SOURCE: IDW Media Holdings

IDW Media Holdings

September 14, 2017 22:00 ET

IDW Media Holdings Reports Fiscal Third Quarter 2017 Results

IDW Entertainment Expands Line-Up of TV Programs, Poised for Significant Growth

STAMFORD, CT and SAN DIEGO, CA--(Marketwired - Sep 14, 2017) - IDW Media Holdings, Inc. (OTCQX: IDWM) (the "Company"), an integrated media company announced today its results for the third quarter ended July 31, 2017.

Major Highlights and Milestones:

  • Wynonna Earp Television series renewed for Season 3 with Syfy Channel in the U.S. and Space Channel in Canada. The series continues to receive critical acclaim and awards from fans and press. With Netflix, Viacom and others, Wynonna Earp is available around the world.
  • Dirk Gently TV series completed production of Season 2, with premiere scheduled for October 17 on BBC America, and in December on Netflix outside the U.S.
  • Locke & Key is slated to be IDW Entertainment's third television property, and the Company believes it has breakout potential. We are currently producing a one-hour television pilot for Hulu. Carlton Cuse, as showrunner, is creating a world class production with an all-star cast, and Director Andy Muschietti is coming off a tremendous premiere of his theatrical release of Stephen King's IT.
  • IDW Entertainment is developing several other major media programs based on IDW Publishing's portfolio of books and comics, as well as third party content.
  • IDW Publishing's transition to Random House for distribution is leading to expansion of our sales channels which is expected to support growth for books in 2018 and beyond. 
  • The Company launched IDW Digital Studio which will focus on content development production, distribution and engagement, concentrating on building successful consumer franchises.
  • The Company closed a $10.5 million private placement of stock strengthening its balance sheet to support growth initiatives.

Fiscal Third Quarter 2017 Financial Highlights:

  • Revenue for the Company of $16.7 million for Q3-17 compared to $17.6 million for the year ago period (-5.1%) and $8.9 million in Q2-17 (+87.6%). The year over year decline in revenue and the sequential increase in revenue are discussed below for each segment of the Company.
  • Gross profit margin for the Company of 46.2% for Q3-17compared to 50.6% for Q3-16 and 47.3% for Q2-17. The year over year decline was principally due to increasing printing costs at IDW Publishing, reduced revenue at CTM Media Group (where almost all direct costs are fixed costs), and a change in revenue mix in which a higher percentage of the total revenue were from relatively lower margin offerings, partially offset by an increase in gross margin at IDW Entertainment.
  • Net income for the Company of $0.1 million for Q3-17 compared to $1.8 million for Q3-16 and a loss of $1.8 million for Q2-17. The decline in net income from the prior year was principally due to the decline in Company revenue and gross profit margin discussed above as well as an increase in SG&A expenses at IDW Entertainment associated with the launch of new programs and an increase of $0.7 million of non-cash compensation expense associated with the grant of stock to employees in 2016. The sequential improvement in net income was principally due to the increase revenue discussed above.
  • IDW Entertainment Revenue of $5.2 million for Q3-17 compared to $4.0 million for Q3-16 and $0.04 million for Q2-17. The increase in revenue from the prior year was principally due to licens e fee increases for season 2 of Wynona Earp, and timing of delivery of episodes. The substantial increase in revenue from the prior quarter was impacted by the timing of the release of the Wynonna Earp series. IDW Entertainment is positioned for significant future growth with programs at various stages of development.
  • IDW Publishing Revenue of $5.4 million for Q3-17 compared to $6.9 million for Q3-16 and $4.9 million for Q2-17. IDW Publishing's revenue this year was impacted by a cyclically slow period in the comic book market, compounded by temporary disruption related to the transition in distributors to Random House. With the move to Random House complete and with the planned release of major titles including Star Wars Adventures, My Little Pony Movie Adaptation, and Star Trek: Discovery as well as new games including Atari: Centipede and Torres, we anticipate continued sequential growth in IDW Publishing.
  • CTM Media Group Revenue of $6.1 million for Q3-17 compared to $6.7 million for Q3-16 and $4.0 million for Q2-17. The year over year decline is attributable to the loss of certain locations and customers including due to cyclical factors impacting the Broadway industry. The sequential increase is primarily attributable to seasonal factors. In the quarter, CTM made progress in engaging with new customers and channels, and re-engaging with some lost accounts, which is anticipated to contribute in 2018.

Ted Adams, CEO of IDW Media Holdings, commented "We launched IDW Entertainment in 2013 with a vision to leverage creative content, principally those created by IDW Publishing, into television productions. We are proud to report that this vision is becoming a reality. The reviews and consumer demand for IDW Entertainment's programs has been fantastic as evidenced by the fan support and renewal of Wynonna Earp for a third season, the renewal of Dirk Gently for a second season and the current production of Locke and Key."

Mr. Adams continued, "The demand for high quality, creative content for television, streaming and new media is robust, with the pace accelerating. IDW Publishing's deep and expanding library of creative publications that spans numerous genres is a treasure chest of opportunity for the entertainment business. With our strengthened balance sheet and IDW Entertainment's proven track record, we are well-positioned to satisfy the television and streaming industries' increasing appetite for high quality programming."

About IDW Media Holdings
IDW Media Holdings, Inc. (OTCQX: IDWM) is an integrated media company, which includes the award-winning IDW Publishing, IDW Games, IDW Entertainment, Top Shelf Productions, the San Diego Comic Art Gallery, and CTM Media Group Inc.

Forward Looking Statements:
All statements above that are not purely about historical facts, including, but not limited to, those in which we use the words "believe," "anticipate," "expect," "plan," "intend," "estimate," "target" and similar expressions, are forward-looking statements. While these forward-looking statements represent our current judgment of what may happen in the future, actual results may differ materially from the results expressed or implied by these statements due to numerous important factors. Our public disclosures provide information on certain of such statements and risks, and should be consulted along with this release. To the extent permitted under applicable law, we assume no obligation to update any forward-looking statements.

The financial statements below have been derived from the Company's financial statements at the dates shown, but do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the Company's quarterly report for the nine months ended July 31, 2017 filed on September 14, 2017, and annual report for the fiscal year ended October 31, 2016 filed on January 30, 2017, both with the OTC Markets Group OTCQX: IDWM.

   
   
CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in thousands)   July 31, 2017 (Unaudited)     October 31, 2016  
Assets            
Current assets:                
  Cash and cash equivalents   $ 17,192     $ 6,203  
  Trade accounts receivable, net     10,443       11,592  
  Inventory - print and production costs     18,599       13,652  
  Prepaid expenses     2,942       1,738  
  Note receivable - current portion     31       310  
Total current assets     49,207       33,495  
Property and equipment, net     3,465       3,394  
Non-current assets                
  Trade accounts receivable - non-current portion     2,381       2,478  
  Deferred taxes     11,354       10,413  
  Intangible Assets, net     1,242       1,539  
  Goodwill     2,227       2,227  
  Other assets     481       392  
Total non-current assets     17,685       17,049  
Total assets   $ 70,357     $ 53,938  
Liabilities and stockholders' equity                
Current liabilities:                
  Trade accounts payable     2,382     $ 2,412  
  Accrued expenses     7,129       8,730  
  Deferred revenue     3,459       1,809  
  Bank loans payable - current portion     5,016       426  
  Income taxes payable     744       1,037  
  Capital lease obligations - current portion     384       365  
  Other current liabilities     526       421  
Total current liabilities     19,640       15,200  
Non-current liabilities                
  Accrued liabilities - non-current     1,144       470  
  Capital lease obligations - long term portion     854       807  
  Bank loans payable - long term portion     767       749  
Total non-current liabilities     2,765       2,026  
Total liabilities     22,405       17,226  
Commitments and contingencies     -       -  
Stockholders' equity:                
  Preferred stock, $.01 par value; authorized shares - 500; no shares issued at July 31, 2017 and October 31, 2016     -       -  
  Class B Common stock subscribed, $.01 par value; 40 shares at July 31, 2017     -       -  
  Class B common stock, $0.01 par value; authorized shares - 12,000; 6,050 shares and 5,553 shares issued and outstanding at July 31, 2017 and October 31, 2016, respectively     61       56  
  Class C common stock, $0.01 par value; authorized shares - 2,500; 545 shares issued and outstanding at July 31, 2017 and October 31, 2016     5       5  
  Additional paid-in capital     65,920       53,208  
  Common stock subscriptions receivable     (7 )     -  
  Accumulated other comprehensive loss     (179 )     (250 )
  Accumulated deficit     (16,652 )     (15,111 )
  Treasury stock, at cost, consisting of 519 shares of Class B common stock at July 31, 2017 and October 31, 2016     (1,196 )     (1,196 )
Total stockholders' equity     47,952       36,712  
Total liabilities and stockholders' equity   $ 70,357     $ 53,938  
   
   
IDW MEDIA HOLDINGS, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Three Months Ended
July 31,
    Nine Months Ended
July 31,
 
(in thousands, except per share data)   2017     2016     2017     2016  
                                 
Revenues   $ 16,705     $ 17,608     $ 40,378     $ 41,634  
Costs and expenses:                                
  Direct cost of revenues     8,989       8,706       21,415       20,752  
  Selling, general and administrative (i)     7,011       5,791       19,979       16,611  
  Depreciation and amortization     397       395       1,159       1,137  
  Bad debt expense     12       99       23       122  
Total costs and expenses     16,409       14,991       42,576       38,622  
Income (loss) from operations     296       2,617       (2,198 )     3,012  
Interest expense, net     (68 )     (19 )     (102 )     (57 )
Other (expense) income, net     (2 )     10       (1 )     (22 )
Income (loss) before income taxes     226       2,608       (2,301 )     2,933  
(Provision for) benefit from income taxes     (83 )     (998 )     760       (1,229 )
Net income (loss)     143       1,610       (1,541 )     1,704  
                                 
Net income attributable to non-controlling interests     -       227       -       -  
Net income (loss) attributable to IDW Media Holdings, Inc.   $ 143     $ 1,837     $ (1,541 )   $ 1,704  
                                 
Basic and diluted income per share attributable to IDW Media Holdings, Inc. common stockholders:                                
Net income (loss) per share   $ .03     $ .37     $ (.27 )   $ .36  
                                 
Weighted-average number of shares used in the calculation of basic and diluted income per share:     5,795       5,007       5,750       4,772  
                                 
Dividend declared per common share:   $ 0.00     $ 0.00     $ 0.00     $ 0.163  
                                 
Interest Expense   $ 70     $ 22     $ 109     $ 68  
                                 
(i) Stock-based compensation included in selling, general and administrative expenses   $ 771     $ 96     $ 2,166     $ 289  
                                 
                                 

IDW Media Holdings, Inc. EBITDA and Adjusted EBITDA

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information, the Company is also disclosing for the three and nine months ended July 31, 2017 and 2016, EBITDA and Adjusted EBITDA, which are non-GAAP measures. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

The Company's measure of EBITDA consists of net income before depreciation, amortization, provision for or benefit from income taxes, and net interest expense or interest income. Adjusted EBITDA makes further adjustments to EBITDA to reflect the elimination of certain income statement items including non-cash compensation, and expenses that we consider to be not indicative of ongoing operations.

These additions and subtractions are non-cash and/or non-routine items in the relevant fiscal 2017 and fiscal 2016 periods.

Management believes that the Company's EBITDA and Adjusted EBITDA measures provide useful information to both management and investors by excluding certain expenses and non-routine gains and losses that may not be indicative of the Company's core operating results. Management uses EBITDA and Adjusted EBITDA, among other measures, as a relevant indicator of core operational strengths in its financial and operational decision making. In addition, management uses EBITDA and Adjusted EBITDA to evaluate operating performance in relation to its competitors. Disclosure of these financial measures may be useful to investors in evaluating performance and allows for greater transparency to the underlying supplemental information used by management in its financial and operational decision-making. In addition, management believes such measures are commonly used by readers of financial information in assessing performance, therefore the inclusion of comparative numbers provides consistency in financial reporting at this time.

Management refers to EBITDA and Adjusted EBITDA to facilitate internal and external comparisons to historical operating results, in making operating decisions, for budget and planning purposes, and to form the basis upon which management is compensated for the Company's business segments.

While depreciation and amortization are considered operating costs under GAAP, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. The Company's operating results exclusive of depreciation and amortization charges are useful indicators of its current performance.

Interest is excluded from operating income to arrive at EBITDA as this expense reflects the cost of debt financing and its exclusion may provide users of the financial information with a useful indication of the Company's operations. Income taxes are excluded in arriving at EBITDA as they reflect costs based on taxable income where computations and rates vary by the jurisdictions in which the Company does business and provides a different measure to evaluate operations and may be useful in evaluating operational performance.

Non-cash compensation is also considered an operating expense under GAAP and represents expenses that do not utilize the Company's cash resources and are useful in evaluating the Company's current performance.

EBITDA and Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, income (loss) from operations, cash flow from operating activities, net income, and other liquidity and financial performance prepared in accordance with GAAP. In addition, the Company's measurements of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.

Following are reconciliations of EBITDA and Adjusted EBITDA to Net Income (Loss), which is the most directly comparable GAAP measure.

 
 
Reconciliation of Consolidated Net Income (Loss) to
Consolidated EBITDA and Consolidated Adjusted EBITDA
(Unaudited)
 
    Three Months Ended
July 31,
  Nine Months Ended
July 31,
(in thousands)   2017   2016   2017     2016
Net income (loss)   143   1,837   (1,541 )   1,704
  Depreciation and amortization   397   395   1,159     1,137
  Provision for (benefit from) income taxes   83   998   (760 )   1,229
  Interest expense, net   68   19   102     57
EBITDA   691   3,249   (1,040 )   4,127
  Non-cash compensation   771   96   2,166     289
Adjusted EBITDA  
1,462
 
3,345
  1,126     4,416
                   
                   

Adjusted EBITDA is defined as net income before interest expense, provision for income taxes and depreciation and amortization, with further adjustments to reflect the elimination of income statement items including non-cash charges, and expenses that we consider not indicative of ongoing operations.

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