- 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 /CNW/ - 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 | 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.
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Create Premium Kids' Content to | 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.
