VANCOUVER, British Columbia, April 29, 2020 (GLOBE NEWSWIRE) -- WOW! Unlimited Media Inc. (“WOW!” or the “Company”) (TSX-V: WOW; OTCQX: WOWMF) announced its fourth quarter and fiscal year-end results for the period ended December 31, 2019.
The Company completed its third full year of operations with revenue of $103.9 million in 2019, as compared to $78.6 million in 2018.
2019 HIGHLIGHTS
Operating highlights
- Castlevania season 3, produced by WOW!’s Frederator Studios, was released on Netflix worldwide on March 5, 2020, to rave reviews. On the heels of this success, on March 27, 2020, Netflix announced the renewal for a fourth season of Castlevania. The title has enjoyed extensive ongoing coverage by numerous media outlets and entertainment publications. In addition to “Top 10” designations from Netflix across dozens of territories, the animated hit series has achieved a “Masterpiece” and “Editor’s Choice” rating from IGN and a 100% critic’s rating on Rotten Tomatoes.
- With the onset of the global COVID-19 crisis, the Mainframe team pro-actively leveraged its Global Studio Pipeline (see below) to expeditiously transition into a ‘Work From Home’ model for its entire 400+ Studio crew. The Work From Home directive was successfully deployed within one week, without interruption to operations, and all Mainframe Studio employees can function seamlessly from the safety of their homes. Mainframe plans to adapt this Work From Home model, beyond the current crisis, to expand its production capacity significantly, without leasing additional facilities. Production of each of the Company’s titles has continued with minimal disruption to client commitments. Over 200 half-hours of episodic animation and 7 animated movie specials are currently in production or contracted and scheduled.
- Mainframe Studios began production on a new animated series titled Madagascar: A Little Wild for DreamWorks Animation in 2019. Based on the hit animated film Madagascar, initial deliveries of the new series will commence in Q2 2020.
- Production continues on existing and new Barbie content for Mainframe Studios’ long-time client, Mattel.
- Production is proceeding on the popular Octonauts title for Silvergate Media, as well as the charming Made by Maddie series.
- Early in 2020, production commenced on an animated series based upon the Company’s own IP which has been licensed to a leading international studio.
- WOW’s popular series, Bee & Puppy Cat season 2, won the Animated Series Competition Award at the Ottawa Animation Festival in September 2019.
- The Company announced further development of its Catbug property for a full spin-off series, following significant growth and engagement across internet platforms. Catbug is the breakout character from Frederator Studios’ hit series Bravest Warriors, with more than 25 million views and over 400,000 likes on YouTube videos featuring Catbug alone. Over the past few months, the character has continued to expand into a viral, pop culture phenomenon, garnering 170 million views on TikTok and 200 million loops of Catbug-themed GIFs on Giphy.com.
- During 2019, Mainframe Studios launched its “Global Studio Pipeline” to expand scalability to work with third party studios without sacrificing the creative production value of the Studios’ projects. This has given Mainframe tremendous flexibility to work on a variety of different projects with partners worldwide. The Global Studio Pipeline has been operational for over a year, and time zone differences have often allowed two traditional days of production every 24 hours, resulting in a huge boost to productivity. As a result of its Global Studio Pipeline, Mainframe has created a virtual studio with remote workstations that allows employees to collaborate, whether they are sitting next to each other or are halfway across the world.
Financial highlights
- Revenue of $103.9 million exceeded the previous guidance of $90 million
- Operating EBITDA of $1.4 million exceeded the previous guidance of $0.6 million
- For Q4 2019, the Company recorded its highest quarterly operating EBITDA of $3.0 million
- For Q4 2019, the Company also recorded its first operating profit of $1.6 million
- The production pipeline continues to be strong - as of December 31, 2019, WOW!’s animation production backlog was $43.9 million, not including contracts signed subsequent to year-end, which represents $29.6 million in additional animation work to be completed over the next 30 months
| OVERVIEW OF RESULTS | ||||||||||||
| For the three months ended | For the twelve months ended | |||||||||||
| $000's, except per share amounts | December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | ||||||||
| Revenue | $ | 34,413 | $ | 28,984 | $ | 103,872 | $ | 78,628 | ||||
| Operating EBITDA1 | 3,038 | (920 | ) | 1,432 | (2,831 | ) | ||||||
| Operating profit (loss)1 | 1,622 | (1,875 | ) | (4,581 | ) | (7,137 | ) | |||||
| Operating profit (loss) per share | ||||||||||||
| - basic and diluted | $ | 0.05 | $ | (0.06 | ) | $ | (0.15 | ) | $ | (0.26 | ) | |
| Net loss | $ | (12,473 | ) | $ | (1,429 | ) | $ | (19,583 | ) | $ | (6,723 | ) |
| Net loss per share | ||||||||||||
| - basic and diluted | $ | (0.39 | ) | $ | (0.05 | ) | $ | (0.62 | ) | $ | (0.25 | ) |
| Weighted average number of shares outstanding: | ||||||||||||
| - basic and diluted | 32,024,314 | 30,185,577 | 31,555,814 | 27,215,079 | ||||||||
| 1 Operating EBITDA and operating profit (loss) include amortization of investment in film and television programming. Refer to | ||||||||||||
| discussion under Consolidated Results for a reconciliation of Operating EBITDA and Operating profit (loss) to Net loss. | ||||||||||||
- Revenue for Fiscal 2019 was $103.9 million. This included $63.5 million generated by the Networks and Platforms segment and $40.4 million for the Animation Production segment which was bolstered as a result of the deliveries of Castlevania season 3 and Bee & Puppy Cat season 2 during the year.
- Operating EBITDA was $1.4 million, and the net loss was $19.6 million for Fiscal 2019 which included $13.8 million in non-cash impairment charges related to other intangible assets and goodwill.
In April 2020, Frederator Networks Inc., a subsidiary of the Company, was awarded an unsecured advance of $0.6 million USD ($0.8 million CAD) 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.
Michael Hirsh, Chairman & CEO, commented: “2019 marked an inflection point in the evolution of WOW! - the company had several highlights in its most important business segment, Animation Production. We are seeing exciting levels of interest in a few of our key original animation characters, as demonstrated by their substantial audience growth on digital platforms. Like everyone else, we are concerned about the effects of the COVID-19 virus, and the personal and economic disruptions that it has caused. The future is not predictable, particularly in this current climate. However, we are fortunate to have a solid, and growing, backlog which points to additional production growth in 2020, barring the obvious risks. Our entire team – Vancouver, Toronto, New York and Los Angeles – have successfully migrated to a “Work From Home” model, thanks in no small part to the efforts of our outstanding IT and technical staff.”
CONSOLIDATED RESULTS
Cumulative prior period information for 2017 in the following table has been restated for purchase price allocation adjustments relating to the acquisition of Frederator.
| $000's | 2019 | 2018 | 2017 | ||||||||
| Revenue | $ | 103,872 | $ | 78,628 | $ | 44,660 | |||||
| Amortization of investment in film and television programming | $ | 10,976 | $ | 7,141 | $ | 7,455 | |||||
| Operating EBITDA | $ | 1,432 | $ | (2,831 | ) | $ | (2,474 | ) | |||
| Finance costs | 1,875 | 1,177 | 443 | ||||||||
| Depreciation and amortization1 | 4,138 | 3,129 | 4,878 | ||||||||
| Operating loss | (4,581 | ) | (7,137 | ) | (7,795) | ||||||
| Items affecting comparability: | |||||||||||
| Share-based compensation expense | 1,117 | 799 | 1,342 | ||||||||
| Impairment of other intangible assets and goodwill | 13,811 | – | – | ||||||||
| Deferred income tax expense (recovery) | 74 | (1,213 | ) | (4,051 | ) | ||||||
| 15,002 | (414 | ) | (2,709 | ) | |||||||
| Net loss | $ | (19,583 | ) | $ | (6,723 | ) | $ | (5,086 | ) | ||
| 1 Excludes amortization of investment in film and television programming | |||||||||||
Revenue and Operating EBITDA
Revenue for the year ended December 31, 2019, increased by $25.2 million, compared to 2018, primarily driven by higher revenues for the Networks and Platforms segment of $18.6 million, as a result of increased views and revenues generated by Channel Frederator Network. Revenues for the Animation Production segment in 2019 increased by $6.6 million compared to 2018, primarily resulting from the delivery of Castlevania season 3 and Bee & Puppy Cat season 2 during the year.
Operating EBITDA increased by $4.3 million for the year ended December 31, 2019 compared to 2018. The increase in operating EBITDA for the year ended December 31, 2019, was primarily as a result of the revenue recognized on the delivery of Castlevania season 3 and Bee & Puppy Cat season 2 during the year, net of amortization of capitalized production costs. Other factors increasing EBITDA for 2019 compared to 2018 included the Company earning higher refundable tax credits on animation productions in 2019 compared to 2018, as well as a decrease in rent and occupancy costs from the adoption of IFRS 16.
CONFERENCE CALL
The Company will host a conference call at 8:30 a.m. Eastern Time on Thursday, April 30, 2020, featuring management's remarks and a follow-up question and answer period with analysts.
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 2895165.
A digital recording of the call will be available for one month (until midnight Eastern Time, May 30, 2020) by dialling 1 (855) 859-2056 or (404) 537-3406 and using the Conference ID 2895165.
NON-IFRS FINANCIAL MEASURES
In addition to results reported in accordance with IFRS, the Company reports using certain non-IFRS financial measures as supplemental indicators of the Company’s financial and operating performance. These non-IFRS financial measures include operating profit or loss, operating profit or loss per share and operating EBITDA. 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.
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; and (v) the ability of the Company to raise financing in the future.
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 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 Unlimited Media Inc.
WOW! Unlimited Media is creating a leading animation-focused entertainment company by producing top-end content and building brands and audiences on the most engaging media platforms. The Company produces animation in its two established studios: Frederator Studios in Los Angeles, which has a 20-year track record; and one of Canada's largest, multi-faceted animation production studios, Mainframe Studios in Vancouver, which has a 25-year track record. The Company’s media assets include Channel Frederator Network, which is a Multi-Channel Network on YouTube, as well as WOW! branded programming on Crave, Canada’s leading streaming entertainment platform, owned by Bell Media. The Company operates out of offices in Toronto, New York, Vancouver and Los Angeles. The common voting shares of the Company (the “Common Voting Shares”) and variable voting shares of the Company (the “Variable Voting Shares”) are listed on the TSX Venture Exchange (the “TSX-V”) (TSX-V: WOW) and the OTCQX Best Market (OTCQX: WOWMF).