice Chair, said: "Even in the face of continuing economic
uncertainties, our results for Fiscal 2020 reflect strong demand
for our content, as well as the endurance of our television and
consumer products businesses. Our studio is now in full production
on new Peanuts, Johnny
Test and Go, Dog. Go! content for Apple TV+,
Netflix and DreamWorks, respectively, contributing to a 46%
increase in Q4 production revenue. Additional premium
projects are in development including an original animated Green
Hornet series with acclaimed filmmaker Kevin Smith. While we expect market
pressures to persist in coming quarters, in recent weeks we've
started to see modest improvements in advertising rates and revenue
at WildBrain Spark, following declines precipitated by changes at
YouTube and COVID-19 impacting global advertising. To fully
monetize WildBrain Spark's extensive viewership, we're building our
direct ad sales team to better access the US$4.5 billion spent annually in global kids'
advertising and tap into the more traditional and very large
branded segment of this market. Our incredible reach and
engagement present a compelling solution to brands as they seek to
reach families in a safe and trusted environment."
Ellenbogen continued: "Over the last year, we've made great
strides in realigning operations and intensifying our focus on
creativity, digital media and brands. We're continuing to invest in
these areas to unlock the long-term earnings potential of our
assets and IP. And in Fiscal 2021, we're expecting to see
returns on those investments in our key brands and the monetization
of the large viewership on WildBrain Spark that's drawn to our
quality, kid-safe curated content."
Aaron Ames, CFO of WildBrain,
added: "In Fiscal 2020, we improved our financial position. By
implementing our disciplined investment strategy related to our
content production requiring less cash outlay, as well as better
management of working capital, we increased free cash flow by 160%
to $27.1 million. We also took
decisive actions to reduce operating costs to offset lower revenue
in certain parts of our business, moderating the impact of COVID-19
on adjusted EBITDA. During the year, we paid down debt by
$58.0 million and also secured
$25.0 million in growth capital to
fund accretive opportunities and invest across the company.
While we remain vigilant on managing our costs, we will continue to
invest responsibly in initiatives to grow our business for the
long-term."
Q4 2020 Performance - Executing on Priorities
PRIORITIES
|
HIGHLIGHTS
|
Grow Brands and
Build Awareness
on WildBrain Spark
|
WildBrain Spark's
online audience increased by 24% to over 11.6 billion views in the
quarter vs Q4 2019. More than 72.1 billion minutes of videos
were watched, up 55% from Q4 2019.
Fiscal 2020
viewership increased 35% to 43.9 billion views vs Fiscal
2019. More than 239.6 billion minutes of videos were watched
on our AVOD network in Fiscal 2020, up 45% from the year
prior.
|
Create Premium
Kids' Content to
Drive Franchise Brands
|
Grew our production
slate with higher margin, proprietary projects as evidenced by a
46% increase in Production revenue to $26.3 million vs Q4
2019.
Premium original
productions underway include more new Peanuts content for Apple
TV+, a new Johnny Test global exclusive for Netflix and a
co-production with DreamWorks on Go, Dog. Go!
New seasons of
Fireman Sam and Polly Pocket in the works supporting
our partner brands with Mattel where we share in merchandising
royalties. In Fiscal 2020, consumer products revenue derived
from such brand partnerships increased 14% vs a year
ago.
|
Improve Cash Flow
and Balance Sheet
|
Positive Free Cash
Flow of $9.3 million in Q4 2020 vs Free Cash Flow of $4.1
million in Q4 2019. Fiscal 2020 positive Free Cash Flow of
$27.1 million vs Free Cash Flow of $10.4 million in Fiscal
2019.
Net leverage
ratio3 was 5.40x at June 30, 2020 vs 5.92x at June 30,
2019.
|
In Fiscal 2021, we will continue to create premium kids' content
with priorities focused on growing key brands, monetizing our large
audience on WildBrain Spark viewership and improving cash flow and
the balance sheet.
Financial Highlights
Financial
Highlights
(in millions of
Cdn$)
|
Three Months
ended
June
30,
|
Year
ended
June
30,
|
2020
|
2019
|
2020
|
2019
|
Revenue
|
$92.9
|
$108.8
|
$425.6
|
$439.8
|
Gross
Margin
|
$39.6
|
$48.0
|
$187.8
|
$186.8
|
Gross Margin
(%)
|
43%
|
44%
|
44%
|
42%
|
Adjusted EBITDA
attributable to WildBrain
|
$18.7
|
$20.2
|
$81.8
|
$79.6
|
Net Income (Loss)
attributable to WildBrain
|
$4.0
|
$(62.8)
|
$(236.0)
|
$(101.5)
|
Basic Earnings (Loss)
per Share
|
$0.02
|
$(0.47)
|
$(1.51)
|
$(0.75)
|
Free Cash
Flow
|
$9.3
|
$4.1
|
$27.1
|
$10.4
|
Q4 2020 revenue was $92.9 million
compared with $108.8 million in the
same prior year quarter. The decrease was primarily driven by
declines at WildBrain Spark, resulting from changes in "Made for
Kids" content policy made by YouTube and the negative advertising
impacts of COVID-19, as well as Consumer Products-Owned revenue,
which were also impacted by COVID-19. These declines were
partially offset by higher Production revenue. Fiscal 2020
revenue was down 3% to $425.6 million
vs $439.8 million in Fiscal 2019,
primarily due to decreases at WildBrain Spark and in our Consumer
Products-Owned business.
Production revenue increased 46% to $26.3
million in Q4 2020 vs $18.0
million in Q4 2019, driven primarily by premium proprietary
projects including new content for Peanuts, Go, Dog. Go! and
Johnny Test that are ramping up to full run rate. Fiscal
2020 Production revenue rose to $86.1
million vs $84.0 million in
the same prior year period.
In Q4 2020, distribution revenue (excluding WildBrain Spark) was
$13.4 million compared with
$16.6 million a year ago, indicative
of the fluctuations we see in revenue quarter-by-quarter due to the
timing of deals. Fiscal 2020 distribution revenue (excluding
WildBrain Spark) remained steady at $59.2
million compared with $59.8
million in the same prior year period.
Advertising pressures from changes on YouTube, implemented in
January 2020, and from the onset of
COVID-19 in March 2020, contributed
to a 64% decline in WildBrain Spark revenue in Q4 2020 to
$6.5 million vs Q4 2019. We
expect a recovery in advertising as the COVID-19 pandemic begins to
wane. In response, we are reducing costs and reallocating resources
to growth areas, including direct ad-sales and data
analytics. As audience engagement continues to climb, we see
considerable opportunities to monetize the large and growing
audience on our AVOD network. In Q4 2020, WildBrain Spark
reached 11.6 billion views, up 24% from the prior year. More
than 72.1 billion minutes of videos were watched on our AVOD
network in Q4 2020, up 55% from the prior year quarter. Fiscal
2020, WildBrain Spark revenue was $62.3
million vs $69.0 million in
the same prior year period and continued to contribute to overall
EBITDA.
Consumer Products-Owned revenue was $29.0
million in Q4 2020 vs $38.6
million in Q4 2019. For Fiscal 2020, revenue declined
4% to $154.0 million compared with a
year ago. The declines in both the current quarter and full year
were due to the disruption in the global retail sector caused by
COVID-19 and the expiry of the MetLife contract for Peanuts in
December 2019. Normalizing for
MetLife, revenue declined by 17% in Q4 2020 and increased slightly
in Fiscal 2020 vs the same prior year periods.
Gross Margin was 43% in Q4 2020 vs 44% in Q4 2019.
Fiscal 2020 Gross Margin increased to 44% compared with 42% the
year prior. Gross Margin for F2020 was positively impacted by
IFRS 162 and growth in Production revenue derived from a
growing slate of higher margin, proprietary projects.
During Q4 2020, we completed our previously stated
reorganization initiatives and expensed approximately $10.9 million in one-time costs for Fiscal
2020. This resulted in annual estimated savings of
$10.0 million, the majority of which
were redeployed back into creative, our AVOD business and
brands.
Positive Free Cash Flow for Q4 2020 increased to $9.3 million, compared to Free Cash Flow of
$4.1 million in Q4 2019. In
Fiscal 2020, we generated positive Free Cash Flow of $27.1 million vs. Free Cash Flow of $10.4 million in Fiscal 2019. The
period-over-period increases were driven by lower cash outlay due
to a targeted production slate and timing of working capital,
including higher collection of tax credits and trade receivables in
Fiscal 2020.
Adjusted EBITDA was $18.7 million
in Q4 2020 compared with $20.2
million in Q4 2019. The adoption of IFRS
162 positively impacted adjusted EBITDA by $2.0 million in Q4 2020. Normalizing for
this impact, adjusted EBITDA declined $3.4
million compared with Q4 2019. Fiscal 2020 adjusted
EBITDA was $81.8 million compared
with $79.6 million in Fiscal
2019. Fiscal 2020, IFRS 162 positively impacted
adjusted EBITDA by $8.0 million while the first quarter of
Fiscal 2019 benefited from $1.3
million related to a higher ownership stake in Peanuts for
part of that quarter4. Normalizing for these
items, adjusted EBITDA declined by $4.5
million in Fiscal 2020 vs the year prior. Early
mitigating actions to reduce operating costs together with
government wage subsidies have helped to moderate the impact of
COVID-19 on adjusted EBITDA.
Q4 2020 saw a net income of $4.0
million vs a net loss of $62.8
million in the same quarter last year. This increase
was largely driven by lower SG&A, lower non-cash impairment
charges and a higher non-cash foreign exchange gain in Q4 2020
compared to Q4 2019. Fiscal 2020, net loss was $236.0 million vs a net loss of $101.5 million in the same period a year ago. The
higher net loss in the full year was primarily due to higher
non-cash impairment charges resulting from the $184.5 million goodwill impairment1
recorded in Q3 2020, which was taken due to the impact on
advertising revenue from YouTube's changes to targeted ads as well
as potential impacts of global economic uncertainties from
COVID-19.
In Q4 2020, we completed a $25.0
million financing with Fine Capital Partners, L.P. ("Fine
Capital"), our largest shareholder. Fine Capital subscribed
for an initial $16.5 million of
exchangeable debentures convertible to Variable Voting Shares of
WildBrain at $1.45 per Variable
Voting Share. The remainder of the funds can be drawn down at our
discretion prior to maturity on June
24, 2023. Concurrently, we issued Fine Capital
five-year warrants to purchase 5,000,000 Variable Voting Shares at
a price of $1.45 per Variable Voting
Share, which vest immediately. The financing structure does
not increase our net leverage ratio3 for covenant
purposes under our term facility. The net proceeds will be used to
fund accretive growth investments across WildBrain, especially in
our AVOD business.
1.
|
The non-cash
goodwill impairment charge of $184.5 million excludes goodwill held
in the Company's Peanuts and Television cash generating units
(CGUs).
|
|
|
2.
|
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. Adjusted
EBITDA was positively impacted by $8.0 million and $2.0 million in
F2020 and Q4 2020, respectively, due to the adoption of IFRS
16. See note 3 in the Fiscal 2020 consolidated financial
statements.
|
|
|
3.
|
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.
|
|
|
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.
|
|
|
5.
|
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,
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, 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 Fiscal 2020
MD&A.
|
Q4 and Fiscal 2020 Conference Call
WildBrain will hold a conference call on September 23, 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 3474779. Please allow
10 minutes to be connected to the conference call. Replay
will be available after the call on +1 (855) 859-2056 or +1 (416)
849-0833, under passcode 3474779, until September 30, 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 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, Johnny Test 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 168 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 productions in
development, advertising rates and revenue of WildBrain Spark,
investments by the Company and expected benefits from such
investments, use of proceeds from an exchangeable secured debenture
financing arrangement, future growth and financial and operating
performance of WildBrain Spark, impacts of YouTube's changes to
targeted advertising, 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, and the business strategies and operational activities of
the Company and its 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.