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WildBrain's Strategic Response to Revenue Dip Amid Market Downturn


Michael Chen

May 10, 2024 - 01:51 am


WildBrain Experiences Sharp Revenue Decline Amid Industry Slowdown

Third Quarter Brings Challenges and a Strategic Focus on Key Franchises

TORONTO, May 9, 2024 /PRNewswire/ — WildBrain Ltd. ("WildBrain" or the "Company"), an international frontrunner in children's and family entertainment, disclosed its financial outcomes for the third quarter of 2024 (Q3 2024), ending March 31, 2024. Though faced with industry-wide challenges, WildBrain highlights its concentration on leading franchises and strategic partnerships in its quest to strengthen its position in content creation, audience engagement, and global licensing.

Financial Highlights Reveal Downward Trend

WildBrain presented a concerning financial picture for Q3 2024, with revenue marking a steep descent to $100.1 million, plummeting from $140.9 million in Q3 2023. The net loss stood at $14.7 million, a significant downshift when contrasted with the net income of $19.4 million during the same quarter the preceding year. Adjusted EBITDA saw a contraction to $19.6 million from the former $32.9 million.

The cash flow from operating activities was reported at $23.3 million, marginally down compared to $24.0 million in Q3 2023. The Free Cash Flow also remained in negative territory, at negative $2.9 million, albeit showing slight improvement from the negative $4.6 million in Q3 2023.

Leadership Optimism Amid Fiscal Strain

Josh Scherba, President and CEO of WildBrain, shared his insights stating, "In reviewing my inaugural year at the helm, it's encouraging to witness the considerable strides we've taken in honing our pivotal franchises and affirming our stature as stalwarts in content craft, audience captivation, and worldwide licensing." He acknowledged the sector's dampened content production climate but expressed confidence in normalized production pipeline for upcoming years. He spotlighted WildBrain's successes, including a new Peanuts feature for Apple TV+ and the Netflix triumph of 'Sonic Prime,' as affirmations of the company's standing as a premium animation partner.

Nick Gawne, WildBrain's CFO, added their unwavering dedication to high-return franchises. Although Fiscal Year 2024 suffers due to deferred greenlights, Gawne reaffirms their focus on reducing leverage over time and emphasizes significant progress in divesting non-core assets.

Q3 2024 Execution and Strategic Priorities

WildBrain's strategic execution spotlights efforts to bolster key brands and partnerships. August 2024 will see the debut of 'Yo Gabba GabbaLand!' on Apple TV+, an expansion of the adored 'Yo Gabba Gabba!' universe. This release is coupled with fresh consumer products programs with franchise partners. Additionally, the launch of the Omega x Swatch Snoopy MoonSwatch and the 45th-anniversary celebrations for Strawberry Shortcake point to a robust licensing program.

However, the outlook for Fiscal Year 2024 is subdued, with expected revenue and Adjusted EBITDA projected to be down partially due to current market slowdown. Despite this, the company remains confident regarding the content production outlook for Fiscal Year 2025 and 2026 with a significant portion of the pipeline already greenlit.

Efforts to Strengthen Financial Footing

A concerted effort to bolster the balance sheet is evident as WildBrain upholds financial discipline and focus on consistent free cash flow generation. The company aims to achieve a leverage target of under 4x via EBITDA growth and successful completion of non-core asset sales.

A Closer Look at the Numbers

Breaking the financial details down reveals a clearer narrative of the challenges WildBrain is navigating. A 29% revenue fall in Q3 2024 is attributed to reduced studio productions reflective of the broader industry slowdown. Nevertheless, this was partially counterbalanced by the resilience of FAST and AVOD networks, boasting 60 billion minutes watched in the quarter.

Content Creation and Audience Engagement revenue saw a 49% dip to $40.8 million in Q3 2024, while Global Licensing revenue decreased by 3% to $49.6 million when compared to Q3 2023. Despite these declines, areas such as North America, China, and Asia-Pacific exhibited continued growth, especially in licensing for the Peanuts brand and WildBrain CPLG's operations.

Q3 2024's gross margin improved to 50%, from 48% in Q3 2023, reflecting the higher proportion of Global Licensing and Audience Engagement revenues.

Cash from operations remained relatively stable at $23.3 million in Q3 2024, with a marginal decrease when juxtaposed against the previous year's $24.0 million. Free Cash Flow improved slightly, despite remaining negative at $2.9 million, as opposed to $4.6 million in Q3 2023.

The noteworthy decrease in Adjusted EBITDA by 40% to $19.6 million was influenced primarily by lower gross margin dollars, although this was partly mitigated by a $3.1 million reduction in SG&A expenses.

The substantial switch from a net income to a net loss of $14.7 million was largely propelled by declining gross margin dollars, ameliorated by reduced SG&A, a decrease in the valuation change of embedded derivatives, and no recurrence of prior-period impairment charges.

In-Depth Operational Initiatives and Q3 Dissections

In Q3 2024, despite substantial headwinds, the company's legacy WildBrain Spark revenue saw significant growth with a 36% rise to $12.4 million. This area continues to demonstrate strong engagement with children, attributable to an expansive YouTube network and improved average viewing duration.

Non-GAAP Measures and Investor Disclosures

To provide a comprehensive overview of WildBrain's financial health, non-GAAP financial measures like Adjusted EBITDA, Free Cash Flow, and Gross Margin are deployed. These augment the IFRS results by excluding amounts not indicative of core operating outcomes, assisting in a consistent analysis across periods.

Investors should exercise caution, as these non-GAAP measures aren't standardized and don't replace GAAP measures such as net income or cash from operating activities.

Upcoming Conference Call and Investor Relations

WildBrain is scheduled to conduct a conference call on May 10, 2024, at 10:00 a.m. ET to discuss the Q3 results. Interested participants can obtain instant access to the call or be connected by an operator by dialing the designated references or joining via an automated instant callback.

For those unable to join live, a replay will be available until May 17, 2024, via given access numbers. Additionally, an audio and transcript will be archived on the company's website following the event.

Contact and Corporate Insight

Investor Relations and Media contacts, including Kathleen Persaud and Shaun Smith, are available for further inquiries. Their contact details are publicly listed for stakeholders to reach out for additional information on WildBrain, its operational strategies, or its financial outlook.

About WildBrain and Its Forward-Looking Aspirations

WildBrain stands as a beacon of imagination and storytelling craftsmanship, managing an extensive library of popular franchises such as Peanuts and Teletubbies. With approximately 13,000 half-hours of filmed entertainment under its belt, WildBrain continues to produce award-winning series distributed across more than 150 countries on various platforms. As a testament to its influence, the company's YouTube network has registered over 1 trillion minutes of watch time.

The company's forward-looking statements illuminate its intentions, predicting operational strategies, financial goals, and anticipated content production projections. Though there are risks associated with these projections, WildBrain is devoted to navigating the evolving landscapes of the entertainment industry while upholding its financial objectives.

Embracing the Future with Caution and Strategy

While WildBrain faces tribulations mirrored in the broader landscape of the entertainment industry, its leadership's focus on strategic partnerships, disciplined financial management, and content creation pipeline for the future remains steadfast. Although the financial figures from Q3 2024 represent a challenging period, the detailed plans and positive aspects of the report provide a glimpse into how WildBrain is positioning itself for recovery and growth.

It is this blend of optimism and strategy that WildBrain hopes will return the company to stronger financial performance, build investor confidence, and continue to delight its global audience with inspiring and captivating content for years to come.

Wrapping Up

In conclusion, WildBrain’s Q3 2024 results, though sobering, are marked by a targeted approach to fostering key partnerships and franchises. With their eyes set on future content offerings and operational refinements, the company embarks on a journey to navigate the turbulent waters of the industry's present while focusing on long-term stability and growth.

This news article contains statements pertaining to future activities that can also be accessed through WildBrain's SEDAR Profile, fulfilling the company's commitment to transparency and providing stakeholders consistent updates on strategic moves and fiscal achievements.

Indeed, WildBrain’s journey is embracing both challenge and opportunity with relentless innovation and strategic execution, paving the way for future successes in the dynamic realm of global entertainment.

Source: WildBrain Ltd.