WOW! Unlimited Media Announces Financial Results For the Second Quarter of 2020

Nachrichtenquelle: globenewswire
27.08.2020, 23:22  |  108   |   |   

VANCOUVER, British Columbia, Aug. 27, 2020 (GLOBE NEWSWIRE) -- WOW! Unlimited Media Inc. (“WOW!” or the “Company”) (TSX-V: WOW; OTCQX: WOWMF) announced today its financial results for the three and six months ended June 30, 2020.

KEY Q2 2020 HIGHLIGHTS

  • Revenue for the quarter was $11.5 million
  • Operating EBITDA was a loss of ($0.7) million
  • Over 200 half-hours of episodic animation and 7 animated movie specials currently in production or contracted
  • Production pipeline continues to be strong - $64.3 million as of June 30, 2020
  • Barbie Princess Adventure expected to be available for streaming on Netflix beginning September 2020
  • Octonauts and the Caves of Sac Actun was released on Netflix in August 2020
  • Mainframe’s Global Studio Pipeline has increased overall production capacity further 
  • Company’s credit facility increased from $1.5 million to $5.0 million
  • Restructuring at Frederator expected to provide potential EBITDA savings in excess of $2.0 million on an annualized basis
  • Fred Seibert to depart and return to independent production roots; will continue to work with Company on current and future projects
  • A prominent global streaming platform picked up 13 existing episodes of the Company’s Bee & PuppyCat series

Operating highlights

  • During the global COVID-19 crisis, WOW!’s staff continue to function seamlessly from the safety of their homes - production of each of the Company’s titles has continued with minimal disruption to client commitments. Mainframe Studios plans to adapt its work from home model, beyond the current crisis, to expand its production capacity considerably, without leasing additional facilities. Frederator’s operations have been largely unaffected by the virus except for some delays experienced by its external animation service providers. Over 200 half-hours of episodic animation and 7 animated movie specials are currently in production or contracted and scheduled.
  • Castlevania, season 4, produced by WOW!’s Frederator Studios, continues in production with deliveries slated to commence in Q4 2020.
  • WOW!’s Mainframe Studios’ continues production on a new animated series titled Madagascar: A Little Wild for DreamWorks Animation, with deliveries of episodes on the new series commencing shortly.
  • In August 2020, Mainframe Studios delivered a 70-minute animated film entitled Barbie Princess Adventure to our long-time client, Mattel.  The film is expected to be available for streaming on Netflix beginning September 1, 2020.  
  • Production also continues at Mainframe Studios on other existing and new Barbie content for Mattel.
  • Production is proceeding on the popular Octonauts title for Silvergate Media, as well as the Made by Maddie series.
  • Subsequent to the end of Q2 2020, the Company’s premiere property, Bee & PuppyCat, was picked up by a prominent global streaming platform. Additional details will be released in the coming months.
  • In June 2020, the Company commenced a restructuring project at its Frederator operations and as a result, for the three and six months ended June 30, 2020, the Company has recognized restructuring costs of $1.1 million in the condensed interim consolidated statements of comprehensive loss.  A restructuring and reorganization project was implemented in order to reduce the headcount at Frederator and to implement overhead and cost saving initiatives which are expected to provide potential EBITDA savings in excess of $2.0 million on an annualized basis. Reductions were specific to the Owned & Operated (O&O) channels group, where the Company is in the process of redefining its business model for optimal success within the YouTube and other advertising-supported online platforms.
  • In April 2020, Frederator Networks Inc. (“Frederator”), a subsidiary of the Company, was awarded an unsecured loan of $0.9 million under the Paycheck Protection Program, which is guaranteed by the US Small Business Administration, pursuant to the Coronavirus Aid, Relief and Economic Security Act. The loan bears interest at 1% per annum and, subject to the satisfaction of certain conditions, the loan may be forgiven during its 24-month term.

Financial highlights

  • Revenue for the quarter was $11.5 million
  • Operating EBITDA was a loss of ($0.7) million
  • The production pipeline continues to be strong - as of June 30, 2020, WOW!’s animation production backlog was $64.3 million
  • In July 2020, the Company amended its credit facility with a Canadian bank. The amendment to the Facility increased the Company’s revolving demand facility limit to $5,000,000 and its equipment lease line to $7,000,000. In addition, amendments were made to financial covenants under the Facility.

OVERVIEW OF RESULTS

  For the three months ended For the six months ended
$000's, except per share amounts June 30, 2020
  June 30, 2019
  June 30, 2020
  June 30, 2019
 
Revenue $ 11,528   $ 26,614   $ 25,223   $ 46,111  
Operating EBITDA1   (664 )   (625 )   (553 )   (2,438 )
Operating loss1   (2,131 )   (2,214 )   (3,518 )   (5,481 )
Operating loss per share        
- basic and diluted $ (0.07 ) $ (0.07 ) $ (0.11 ) $ (0.18 )
         
Net loss $ (3,368 ) $ (2,361 ) $ (4,836 ) $ (5,754 )
Net loss per share        
- basic and diluted $ (0.11 ) $ (0.07 ) $ (0.15 ) $ (0.19 )
Weighted average number of shares outstanding:        
- basic and diluted   32,024,314     31,963,696     32,024,314     31,079,549  
         
1 Operating EBITDA and operating loss include amortization of investment in film and television programming. Refer to discussion under Consolidated Results for a reconciliation of Operating EBITDA and Operating loss to Net loss.
     
  • Revenue for the three months ended June 30, 2020, was $11.5 million.  This included $4.2 million generated by the Networks and Platforms segment and $7.3 million for the Animation Production segment for the three months ended June 30, 2020, bolstered by the continued production of the film Barbie Princess Adventure, an additional 60-minute animated Barbie film, Made by Maddie, Madagascar: A Little Wild, the Octonauts specials, and Octonauts, seasons 5 through 8.
  • Operating EBITDA was a loss of ($0.7) million, and the net loss was ($3.4) million, for the three months ended June 30, 2020. 

Michael Hirsh, Chairman & CEO, commented: “The COVID-19 crisis continues to pose challenges for businesses and individuals alike and WOW! is adapting its business model to face the future. During the quarter, WOW! took steps to restructure and rationalize its Frederator operations in New York, as a result of which we anticipate EBITDA savings of over $2.0 million on an annualized basis.  On behalf of the Board, management, and entire staff of the WOW! organization, we would like to thank Fred for all of his contributions since the formation of WOW!. We wish Fred the best in his next independent venture and look forward to continuing to work with him on projects we know our fans will love.”

CONSOLIDATED RESULTS

  For the three months ended For the six months ended
$000's June 30, 2020
  June 30, 2019
  June 30, 2020
  June 30, 2019
 
Revenue $ 11,528   $ 26,614   $ 25,223   $ 46,111  
Amortization of investment in film and television programming $ 559   $ 293   $ 1,124   $ 657  
         
Operating EBITDA $ (664 ) $ (625 ) $ (553 ) $ (2,438 )
Finance costs   440     530     1,003     979  
Depreciation and amortization1   1,027     1,059     1,962     2,064  
Operating loss   (2,131 )   (2,214 )   (3,518 )   (5,481 )
Items affecting comparability:        
Share-based compensation expense   137     147     293     273  
Restructuring costs   1,100         1,100      
Deferred income tax expense (recovery)           (75 )    
    1,237     147     1,318     273  
Net loss $ (3,368 ) $ (2,361 ) $ (4,836 ) $ (5,754 )
1 Excludes amortization of investment in film and television programming
         

Revenue and Operating EBITDA

Revenue for the three and six months ended June 30, 2020, decreased by $15.1 million and $20.9 million, respectively, compared to the same periods in 2019.  The decrease in revenue was primarily as a result of decreased views generated by Channel Frederator Network due to the termination of the ADME agreement as previously announced in December 2019.  

Operating EBITDA for the three and six months ended June 30, 2020 decreased by $0.04 million and increased by $1.9 million, respectively, compared to the same periods in 2019. The higher operating EBITDA for the six months ended June 30, 2020 was driven by increased revenue and margins in the Animation Production segment as a result of the increase in the number of active productions.    

CONFERENCE CALL

The Company will host a conference call at 9:00 a.m. Eastern Time on Friday, August 28, 2020 to discuss the Company’s financial results.

The conference call can be accessed live by dialling 1 (877) 825-9920 five minutes prior to the scheduled start time. The Conference ID is 5987154.

A digital recording of the call will be available for one month (until midnight Eastern Time, September 28, 2020) by dialling 1 (855) 859-2056 or (404) 537-3406 and using the Conference ID 5987154.

NON-IFRS FINANCIAL MEASURES

In addition to results reported in accordance with International Financial Reporting Standards (“IFRS”), this news release includes financial terms that the Company utilizes to assess the financial performance of its business that are not measures recognized under IFRS. These non-IFRS financial measures include operating profit or loss, operating profit or loss per share, operating EBITDA, and backlog. The Company believes these supplemental financial measures reflect the Company's on-going business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business. These non-IFRS measures have been consistently calculated in all periods presented.

The Company defines operating profit or loss as net profit or loss excluding the impact of specified items affecting comparability, including, where applicable, share of gain or loss of equity accounted investees, impairment of other intangible assets and goodwill, 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 profit or loss per share is calculated using diluted weighted average shares outstanding and does not represent actual profit or loss per share attributable to shareholders.  The Company believes that the disclosure of operating profit or loss and operating profit or loss 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 profit or loss net of amortization of investment in film and television programming, but before interest, taxes, depreciation, and amortization, adjusted for certain items affecting comparability as specified in the calculation of operating profit or loss.  Operating EBITDA is presented on a basis consistent with the Company's internal management reports.  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 investment in film and television programming in the calculation of operating EBITDA.

The Company defines backlog as the undiscounted value of signed agreements for production services and intellectual property in relation to licensing and distribution agreements for work that has not yet been performed, but for which the Company expects to recognize revenue in future periods.  Backlog excludes estimates of variable consideration for transactions involving sales or usage-based royalties in exchange for licences of intellectual property.  The extent of eventual revenue recognized in future periods may be materially higher or lower than this amount, depending upon factors which include, but are not limited to the following: (i) contract modifications, (ii) fluctuations in foreign exchange rates for contracts not denominated in Canadian dollars, (iii) changes to production and delivery schedules, or (iv) valuation issues in connection with the collectability of fees.

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

For additional information regarding the Company's use of non-IFRS measures, including the calculation of these measures and a reconciliation of operating EBITDA and operating (loss) profit to net (loss) profit, please refer to the “Reconciliations” section of the Company's management's discussion and analysis for the three and six months ended June 30, 2020, available on the Company's website at www.wowunlimited.co and on SEDAR at www.sedar.com.

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 impact of overhead and cost savings initiatives at the Company’s Frederator operations; (vi) Mainframe’s plans to adapt its work from home model; (vii) deliveries of Castlevania, season 4; (viii) deliveries of Mainframe Studios’ production on a new animated series; (ix) streaming on Netflix of Barbie Princess Adventure; and (x) Fred Seibert’s future involvement with the Company.

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. Specific material factors and assumptions include, but are not limited to: (i) the performance of WOW!'s business, including current business and economic trends; (ii) capital expenditure programs and other expenditures by WOW! and its customers; (iii) dependence on key personnel and the ability of WOW! to retain and hire qualified personnel; (iv) the ability of WOW! to market its content successfully to existing and new customers; (v) the ability of WOW! to retain customers; (vi) the ability of WOW! to obtain timely financing on acceptable terms; (vii) a stable competitive environment; (viii) WOW!’s ability to anticipate and adapt to changes in technology and product consumption patterns; (ix) a stable industry regulatory environment; (x) ongoing relationships with WOW!’s distributors and business partners; and (xi) competitive forces within the entertainment industry. 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 Management’s Discussion and Analysis for the year ended December 31, 2019, 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!  
WOW! is creating a leading animation-focused entertainment company by producing top-end content and building brands and audiences on engaging media platforms. The Company produces animation in its two established studios: Mainframe Studios in Vancouver and Frederator Studios in Los Angeles. The Company’s media offerings include Channel Frederator Network on YouTube, as well as WOW! branded programming on Crave, Canada’s premier streaming entertainment platform, owned by Bell Media. The common voting shares of the Company and variable voting shares of the Company are listed on the TSX Venture Exchange and the OTCQX Best Market.

Neither the 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.

Further information available at: 
Website: www.wowunlimited.co
Contact: Bill Mitoulas, Investor Relations
Tel: (416) 479-9547
Email: billm@wowunlimited.co


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Disclaimer

WOW! Unlimited Media Announces Financial Results For the Second Quarter of 2020 VANCOUVER, British Columbia, Aug. 27, 2020 (GLOBE NEWSWIRE) - WOW! Unlimited Media Inc. (“WOW!” or the “Company”) (TSX-V: WOW; OTCQX: WOWMF) announced today its financial results for the three and six months ended June 30, 2020. KEY Q2 2020 …

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