VANCOUVER, British Columbia, May 28, 2020 (GLOBE NEWSWIRE) -- WOW! Unlimited Media Inc. (“WOW!” or the “Company”) (TSX-V: WOW; OTCQX: WOWMF) announced its results for the three months ended March 31, 2020.
The Company completed the first quarter of 2020 with operating EBITDA of $0.1 million, as compared to a loss of ($1.8) million for the first quarter of 2019.
Q1 2020 HIGHLIGHTS
Operating highlights
- 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.
- 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.
- 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.
- 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 for the quarter was $13.7 million
- Operating EBITDA was $0.1 million
- The production pipeline continues to be strong - as of March 31, 2020, WOW!’s animation production backlog was $72.4 million
OVERVIEW OF RESULTS
| For the three months ended | |||||||
| $000's, except per share amounts | March 31, 2020 | March 31, 2019 | |||||
| Revenue | $ | 13,695 | $ | 19,496 | |||
| Operating EBITDA1 | 111 | (1,814 | ) | ||||
| Operating loss1 | (1,387 | ) | (3,267 | ) | |||
| Operating loss per share | |||||||
| - basic and diluted | $ | (0.04 | ) | $ | (0.11 | ) | |
| Net loss | $ | (1,467 | ) | $ | (3,392 | ) | |
| Net loss per share | |||||||
| - basic and diluted | $ | (0.05 | ) | $ | (0.11 | ) | |
| Weighted average number of shares outstanding: | |||||||
| - basic and diluted | 32,024,314 | 30,185,577 | |||||
| 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 March 31, 2020, was $13.7 million. This included $6.0 million generated by the Networks and Platforms segment and $7.7 million for the Animation Production segment for the three months ended March 31, 2020, bolstered by the continued production of Barbie Dreamhouse Adventures, season 2, two animated Barbie films, Made by Maddie, Madagascar: A Little Wild, the Octonauts specials, and Octonauts, seasons 5 through 8.
- Operating EBITDA was $0.1 million, and the net loss was $1.5 million, for the three months ended March 31, 2020.
In April 2020, Frederator Networks Inc., a subsidiary of the Company, was awarded an unsecured advance of $0.6 million USD ($0.9 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: “The most notable event in the first quarter of 2020 was the global pandemic. Given that, our foremost priorities were to ensure the safety of our employees and to normalize business as quickly as possible. As communicated earlier, we made a successful migration to a “Work from Home” model, and we’re currently focused on execution of our backlog and operational synergies. Our teams are making great cartoons for our fans and audiences.”
CONSOLIDATED RESULTS
| For the three months ended | |||||||
| $000's | March 31, 2020 | March 31, 2019 | |||||
| Revenue | $ | 13,695 | $ | 19,496 | |||
| Amortization of investment in film and television programming | $ | 564 | $ | 365 | |||
| Operating EBITDA | $ | 111 | $ | (1,814 | ) | ||
| Finance costs | 564 | 449 | |||||
| Depreciation and amortization1 | 934 | 1,004 | |||||
| Operating loss | (1,387 | ) | (3,267 | ) | |||
| Items affecting comparability: | |||||||
| Share-based compensation expense | 155 | 125 | |||||
| Deferred income tax expense (recovery) | (75 | ) | – | ||||
| 80 | 125 | ||||||
| Net loss | $ | (1,467 | ) | $ | (3,392 | ) | |
| 1 Excludes amortization of investment in film and television programming | |||||||
Revenue and Operating EBITDA
Revenue for the three months ended March 31, 2020, decreased by $5.8 million compared to the same period in 2019. For the three months ended March 31, 2020, revenues for the Networks and Platforms segment decreased by $8.0 million and revenues for the Animation Production segment increased by $2.2 million in comparison to the same period in 2019. The decrease in revenue for the Networks and Platforms segment for the three months ended March 31, 2020, resulted from decreased views generated by Channel Frederator Network after the termination of the agreement with ADME (CY), Ltd.
The growth in revenue for the Animation Production segment for the three months ended March 31, 2020, was driven by the increased number of active productions compared to the same period in 2019.
Changes to Officer Remuneration
Effective June 1, 2020, the Board approved an adjustment to the severance provisions in the employment agreement of, John Vandervelde, CFO, to extend the potential severance term to 24 months, from the existing 18 months, to be consistent with the contracts of other senior management.
Market Services Agreement
The Company is pleased to announce that, subject to regulatory approval, it has engaged Integral Wealth Securities Limited ("Integral") to provide Market-Making services in accordance with TSX Venture Exchange ("TSXV") policies and guidelines and other applicable legislation.
Integral will trade securities of WOW on the TSXV with the objective of maintaining an orderly market of the Company's securities. In consideration of the services provided by Integral, WOW will pay Integral a monthly cash fee of $5,500 payable monthly. Integral will not receive shares or options as compensation, however, Integral and its clients may have, or may acquire, a direct interest in the securities of WOW. WOW and Integral are unrelated and unaffiliated entities; Integral is a member of the Investment Industry Regulatory Organization of Canada ("IIROC") and can access all Canadian Stock Exchange and Alternative Trading Systems. The capital and securities required for any trade undertaken by Integral as principal will be provided by Integral. The agreement is effective June 1, 2020 and will have an initial term of three months; following the initial term, WOW may terminate the agreement on 15 days' notice.
CONFERENCE CALL
The Company will host a conference call at 9:00 a.m. Eastern Time on Friday May 29, 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 3149844.
A digital recording of the call will be available for one month (until midnight Eastern Time, June 29, 2020) by dialling 1 (855) 859-2056 or (404) 537-3406 and using the Conference ID 3149844.
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).