www.dhxmedia.com
AIM and TSX ticker: "DHX"
HALIFAX, May 16 /CNW/ - DHX Media Ltd. ("DHX Media" or the "Company") (AIM & TSX ticker: "DHX"), a leading independent international producer and distributor of television programming and interactive content, announces its unaudited consolidated interim results for the three and nine month period ended March 31, 2008.
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Highlights
(All amounts expressed in Canadian dollars)
- Record revenues of $20.4 million and $40.9 million for the three and
nine month periods ended March 31, 2008, respectively, representing an
increase of 280% and 168% over the comparative periods last year;
- EPS grows to $0.02 in the quarter and $0.04 for the nine-month period;
- Gross profit of $5.8 million, an increase of 176% for Q3 2008
(Q3 2007: $2.1 million);
- EBITDA(1) increased by 324% for Q3 2008 to $2.7 million up from
$0.6 million for Q3 2007;
- Net income of $0.9 million and $1.4 million for Q3 2008 and the nine
months ended March 31, 2008, respectively, representing increases of
554% and 735% over the respective periods of last year; and
- Number of delivered half-hours of production for which revenue was
recognized increased 191% to 78.5 for Q3 2008 up from 27 for Q3 2007.
Michael Donovan, Chairman and CEO, commented, "Our exceptional results in
third quarter are the result of the continued focus on creating content
specifically for children and family entertainment. Through acquisitions and
organic growth DHX is one of the largest independent producers for this genre
in the world. Our growing film and television library and our experienced,
award-winning management will enable DHX to continue to capitalize on a robust
global market for family programming and deliver outstanding top and bottom
line performance."
Operating Review
DHX continued to deliver on its strategic objectives during the third
quarter of fiscal 2008 Including:
- January 8, 2008: Announced the commissioning of 40 15-minute episodes
of Animal Mechanicals
- February 20, 2008: Cartoon Network Germany acquired all of the German
TV rights to Chop Socky Chooks, a co-production by DHX Media's
DECODE Entertainment and UK based Aardman Animations for the Cartoon
Network (Worldwide) and Teletoon in Canada.
- March 18, 2008: Two seasons of Bo on the GO!, produced by DHX Media's
subsidiary Halifax Film, were licensed by France 5
- March 25, 2008: DHX acquired Bulldog Interactive Fitness Inc., a
privately-owned developer of children's entertainment centers.
- March 26, 2008: Announced co-production deal with Spain's Neptuno
Studios for 26 half-hours of Poppets Town
Subsequent to the end of the quarter, the Company achieved the following:
- April 9, 2008: The Guard, a co-production between DHX Media's
subsidiary Halifax Film and Brightlight Pictures Inc., has been
licensed for a second season by Global Television.
- April 10, 2008: Announced that its subsidiary DECODE Entertainment and
The Foundation (RDF Media Group) will co-produce 100 20-minute episodes
of Way to Blue, a landmark pre-school series featuring a mix of live
action and animation.
- April 15, 2008: Jetix U.S. acquired all 52 11-minute episodes of the
animated comedy series Kid vs. Kat. The new series is being produced by
DHX Media's recently acquired animation company Studio B
Productions Inc., in association with Jetix Europe, and Canadian kids'
broadcaster, YTV.
- April 22, 2008: DHX Media's distribution subsidiary DECODE Enterprises
signed multiple international deals, including a deal with
Nick Jr. (UK) for all 65 half-hours of the critically acclaimed
animated preschool show Super WHY!
Financial Results
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------------------
2008 2007 2008 2007
$ $ $ $
------------------------------------------------------
Consolidated
Statements
of Income and
Comprehensive
Income Data:
Revenues 20,392,285 5,366,329 40,877,860 15,270,926
Direct production
costs and
amortization
of film and
television
programs
produced 14,551,344 3,253,332 28,256,456 9,717,635
------------------------------------------------------
Gross margin 5,840,941 2,112,997 12,621,404 5,553,291
------------------------------------------------------
Selling,
general, and
administrative 3,315,480 2,056,226 8,123,110 5,598,520
Income (loss)
before the
following 1,983,327 9,103 3,527,495 (338,377)
Income (loss)
from strategic
investments (9,899) 495,559 (17,707) 1,463,789
Interest and other
(expenses), net (577,895) (304,772) (1,307,852) (942,306)
Provision for
(recovery of)
income taxes 520,000 66,000 815,000 17,000
Net income and
comprehensive
income 875,533 133,890 1,386,936 166,106
Basic earnings
per common share 0.021 0.004 0.037 0.005
Fully diluted
earnings per
common share 0.017 0.004 0.031 0.005
Weighted average
common shares
outstanding
Basic 42,619,727 32,801,452 37,817,503 32,663,816
Fully Diluted 52,198,957 35,972,911 44,087,851 35,886,199
--------------------------
March 31, June 30,
2008 2007
$ $
--------------------------
Consolidated
Balance Sheet
Data:
Cash, restricted
cash, and
short-term
investments 12,870,240 5,778,545
Investment
in film and
television
programs 48,736,727 47,025,343
Total assets 151,610,528 103,005,130
Total debts 91,630,767 61,543,529
Shareholder
equity 59,979,761 41,461,601
Revenues for Q3 2008 were $20.4 million, up from $5.4 million for Q3 2007,
an increase of 280%. The increase was generally due to increases in the
Company's production, distribution, and production service fee revenue
categories. For the nine months ended March 31, 2008 revenue increased 168% to
$40.9 million.
Proprietary production revenue for Q3 2008 was $13.4 million, up 279% over
the $3.5 million for Q3 2007. This represents 78.5 half-hours of proprietary
film and television programming, an increase of 191% over the 27 half-hours
for Q3 2007. For the nine months proprietary production revenue increased 249%
to $28.5 million. In addition, as of Q3 2008 the Company has to date delivered
$2.7 million in potential revenue from 24 half-hours of proprietary television
programs, where the license periods had not yet commenced by March 31, 2008,
and therefore the revenue recognition criteria have not been met to recognize
their associated revenue in the nine months ended 2008. These license periods
are scheduled to commence throughout fiscal 2008 and 2009 and will be
recognized in the corresponding quarters, when the license periods have
commenced and all revenue recognition criteria have been met.
Distribution revenues were up 230% to $4.4 million from $1.3 million for
Q3 2007. For Q3 2008 the Company recognized revenue on several contracts
throughout its existing library and delivered episodes of newer titles. Some
of the more significant sales were on the following titles: Franny's Feet,
Naturally Sadie, Urban Vermin, and Planet Sketch. For the nine month period,
distribution revenue increased 78% to $8.3 million.
Producer and service fee revenues were $2.3 million in the third quarter
of 2008 versus nil in the same period of 2008. For the nine months ended
March 31, 2008, producer and service fee revenues grew 172% to $3.0 million.
For the nine month period, Gross margin was $12.6 million (31% of revenue)
versus $5.6 million (36% of revenue).
Gross margin for Q3 2008 was $5.8 million an overall 29% of revenue versus
$2.1 million or 39% of revenue for Q3 2007, an increase in absolute margin
dollars of $3.7 million. The absolute gross margin dollars for Q3 2008 were
higher than Q3 2007 as there were significant increases in slightly lower
margin production revenue.
In Q3 2008 EBITDA was $2.7 million, a 324% in total increase as compared
to $0.6 million (including $0.5 million from Income from Strategic
Investments) for Q3 2007. For the nine month period, EBITDA increase 193% to
$4.9 million.
As at March 31, 2008, DHX reported cash, restricted cash, and short-term
investments of $12.9 million and working capital of $18.4 million.
Outlook
The Company's nine months ended March 31, 2008 balance sheet remains
strong and Management believes the Company is in a solid position for the
remainder of Fiscal 2008 and Fiscal 2009. Management continues to focus on its
core values and using its strengths to take advantage of present opportunities
and to create further value for shareholders. With the proceeds of the
Company's November 13, 2007 Unit Offering now at work through the acquisitions
of Studio B and Bulldog, Management remains focused on increasing shareholder
value through further organic growth and acquisitions. The Company anticipates
using the balance of the proceeds of the November 13, 2007 Offering to move
forward on the acquisition front and expects to be in a position to report on
this in the coming quarters.
In particular, the Company believes it is well on its way to carrying
forward its contemplated strategic initiatives, including revenue growth in
production and distribution, increasing profitability metrics, expanding the
Company's presence in international markets, leveraging the Company's
experience to focus on children, youth, and family content and merchandising,
and undertaking further potential synergistic acquisitions. In this regard,
for Fiscal 2008, the Company remains focused on organic growth and growth
through acquisitions and is currently exploring a number of opportunities to
expand its revenue platform.
On August 10, 2007, the Company announced a deal relating to the
acquisition of Distribution Rights to license the first twelve seasons of This
Hour Has 22 Minutes, representing 258 half-hours of the distribution rights
package, to The Comedy Network in Canada which exhibits DHX's ability to
exploit these rights across multiple platforms by leveraging its existing
distribution capabilities. For Nine Months 2008 the Company has recorded
$0.5 million in distribution revenue for this licensing deal. The Company is
expecting revenues on this licensing deal for Fiscal 2009 of $1.0 million.
For Fiscal 2008 the Company has to date delivered 195 half-hours and is on
target to exceeding its previously reported goal of over 215 half-hours of
contracted proprietary programs, made up of over 15 different episodic
television series, which have been or are scheduled for delivery and for which
the license periods have or will commence. Given the addition of Studio B and
how the Company is trending, Management is expecting that the number of
proprietary deliveries where the license periods are projected to commence now
to be over 240 half-hours for Fiscal 2008.
For Q4 2008, the Company expects these deliveries to represent
double-digit production revenue growth, perhaps in the 10-20% range over Q4
2007. Specifically, for Q4 2008, the Company has over 50 half-hours of
contracted proprietary programs which are scheduled for delivery and for the
license periods to commence. The Company's historic average production revenue
value (once the license period has commenced) per half-hour of television
programs is approximately $0.1-$0.2 million and Management expects the average
production revenue value per half-hour actually delivered with the license
periods commenced for the remainder of Fiscal 2008 to be in this range.
For Q4 2008, given the Studio B acquisition, the Company is expecting
between $1.5 to $3.5 million in producer and service fee revenue based on
existing service contracts in progress. The Company expects a gross margin
range of 20-30% for this producer and service fee revenue.
For Q4 2008 the Company is expecting, somewhat based on contracted sales
delivered and awaiting their licensing periods to commence (See "Critical
Accounting Policies-Revenue Recognition" section of this MD&A for further
details), further distribution revenue penetration perhaps in the range of
$2.0 to $4.0 million on a number of additional titles in the current slate and
from the library. For Q4 2008 other revenues, including music and royalty and
new media revenues, are expected to be in line with 2007.
Further synergies from the recent acquisition of Decode and Studio B are
demonstrated through healthier gross margins as shown by the strong margin for
Q3 2008 of 29%. For Fiscal 2008, gross margin is expected to be in the 25-35%
range.
In the first half of Fiscal 2009, the Company anticipates some further
revenue growth, specifically in the category of music and royalty revenues, as
it embarks upon its M&L relationships with PLAYSKOOL, a division of Hasbro
Inc. set to launch toys for Christmas 2008, for the Company's preschool
property Franny's Feet and Alliance Atlantis on another preschool property
Lunar Jim. The Company is also focused on leveraging other existing
proprietary properties for additional M&L revenues. M&L revenues for Fiscal
2009 are expected to be in the range of $0.5 million to $2.0 million.
The full financial statements and MD&A can be found below and are also
available on SEDAR at www.sedar.com.
About DHX Media Ltd.
DHX Media Ltd. is a leading international producer and distributor of
television programming and interactive content with an emphasis on children,
family and youth markets. DHX Media Ltd. shares trade on AIM and are listed on
the TSX, the Toronto Stock Exchange. DHX Media's production companies, Decode
Entertainment, Halifax Film and Studio B Productions, are the producers or
co-producers of 17 original television series and theatrical releases
currently commissioned for production and maintain a growing library of over
2,200 half-hours of mostly children and youth-oriented television productions.
www.DHXMEDIA.com
Disclaimer
This press release contains forward looking statements with respect to the
Company. Although the Company believes that the expectations reflected in such
forward looking statements are reasonable, such statements involve risks and
uncertainties and are based on information currently available to the Company.
Actual results may differ materially from those expressed or implied by such
forward looking statements. Factors that could cause actual results or events
to differ materially from current expectations, among other things, include
risks related to market factors, customer contract interpretation, application
of accounting policies and principles, and production related risks, and other
factors discussed in materials filed with applicable securities regulatory
authorities from time to time including matters discussed under "Risk Factors"
in the Company's short form prospectus dated November 7, 2007 and in the
Company's Amended Annual Information Form incorporated by reference therein.
These forward-looking statements are made as of the date hereof, and the
Company assumes no obligation to update or revise them to reflect new events
or circumstances.
----------------------
(1) EBITDA represents net earnings (loss) of the Company before
amortization expense, interest and other income (expense), non-
controlling interest, equity income (loss), development expenses and
stock-based compensation expense.
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%SEDAR: 00023380E
For further information: DHX Media Ltd.: Dana Landry, CFO, (902) 423-0260; David A. Regan, EVP, Corporate Development & IR, (902) 423-0260; AIM Nominated Advisors: Grant Thornton Corporate Finance: Gerry Beaney, +44 (0) 20 7383 5100; Troy MacDonald, +44 (0) 20 7383 5100
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