WildBrain Reports Q1 2021 Results

    --  Revenue was $95.5 million in Q1 2021 vs $112.3 million in Q1 2020.
    --  Net loss improved to $3.3 million in Q1 2021 vs a net loss of $16.0
        million in Q1 2020.
    --  Free Cash Flow was negative $2.7 million in Q1 2021 vs positive Free
        Cash Flow of $7.7 million in Q1 2020, partly due to timing of
        distributions to non-controlling interests in the current quarter.
    --  Adjusted EBITDA in Q1 2021 was $17.5 million vs $19.6 million in Q1
        2020.
    --  Gross Margin improved to 45% from 44% in Q1 2020.
    --  WildBrain Spark revenue was $8.9 million in Q1 2021, a sequential
        improvement from $6.5 million in the previous quarter. This compared to
        $22.1 million in Q1 2020.
    --  WildBrain Spark continued to attract a highly engaged audience watching
        64.2 billion minutes of videos in Q1 2021, up 14% from Q1 2020. The
        average view time was up 27% to approximately six minutes per view.
    --  Paid down $5.0 million on the revolving facility in Q1 2021.
    --  Post quarter-end, announced expanded partnership with Apple TV+ for the
        largest production commitment in WildBrain's history for a new slate of
        Peanuts originals and specials as well as licensing the current Peanuts
        library of classic specials. Deal provides significant multi-year
        production pipeline for our studio business.

HALIFAX, NS, Nov. 10, 2020 /PRNewswire/ - WildBrain Ltd. ("WildBrain" or the "Company") (TSX: WILD), a global leader in kids and family entertainment, today reported its Fiscal 2021 first quarter results for the three-month period ended September 30, 2020 ("Q1 2021").

Eric Ellenbogen, WildBrain CEO, said: "We kicked off Fiscal 2021 with an expanded Apple TV+ partnership that will see a new generation of kids and families enjoying a full slate of new Peanuts originals plus the long-running classic specials on a leading global media platform. This multi-year, worldwide agreement is the largest production commitment in our company's history. It aligns with our strategy of creating premium content in long-term deals that will meaningfully grow our earnings base. We have and will continue to line up a book of production business that you'll see play out in our numbers in the coming quarters and years ahead. This Peanuts deal illustrates how we're maximizing the profitability of our key IP across the value chain by leveraging new production to also secure high-value library sales and consumer products opportunities. As we close more content deals and switch on key brands, we'll continue to build momentum, driving growth for years to come."

Ellenbogen continued: "In Q1, we delivered financial results that reflected strong production revenue and resilience in our consumer products and television businesses in the face of current macro-economic headwinds. We're also encouraged by the sequential improvement in Q1 revenue at WildBrain Spark. We're in a great position to benefit from the secular movement of advertising dollars to digital given our network scale, global reach, data insights and kid-safe, premium programming. We expect our direct advertising sales, as well as other initiatives designed to monetize the huge audiences on our AVOD network to help speed recovery and growth at WildBrain Spark as advertising demand returns."

Aaron Ames, WildBrain CFO, added: "During Q1, we continued to execute on our disciplined approach to content investments while managing working capital and controlling our costs. We also paid down $5.0 million on our revolving credit facility in Q1 and the outstanding balance of $5.0 million in October, subsequent to quarter-end. The recently expanded deal with Apple TV+ will begin to add to our EBITDA in Fiscal 2022 and is also a meaningful positive for our consumer products business. While we expect our Total Net Leverage Ratio(2) to increase moderately in Q2 2021 due to timing, based on our current expectations of how the pandemic will play out, coupled with the enhanced visibility we now have around our revenue, earnings and content pipeline over the next 18-plus months, we expect our Total Net Leverage Ratio(2) to be comfortably in the mid-4x level, or below, by the end of Fiscal 2022."

Q1 2021 Performance - Executing on Priorities



            
          PRIORITIES            
     
     HIGHLIGHTS

    ---


            
          Monetizing our Large      WildBrain Spark increased its audience engagement
                                               with 62.4 billion minutes of videos watched on our
                                               AVOD network in Q1 2021, up 14% from 56.3 billion
                                               minutes in Q1 2020. 
              The average view time
                                               also rose by 27% to approximately six minutes per
                                               view.
    Audience on
    WildBrain Spark                                    WildBrain Spark revenue was $8.9 million in Q1 2021
                                                        vs $22.1 million in Q1 2020, due to policy changes
                                                        on YouTube and ongoing industry-wide pressures
                                                        impacting advertising. Q1 2021 revenue reflected
                                                        sequential growth, up 37% from the previous quarter.



    ---


            
          Grow Key Brands           Production is underway on a second new Peanuts
                                               original series, The Snoopy Show, to premiere
                                               globally in February 2021, exclusively on Apple TV+

                                                                  Apple TV+ has ordered a second season of Snoopy in
                                                                   Space - one of the most popular shows viewed across
                                                                   multi-generations on their streaming platform.

                                                      Fresh Peanuts content is supporting a robust licensing
                                                        program with new deals for apparel, housewares,
                                                        appliances, collectibles, food and beverage,
                                                        publishing and more.  Many of the international deals
                                                        were brokered by our licensing agency, WildBrain
                                                        CPLG, highlighting the collaboration realized across
                                                        our business units.

                                                      A round of new global streaming and broadcast deals
                                                        for the latest seasons of Fireman Sam and Polly
                                                        Pocket including US and multi-territory rights to
                                                        Netflix are driving exposure for these partner brands
                                                        with Mattel where we share in back-end merchandising
                                                        royalties.

    ---


            
          Improve Cash Flow and     Paid down $5.0 million on our revolving credit
                                               facility in Q1 2021, as well as the remaining $5.0
                                               million in October, subsequent to quarter-end.
    Balance Sheet
                                                       The Total Net Leverage Ratio(2) was 5.70x at
                                                        September 30, 2020 vs 5.66x at September 30, 2019.
                                                        While we expect our Total Net Leverage Ratio2 to
                                                        increase moderately in Q2 2021 due to timing, based
                                                        on our current expectations of how the pandemic will
                                                        play out coupled with the enhanced visibility we
                                                        have around our revenue, earnings and content
                                                        pipeline over the next 18-plus months, we expect
                                                        our Total Net Leverage Ratio2 to be comfortably in
                                                        the mid-4x level, or below, by the end of Fiscal
                                                        2022.

    ---

Q1 2021 Financial Highlights



       
                Financial Highlights                               Three Months ended


       
                (in million of Cdn$)                               September 30,


                             
              
             2020    2019



       Revenue                                          $95.5   $112.3



       Gross Margin                                     $43.3    $49.4



       Gross Margin (%)                                  45%     44%



       Adjusted EBITDA attributable to WildBrain        $17.5    $19.6



       Net Loss attributable to WildBrain              $(3.3) $(16.0)



       Basic Loss per Share                           $(0.02) $(0.12)



       Free Cash Flow                                  $(2.7)    $7.7

    ---

In Q1 2021, we reclassified our financial reporting to better reflect our 360° approach to IP management and the characteristics of the transactions that we are entering into with global streaming services ("SVODs") and across other distribution channels(3). Growth in our production revenue reflects global SVODs investing heavily to deliver high-quality, exclusive programming. Under this model, typically the SVODs pay for the cost of production inclusive of production fees, while we retain ownership of the underlying IP as well as linear distribution rights (after a holdback of approximately 24 to 36 months) and all consumer products revenues. This differs from the traditional production/distribution model of covering production costs from multiple linear broadcasters, with margins realized over multi-year licensing cycles. Since our slate has become a combination of both these models, we have revised our reporting to aggregate production and distribution, which is consistent not only with the integrated management of our business, but also with industry practice.

Accordingly, we now report production and distribution in one revenue line under "Content Production and Distribution". We also consolidated reporting of all revenue streams related to consumer products, including our licensing agency WildBrain CPLG, under "Consumer Products". Our WildBrain Spark business, which generates revenues primarily from advertising and sponsorships, continues to be reported under "WildBrain Spark". Collectively, the three preceding revenue lines will now comprise our "Content Business" segment for reporting purposes. For clarity, our Canadian television business has been renamed "Canadian Television Broadcasting" and continues to be reported separately.

In Q1 2021, revenue was $95.5 million compared with $112.3 million in the prior year quarter. This decrease was primarily driven by WildBrain Spark, resulting from pressures on global advertising due to COVID-19 and policy changes on YouTube for "Made for Kids" content, partially offset by stability in our other businesses.

Content Production and Distribution revenue increased to $36.3 million in Q1 2021 vs. $35.1 million in Q1 2020, due to higher production revenue. Production revenue increased in Q1 2021, driven by premium proprietary projects including new Peanuts originals such as The Snoopy Show, a number of family specials and a second season of Snoopy in Space. The increase was also driven by new seasons of Johnny Test, Fireman Sam, Polly Pocket and Chip & Potato. The Peanuts library deal, which was signed after quarter-end, will be reflected in second quarter results.

While COVID-19 and YouTube's changes in targeted advertising policies continued to negatively impact advertising sales at WildBrain Spark, with revenue declining 60% to $8.9 million in Q1 2021 vs Q1 2020, we are encouraged by the sequential growth in revenue. Revenue improved sequentially month-over-month as we moved through the quarter, reflecting an increase of 37% compared with $6.5 million in Q4 2020. This trend has continued in October as digital advertising begins to show improvement and we continue to implement initiatives to monetize the significant viewership consuming content on our AVOD network. WildBrain Spark has one of the largest and most engaged global audiences in the kids and family space with 62.4 billion minutes of videos watched this quarter, up 14% vs Q1 2020. On average, the duration of each view amounted to approximately six minutes, an increase of 27% from Q1 2020. Viewership remained strong at 10.7 billion views in Q1 2021.

Excluding the expiring MetLife contract which represented $3.6 million in Q1 2020, Consumer Products revenues were stable at $38.8 million in Q1 2021, reflecting the continuation of strong licensing royalties from our Peanuts franchise and increased commissions from our licensing agency WildBrain CPLG.

Gross Margin increased to 45% in Q1 2021 vs 44% in Q1 2020, driven by growth in production revenue derived from a growing slate of higher-margin premium projects in our studio.

Positive operating cash flow(4) of $19.6 million in Q1 2021 vs $29.9 million in Q1 2020, due to timing of settlement of working capital balances. Free Cash Flow for Q1 2021 was negative $2.7 million, compared to positive Free Cash Flow of $7.7 million in Q1 2020, partly due to timing of distributions to non-controlling interests in the current quarter vs no payments in the prior year quarter.

Adjusted EBITDA was $17.5 million in Q1 2021 compared with $19.6 million in Q1 2020, principally related to the weakness in advertising revenue at WildBrain Spark.

Q1 2021 net loss was $3.3 million vs a net loss of $16.0 million in the same prior year quarter. This improvement was attributable to lower SG&A, lower reorganization and development costs and a higher non-cash foreign exchange gain in Q1 2021 compared to Q1 2020.



     
     1. 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, cash
            interest paid on our long-term debt,
            bank indebtedness and lease liabilities
            and principal repayments on our 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 Q1 2021 MD&A.





     
     2. 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.






     
     3. For more details, refer to the "Revenue
            Model" section of WildBrain's Q1 2021
            MD&A.





     
     4. In Q1 2021, we reclassified cash interest
            paid on our long-term debt, bank
            indebtedness, and lease liabilities that
            were previously included as cash flows
            used in operating activities, to be
            reported in the current quarter as part
            of cash flows used in financing
            activities with a corresponding
            reclassification to Q1 2020, as these
            interest charges do not form part of our
            ongoing operating activities, performance
            and results. Refer to the "Liquidity and
            Capital Resources" section of the
            Company's Q1 2021 MD&A.

Q1 2021 Conference Call

The Company will hold a conference call on November 11, 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 9703649. Please allow 10 minutes to be connected to the conference call. Replay will be available after the call on +1 (855) 859-2056 toll free or +1 (416) 849-0833, under passcode 9703649, until November 18, 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 inspire imaginations to run wild, engaging kids and families everywhere with great content across all media. 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. At our 75,000-square-foot state-of-the-art animation studio in Vancouver, BC, we produce such fan-favourite series as Snoopy in Space, Chip & Potato, Carmen Sandiego and more. Our shows are enjoyed worldwide in more than 150 countries on over 500 streaming platforms and telecasters, and our AVOD business - WildBrain Spark - offers one of the largest networks of kids' channels on YouTube, garnering approximately four billion views per month from over 200 million subscribers. We also license consumer products and location-based entertainment in every major territory for our own properties as well as 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 (TSX: 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, future growth and financial and operating performance of WildBrain Spark, impacts of YouTube's changes to targeted advertising, impacts of the Peanuts deal with Apple, 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 (including leverage), changes to financial reporting classifications, and the business strategies and operational activities of the Company and its growth and 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.