SOURCE: Wow Unlimited Media Inc.

Wow Unlimited Media Inc.

November 29, 2017 21:24 ET

Wow Unlimited Media Announces Financial Results for the Third Quarter of 2017

VANCOUVER, BC--(Marketwired - November 29, 2017) - Wow Unlimited Media Inc. (formerly Rainmaker Entertainment Inc.) ("Wow" or the "Company") (TSX VENTURE: WOW.A)(TSX VENTURE: WOW.B) announced its results for the three and nine months ended September 30, 2017.

         
    For the three months ended   For the nine months ended
   September 30,  September 30,  September 30,  September 30,
$000's, except per share amounts   2017   2016   2017   2016
Revenue $ 10,403 $ 4,698 $ 26,668 $ 14,207
Operating EBITDA   (1,158)   782   (2,122)   1,483
Operating (loss) profit   (1,799)   243   (3,797)   (176)
Net (loss) profit $ (1,799) $ 1,226 $ (3,797) $ (8,599)
Net (loss) profit per share                
 - basic $ (0.07) $ 0.70 $ (0.15) $ (4.90)
 - diluted $ (0.07) $ 0.18 $ (0.15) $ (4.90)
Weighted average number of shares outstanding                
 - basic   25,178,604   1,754,018   25,262,255   1,753,351
 - diluted   25,178,604   8,491,518   25,262,255   1,753,351
         

1 See section "Non-GAAP Financial Measures" in this earnings release.
2 All earnings per share data for comparative periods have been adjusted to reflect a 10:1 share consolidation completed during the year-ended December 31, 2016

FINANCIAL HIGHLIGHTS

The Company reported the following highlights from the three and nine months ended September 30, 2017:

  • Third quarter revenue earned was $10.4 million. This included $2.9 million generated by Channel Frederator Network, which grew by 218 million views during the third quarter of 2017, and revenue from the delivery of the first 8 episodes of Reboot: The Guardian Code to Corus Entertainment Inc. ("Corus").
  • Net loss was $1.8 million for the 3 months ended September 30, 2017.

Michael Hirsh, Chairman and CEO, commented: "We are excited about the progressive growth in Frederator Networks, which exceeded 1 billion views in the month of September, 2017. Frederator Studios is in production on the second season of Castlevania; the first season continues to perform well on Netflix. On the Rainmaker Studios side, the third quarter saw the delivery of 8 episodes of our second proprietary series, Reboot: The Guardian Code. Deliveries of this innovative series, combining live-action with high-end, computer-generated animation, will continue through the fourth quarter. We are also pleased to report that on November 21, 2017, the Company filed a supplement to its short form base shelf prospectus dated October 5, 2017, as a component of new financing initiatives by the business. We expect to bring additional capital into the Company in early December, 2017."

OPERATIONAL UPDATE

Channel Frederator Network continues to grow, with 96 channels added to the network during the third quarter, for a total of 326 channels added between January and September 2017. Monthly views increased by 112% from January 2017 to September 30, 2017, with Channel Frederator Network attracting a total of 6.8 billion views from January 2017 to September 2017. Monthly views increased by 27% for a total of 1 billion views in September 2017.

Rainmaker Studios also delivered the first 8 episodes of the series Reboot: The Guardian Code to Corus during the third quarter of 2017. The remaining 12 episodes of the series are expected to be delivered during the fourth quarter of 2017 and the series is expected to air in the first quarter of 2018.

CONSOLIDATED RESULTS FOR THE QUARTER

Selected financial information for the three and nine months ended September 30, 2017 and 2016 are as follows:

             
  For the three months ended  For the nine months ended 
  September 30,  September 30,  September 30,  September 30, 
$000's   2017    2016    2017    2016  
Revenue $ 10,403  $ 4,698  $ 26,668  $ 14,207  
Operating EBITDA   (1,158 )  782    (2,122 )  1,483  
Net finance costs   113    416    282    1,300  
Depreciation and amortization1   143    123    375    409  
Share based payments   385    -    1,018    -  
Service credits   -    -    -    (50 )
Operating (loss) profit   (1,799 )  243    (3,797 )  (176 )
   
Items affecting comparability:                     
 Impairments   -    -    -    567  
 Share of loss of Ratchet Productions, LLC   -    -    -    8,839  
 Revenue share of Ratchet Productions, LLC   -    (983 )  -    (983 )
    -    (983 )  -    8,423  
Net (loss) profit $ (1,799 )$ 1,226  $ (3,797 )$ (8,599 )
   
Items affecting comparability:                     
 Equity accounted investee - share of OCI   -    -    -    416  
 Foreign currency translation adjustment   (90 )  -    (148 )  -  
Total comprehensive (loss) profit $ (1,709 )$ 1,226  $ (3,649 )$ (9,015 )

1 Excludes amortization of investment in film and television properties

Revenue & Operating EBITDA

Revenue earned for the three months and nine months ended September 30, 2017 increased by $5.7 million and $12.5 million, respectively, compared to the same periods in 2016, driven by the views and revenues generated by the Networks and Platforms segment, in particular, Channel Frederator Network, and the delivery of Castlevania Season 1.

Operating EBITDA decreased by $1.9 million and $3.6 million, respectively, for the three and nine months ended September 30, 2017, compared to the same periods in 2016. This decrease reflects the impact of the lower margins achieved in Channel Frederator Network and on owned IP compared to animation production service work, as well as increased employee costs and corporate head office costs as a result of incorporating the operations of Frederator subsequent to the Reorganization. In addition, the Company experienced foreign exchange losses of $0.09 million and $0.25 million for the three and nine months ended September 30, 2017, in comparison to foreign exchange gains of $0.02 million and $0.21 million for the same periods in 2016, as a result of the strengthening of the Canadian dollar compared to the US dollar.

Net finance costs

The decrease in overall finance costs of $0.3 million and $1.0 million for the three and nine months ended September 30, 2017 is largely due to the decrease in interest expense on convertible debentures. The convertible debentures were settled as part of the Reorganization.

Depreciation and amortization

The reduced depreciation charge is as a result of amounts capitalized during the first three quarters of 2017 for assets used during the production of the Company's owned intellectual property, ReBoot: The Guardian Code.

Share based payments

Shared based payments for the three and nine months ended September 30, 2017 reflects the share appreciation rights issued to certain employees by an officer of the Company, and the grant and initial vesting of stock options to certain officers of the Company approved during the second and third quarters, as well as the continued vesting of all options previously granted.

Impairments and Share of loss in Ratchet Productions, LLC – Ratchet & Clank

During the Company's previous fiscal year, as previously disclosed, the Company's investment in Ratchet Productions, LLC ("RPLLC") ($8.8 million) became impaired and an amount of $0.6 million owing to Wow by RPLLC was no longer recoverable.

NON-GAAP FINANCIAL MEASURES

The Company reports using certain supplemental indicators of the Company's financial and operating performance in addition to results reported in accordance with International Financial Reporting Standards ("GAAP"). These measures are referred to as non-GAAP measures, and include operating earnings, operating earnings per share and operating EBITDA. The Company believes these supplemental financial measures reflect the Company's ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.

The Company defines operating earnings as net profit or loss excluding the impact of specified items affecting comparability, including, where applicable, share of loss of equity accounted investees, other non-operational income and expenses, deferred taxes and other gains or losses. The use of the term "non-operational income and expenses" is defined by the Company as those that do not impact operating decisions taken by the Company's management and is based upon the way the Company's management evaluates the performance of the Company's business for use in the Company's internal management reports. Operating earnings per share is calculated using diluted weighted average shares outstanding and does not represent actual earnings per share attributable to shareholders. The Company believes that the disclosure of operating earnings and operating earnings per share allows investors to evaluate the operational and financial performance of the Company's ongoing business using the same evaluation measures that management uses, and is therefore a useful indicator of the Company's performance or expected performance of recurring operations.

The Company defines operating EBITDA as earnings before interest, taxes, depreciation and amortization (excluding amortization of investments in film and television properties), adjusted for certain items affecting comparability as specified in the calculation of operating earnings. The Company discloses operating EBITDA to capture the profitability of its business before the impact of items not considered in management's evaluation of operating performance. Unless otherwise stated, the Company includes the amortization of investments in film and television in the calculation of EBITDA.

Operating earnings, operating earnings per share and operating EBITDA do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other companies. The Company cautions readers to consider these non-GAAP financial measures in addition to, and not as an alternative for, measures calculated in accordance with GAAP.

Forward-looking Statements

This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words, including negatives thereof, suggesting future outcomes.

In particular, this news release contains forward-looking statements relating to, among other things: (i) general economic conditions; (ii) future revenues to be received by Wow; (iii) Wow's future business prospects and opportunities; (iv) Wow's ability to complete any or all of its proposed production work; (v) the ability of the Company to raise financing in the future; and (vi) the completion of the proposed transactions with Bell Media Inc.

Management of the Company believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon. Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors and assumptions are based on information currently available to the Company, including data from publicly available governmental sources as well as from market research and industry analysis and on assumptions based on data and knowledge of this industry which the Corporation believes to be reasonable. However, although generally indicative of relative market positions, market shares and performance characteristics, such data is inherently imprecise.

Forward-looking statements are not a guarantee of future performance and are subject to and involve a number of known and unknown risks and uncertainties, many of which are beyond the control of the Company, which may cause the Company's actual performance and results to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified in the Company's annual information form for the year ended December 31, 2016, which has been filed with the Canadian Securities Administrators and is available on www.sedar.com. Any forward-looking statements are made as of the date hereof and, except as required by law, the Company assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

About Wow Unlimited Media Inc.

Wow Unlimited Media Inc., (formerly Rainmaker Entertainment Inc.), is creating a leading next-generation kids and youth animation business by focusing on digital platforms and content. The company's key assets include: the world's No. 1 digital animation network, Frederator Networks, which consists of an animation production company, Frederator Studios, as well as VOD channels on digital platforms; the world's first Hispanic animation network, Atomo Network, a joint venture with Anima Estudios; and one of Canada's largest, multifaceted animation production studios, Rainmaker Entertainment, which consists of Mainframe Studios which produces CGI animated television series, and Rainmaker Studios, which produces long-form animated features.

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