Halifax, NS – 15 February 2007 – DHX Media Ltd., (AIM & TSX ticker: DHX) (“DHX” or the “Company”) announces its unaudited consolidated interim results for the second quarter ended December 31, 2006.
Highlights
• Revenues for the second quarter ended December 31, 2006 increased over 116% from the same period of 2005 to C$6.7 million;
• Deliveries of proprietary television programs increased by 229% to 46 half-hours for the quarter ended December 31, 2006 from 14 half-hours in the same period of 2005;
• Profit for the three months ended December 31, 2006 increased by 158% to a profit of C$234,000 against a loss in the same period in 2005 of C$402,000;
• EBITDA¹ increased by 744% to C$951,000 for the quarter, versus C$113,000 in the same period of 2005; and
• Worldwide toy and game merchandising, and publishing deals were announced for Franny’s Feet providing for future minimum guarantee payments as well as royalties from F2008.
Michael Donovan, Chairman and CEO, commented: “We are delighted with both the growth in revenue and the very strong growth in EBITDA¹ which was significantly impacted by the Decode Entertainment merger. During the second quarter we delivered 46 half-hours of proprietary television productions and C$2.2 million of distribution and royalty revenue, and we anticipate this momentum to continue into the seasonally stronger third and fourth quarters. We are pleased to be delivering on our strategy of growing our library and exploiting it through merchandising and licensing deals, international distribution deals and across new media platforms.”
Operating Review
DHX continued to meet its strategic objectives during the second quarter. Most notable was concluding the heads of terms for the appointment of Playskool, a division of Hasbro, Inc., as the worldwide licensee for DHX Media’s Decode Entertainment division’s Franny’s Feet children’s series. This appointment will grant a worldwide license to Playskool in exchange for an upfront minimum guarantee and a percentage of Playskool’s net revenues derived from the sale of Franny’s Feet toys and games worldwide, subject to certain conditions. The long-form agreement is in the final stages of negotiation. Further, in January 2007, the Company appointed major publishing houses Penguin Group (USA) and Simon & Schuster as publishing licensees for Franny’s Feet. Pursuant to the appointments, DHX Media will receive a minimum guarantee advance from both licensees with additional royalty payments expected to commence in fiscal 2008.
Additionally, the Company’s stop-motion animated children’s preschool series Lunar Jim™ was greenlit for a second season based on commissions from the CBC and CBeebies in the U.K.
The Company’s distribution group delivered a number of notable sales during the quarter to important broadcasters around the world, including the sale of multiple rights to its first season of 26 half-hour episodes of the CGI animated series Urban Vermin to Jetix Europe, a major children’s entertainment broadcaster and rights management company. Under the sale agreement, Jetix Europe acquires the TV rights to Urban Vermin for all of Europe, with the exception of France free TV rights, in consideration for a license fee. Further, Jetix Europe was appointed as the home video and merchandising and licensing agent for the series in Europe. The Company will also produce a host of ancillary digital assets which will be used on Jetix websites across Europe to support the TV launch. This will include the opportunity for kids to watch previews of future episodes online.
The Company continued to complete strategic acquisitions and expanded its television library by acquiring the license for the worldwide distribution rights to a library of 520 half-hours of television programming. The library consists of 14 different titles, including 12 seasons of the hit television series This Hour Has 22 Minutes, the acclaimed mini-series The Ten Thousand Day War and several children’s television series.
In February, the Company announced that PBS KIDS will begin broadcasting a second season of 13 half-hour shows of the award-winning preschool series Franny’s Feet in key US broadcast markets including New York and Philadelphia. Furthermore, DHX Media’s DECODE Entertainment unit pre-sold and commenced production on 26 x half-hour episodes of a new animated series for YTV Canada, Gizmo. DHX has worldwide distribution rights for this animated Canada/Hong Kong/Singapore treaty co-production series to be delivered in fall of 2007.
Finally, the Company was pleased to announce that its Decode Entertainment division has been commissioned by The Family Channel in Canada to produce the first 13 episodes of The Latest Buzz, a brand new live action comedy series for ‘tweens’ for which DHX Media will hold the worldwide distribution rights.
Financial Results
Revenues for the second quarter of 2007 were $ 6.705 million, up from $3.106 million for the same quarter in 2006, an increase of 116% due to increases in all of the Company’s revenue categories, of which proprietary production was most significant. Proprietary production revenue growth was 229% and was consistent with the Company’s strategic goal to increase production revenue generated from proprietary productions both in absolute dollars and as a percentage of the total production revenues earned.
Distribution, music and royalty and new media revenues were $2.049 million, $0.136 million, and $0.139 million, respectively, increasing from nil amounts in Q2 2006, largely a reflection of the Decode division acquisition.
Finally, rental income for the period was $0.123 million which related to the rental of the company’s Electropolis production studios which was acquired in July 2006.
Outlook
Based on the momentum of our second quarter results, we anticipate growth to continue, particularly in our proprietary production and distribution segments, as we enter the more active second half of the Company’s year. The Company’s production revenues are generally highest in the third and fourth fiscal quarters, driven by contracted deliveries with the primary broadcasters which are typically made in the first half of the calendar year within the Canadian television industry. Distribution revenues are contract and demand driven and can fluctuate significantly from period to period.
Furthermore, we will continue to increase the number of proprietary productions this fiscal period, with a view to growing our library and continuing to deliver bottom-line growth and improved margins. We also anticipate further growth from our additional strategic value drivers of merchandising and licensing and new content platform exploitation. Our business model gives us the ability to produce audience-winning programming while minimizing financial risk and retaining the maximum exploitation rights associated with a production for the generation of multiple revenue streams. Management intends to continue exploiting this model in order to grow profitably and add to its library of completed productions.
The full financial statements and MD&A are also available on SEDAR at www.sedar.com.
About DHX Media
DHX Media produces, distributes and exploits the rights for television and film programming, with a primary focus on productions for children and youth. The Company has 12 series currently in production and a feature film in post-production. There are also 12 children’s series currently in first window broadcast on multiple major cable and broadcast networks in the UK, US and Canada, including, Lunar Jim, Franny’s Feet, The Save-Ums and Naturally Sadie. DHX Media’s prime time production slate also includes notable achievements in the comedy genre, including the award-winning Canadian prime time comedy series This Hour Has 22 Minutes, which is produced for the CBC and is now in its 14th season.
For more information, please contact:
DHX Media Ltd.
Dana Landry – Chief Financial Officer
David A. Regan – EVP Corporate Development & Investor Relations
+1 902-423-0260
AIM Nominated Advisors: Canaccord Adams Limited
Neil Johnson
Erin Needra
+44 (0) 20 7050 6500
Disclaimer
Certain statements herein may constitute forward-looking statements, including those identified by the expressions ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘anticipate,’’ ‘‘believe,’’ ‘‘plan,’’ ‘‘estimate,’’ ‘‘potential,’’ ‘‘expect,’’ ‘‘intend’’ and similar expressions to the extent they relate to the Company or its Management. These statements reflect the Company’s current expectations and are based on information currently available to Management. These forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results or events to differ materially from current expectations, including the matters discussed under ‘‘Risk Factors’’ contained in the Company’s prospectus dated May 12, 2006. 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.
¹EBITDA represents net earnings (loss) of the Company before amortization expense, interest income (expense), non-controlling interest, equity income (loss), development expenses and stock-based compensation expense.