VANCOUVER, British Columbia, April 29, 2021 (GLOBE NEWSWIRE) -- WOW! Unlimited Media Inc. (“WOW!” or the “Company”) (TSX-V: WOW; OTCQX: WOWMF) announced today its fourth quarter and fiscal year-end results for the period ended December 31, 2020.
KEY HIGHLIGHTS
- The Company completed its fourth full year of operations with operating EBITDA of $2.1 million for the year ended December 31, 2020, its highest ever, as compared to $1.4 million for the year ended December 31, 2019.
- For the fourth quarter of 2020, the Company reported operating EBITDA of $2.0 million and net income of $0.9 million.
- Both reporting segments, Animation Production and Networks & Platforms, reported positive EBITDA for 2020, as well as for the fourth quarter of 2020.
- As at December 31, 2020, the Company’s production backlog was $84.2 million, the highest in the Company’s history. The Company’s backlog at December 31, 2020, did not include additional contracts signed subsequent to year-end which represented $11.3 million in additional animation work to be completed over the next 24 months.
- The Company successfully navigated the operational challenges posed by the onset of the COVID-19 crisis - the plan to transition to a ‘Work From Home’ operating model was successfully deployed within one week, without interruption to operations, and all animation Studio employees have been able to function seamlessly from the safety of their homes.
- Total employees and crew strength has gone up from approximately 410 employees at the beginning of the year to over 550 today.
- Mainframe’s virtual Global Studio Pipeline has further increased overall animation production capacity.
- Madagascar: A Little Wild, produced for DreamWorks Animation, was released on Hulu and Peacock in May 2020; the show subsequently won a Kidscreen Award for Best New Series. The second cycle continues in production with full delivery expected by the end of 2021.
- Octonauts and the Caves of Sac Actun, produced for Silvergate, was released on Netflix in August 2020.
- Barbie Princess Adventure, produced for Mattel, was released on Netflix in September 2020.
- Octonauts and The Great Barrier Reef was released on Netflix in October 2020.
- WOW!’s Bee & PuppyCat: Lazy in Space was picked up by Netflix in October 2020.
- Production continued for the fourth and final season of WOW!’s Castlevania, which releases on Netflix in May 2021.
- Restructuring at Frederator is expected to provide potential EBITDA savings in excess of $1.9 million on an annualized basis.
- The Company closed a non-brokered private placement offering of unsecured convertible debentures which raised gross proceed of $4.7 million, which was used to replace the existing unsecured convertible debentures, to pay for transaction costs related to the offering, and for general working capital purposes.
- In Q4 2020, the Company began production on a significant new project in partnership with Spin Master, a global Canadian toy and entertainment company.
- Additional production includes a number of new and exciting Barbie projects for its longstanding customer Mattel, Seasons 5 through 8 of the series Octonauts for Silvergate, and a new, internally developed, animated series which is being produced in partnership with a leading US based studio.
- The Company announced the acquisition of the series rights to two exciting new projects: Parasol Protectorate, based on the on the award-winning steampunk urban fantasy novel series; and Maggie and the Ferocious Beast, based on the award-winning hit preschool show.
- On April 29, 2021, the Company announced that the Board of Directors, working closely with Management, has commenced a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value. These alternatives could include, among other things, an acquisition, a merger or other business combination, a financing, a sale of assets, a sale of the Company, or other strategic transactions that may be available to the Company.
FINANCIAL HIGHLIGHTS
- Revenue for the fiscal year was $61.1 million.
- Operating EBITDA for the fiscal year was $2.1 million.
- Revenue for the fourth quarter was $20.4 million.
- Operating EBITDA for the fourth quarter was $2.0 million.
- In 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 $5.0 million and its equipment lease line to $7.0 million.
- On February 5, 2021, the Canadian Radio-television and Telecommunications Commission announced, in a broadcasting decision, that it had approved the Company’s application to revoke its Broadcast License. The revocation of the Broadcasting License nullifies the Company’s obligation to invest $0.6 million of tangible benefits into the Canadian broadcasting industry. In the first quarter of 2021, the Company will recognize a recovery associated with the reversal of the tangible benefits obligation into the consolidated statement of comprehensive income or loss.
- On February 6, 2021, the Company was granted forgiveness of its Paycheck Protection Program loan by the US Small Business Administration and will recognize the loan forgiveness of $0.7 million CAD ($0.6 million USD) into the consolidated statement of comprehensive income or loss in the first quarter of 2021.
OVERVIEW OF RESULTS
| For the three months ended | For the twelve months ended | ||||||||||
| $000's, except per share amounts | December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||
| Revenue | $ | 20,437 | $ | 34,413 | $ | 61,123 | $ | 103,872 | |||
| Operating EBITDA1 | 2,044 | 3,038 | 2,082 | 1,432 | |||||||
| Operating profit (loss)1 | 810 | 1,622 | (3,599 | ) | (4,581 | ) | |||||
| Operating profit (loss) per share | |||||||||||
| - basic and diluted | $ | 0.03 | $ | 0.05 | $ | (0.11 | ) | $ | (0.15 | ) | |
| Net profit (loss) | $ | 870 | $ | (12,473 | ) | $ | (4,966 | ) | $ | (19,583 | ) |
| Net profit (loss) per share | |||||||||||
| - basic and diluted | $ | 0.03 | $ | (0.39 | ) | $ | (0.16 | ) | $ | (0.62 | ) |
| Weighted average number of shares outstanding: | |||||||||||
| - basic and diluted | 32,024,314 | 32,024,314 | 32,024,314 | 31,555,814 | |||||||
| 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 profit (loss). | |||||||||||
- Revenue for Fiscal 2020 was $61.1 million. This included $35.6 million generated by the Networks and Platforms segment and $25.5 million for the Animation Production segment which was bolstered by the continued production of Madagascar: A Little Wild, the Octonauts specials, Octonauts, seasons 5 through 8, and various projects for our long-standing customer Mattel.
- Operating EBITDA was $2.1 million and a net loss of $5.0 million for Fiscal 2020.
Michael Hirsh, Chairman & CEO, commented: “2020 was a challenging year for every individual and business worldwide. Our primary focus earlier in the year was to ensure the safety of our employees and to normalize business as swiftly as possible. Due to the tremendous efforts by our teams, led by our technology and human resources departments, the Company was able to successfully migrate to a ‘Work from Home’ operating model. The Company also undertook a restructuring process to drive cost savings and worked aggressively on new mandates. As a result, WOW! ended 2021 with its highest EBITDA to date and has entered 2021 with a very substantial production backlog and a significant ramp-up in team strength. The Company is also increasing its volume of IP projects, which is reflected in the order backlog, as well as the recent announcements around new projects. The animation business is seeing unprecedented demand and we are in active discussions for several new projects.”
CONSOLIDATED RESULTS
| $000's | 2020 | 2019 | 2018 | |||||||
| Revenue | $ | 61,123 | $ | 103,872 | $ | 78,628 | ||||
| Amortization of investment in film and television programming | $ | 6,359 | $ | 10,976 | $ | 7,141 | ||||
| Operating EBITDA | $ | 2,082 | $ | 1,432 | $ | (2,831 | ) | |||
| Finance costs | 1,944 | 1,875 | 1,177 | |||||||
| Depreciation and amortization1 | 3,737 | 4,138 | 3,129 | |||||||
| Operating loss | (3,599 | ) | (4,581 | ) | (7,137 | ) | ||||
| Items affecting comparability: | ||||||||||
| Share-based compensation expense | 413 | 1,117 | 799 | |||||||
| Restructuring costs | 1,100 | – | – | |||||||
| Impairment of other intangible assets and goodwill | – | 13,811 | – | |||||||
| Deferred income tax expense (recovery) | (146 | ) | 74 | (1,213 | ) | |||||
| 1,368 | 15,002 | (414 | ) | |||||||
| Net loss | $ | (4,966 | ) | $ | (19,583 | ) | $ | (6,723 | ) | |
| 1 Excludes amortization of investment in film and television programming | ||||||||||
Revenue and Operating EBITDA
Revenue for the year ended December 31, 2020, decreased by $42.7 million, compared to 2019, primarily as a result of the decrease in revenues for the Networks and Platforms segment of $38.0 million after the termination of the ADME agreement with Channel Frederator Network, as previously announced in December 2019. Revenues for the Animation Production segment in 2020 decreased by $4.7 million compared to 2019, due to more IP deliveries in the previous year.
Operating EBITDA increased by $0.7 million for the year ended December 31, 2020, compared to 2019. The increase in operating EBITDA for the year ended December 31, 2020, was primarily driven by a reduction of operating costs and overhead expenditures in the Networks and Platforms segment from the Frederator Restructuring, as previously described. In addition, the Company had additional savings in travel, entertainment, and tradeshows compared to 2019, as a result of the on-going COVID-19 pandemic.
CONFERENCE CALL
The Company will host a conference call at 9:00 a.m. Eastern Time on Friday, April 30, 2021 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 4282578.
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 year ended December 31, 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; and (viii) deliveries of Mainframe Studios’ production on a new animated series.
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, 2020, 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 the most engaging media platforms. The Company produces animation in its two established studios: Frederator Studios in the USA, which has a 20-year track record; and one of Canada’s largest, multi-faceted animation production studios, Mainframe Studios, which has a 25-year track record. The Company also operates Channel Frederator Network on YouTube. The common voting shares of the Company and variable voting shares of the Company are listed on the TSX Venture Exchange (TSX-V: WOW) and the OTCQX Best Market (OTCQX: WOWMF).
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