DHX revenues hit $121.9M in Q2

The company's multi-platform network Wildbrain posted strong growth in the quarter, while its linear TV business posted year-over-year declines of 8%.
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DHX Media revenues hit $121.9 million in Q2 2018, with the Halifax-based company posting strong growth in its multi-platform network Wildbrain, while seeing declines in its linear TV business.

Revenue for the quarter grew by 55% year-over-year to $121.9 million, compared to $78.9 million in Q2 2017. DHX attributed around 51% of the increase to acquisitive growth from its May 2017 acquisition of Peanuts and Strawberry Shortcake, while 4% of the quarterly growth was attributed to a combination of organic growth driven by Wildbrain and from investments made through its partnership with Mattel.

Adjusted EBITDA for the quarter was $32 million, while the company reported net income of $7.4 million. DHX also said the company remains on course to achieve its target of $11 million in annual savings on its Peanuts acquisition, as well as other “company-wide cost reductions” by the end of fiscal 2019. Between $5 million and $6 million of these savings are expected to be achieved by the close of fiscal 2018.

Turning to its TV business, year-over-year TV revenues decreased 8% to $14.24 million, from $15.39 million a year ago. Subscriber revenues were down 5% to $12.85 million, from $13.53 million a year ago, due to lower total subscribers and slightly lower average subscriber rates. In Q2 2018, 90% of the television revenues were subscriber revenues. Meanwhile promotion and advertising revenue decreased to $1.39 million, from $1.87 million in the same quarter last year.

On the advertising front, CEO Dana Landry said on an investor call that achieving scale had been an issue, as DHX only owns four channels. Management is currently reviewing its plan for advertising on the channels, which include Family Channel and Family CHRGD. Landry added that DHX is considering strategic partnerships to create a pathway for growth. In November of 2016, the CRTC announced that it will allow advertising on pay TV services in a move to to level the playing field in light of the removal of genre protection.

Wildbrain continues to be a revenue driver for the company, with revenues for the quarter increasing 73% to $17.6 million, compared to $9.4 million in Q2 2017. The network has 35 million subscribers worldwide. As well, DHX said watch time has doubled on the network. Across Q1 and Q2 of 2018, the service saw 11 billion views and more than 55 billion minutes of total watch time, which was equal to the total watch time and views for all of fiscal 2017. In related news, Paris-based producer and distributor Cyber Group Studios announced Monday it had appointed WildBrain to enhance and develop its YouTube channels and digital presence worldwide.

Across the company, production revenue in Q2 was $26.6 million, compared with $28.1 million from a year ago. The most recent quarter saw DHX add 52 new proprietary half-hours of content, which generated $8.6 million in revenue. Meanwhile, service projects accounted for revenue of $18 million, which included new episodes produced through its partnership with Mattel.

The company’s consumer-products business accounted for $46.8 million (38%) of quarterly revenues, driven in part by the growth of the Peanuts brand and its various brand partnerships, including with Levi’s, Nordstrom and Pottery Barn Kids and Teens.

Today’s results come four months after DHX launched a strategic review to evaluate its options following disappointing quarterly results published in October. At the time, the company said the review could result in the sale of part or all of the company, a sale of the assets of the company, a merger with another party, or other options.

“We know that investors are waiting on the results of our strategic review,” said executive chairman Michael Donovan on an investor call Tuesday. “That process is ongoing and robust. The strong results reported in the last two quarters confirm the underlying value of our IP. The work of the special committee validates our strategy of focusing on unlocking further value in our core IP assets and I’d like to ensure our investors that the special committee is continuing its work, which is progressing well, and we will be updating investors when we have news to report.” No timelines were given.

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