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Edited Transcript of IDWM earnings conference call or presentation 12-Sep-19 9:00pm GMT

Q3 2019 IDW Media Holdings Inc Earnings Call

STAFFORD Sep 24, 2019 (Thomson StreetEvents) -- Edited Transcript of IDW Media Holdings Inc earnings conference call or presentation Thursday, September 12, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Davidi Jonas

IDW Media Holdings, Inc. - Chief Strategy Officer

* Ezra Rosensaft

IDW Media Holdings, Inc. - CFO

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Presentation

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Operator [1]

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Good morning and welcome to the IDW Media Holdings third-quarter fiscal year 2019 earnings call. In today's presentation, IDW Media's management will discuss the company's financial and operational results for the three-month period ended July 31, 2019. During prepared remarks by IDW Media's Chief Strategy Officer, Davidi Jonas; and Chief Financial Officer, Ezra Rosensaft, all participants will be in a listen-only mode. (Operator Instructions).

Any following statements made during this conference call in either the prepared remarks or the Q&A session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include but are not limited to specific risks and uncertainties discussed in the reports that IDW Media posts periodically with the OTC market.

IDW Media assumes no obligation either to update any forward-looking statements that they have made, or may make; or to update the factors that may cause actual results to differ from those they forecast. Please note that IDW Media earnings release is available on the investor relations page of the IDW Media corporate website.

I would now like to turn the conference over to Mr. Jonas.

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Davidi Jonas, IDW Media Holdings, Inc. - Chief Strategy Officer [2]

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Thank you, operator, and welcome all to IDW Media Holdings' third-quarter fiscal 2019 conference call. My name is Davidi Jonas. I am the Chief Strategy Officer of IDW Media Holdings, and will present remarks on behalf of our Chairman and CEO, Howard Jonas, who is presently indisposed. Joining me on the call is Ezra Rosensaft, our Chief Financial Officer. After my remarks, Ezra will summarize our financial results, and then the two of us will be happy to take your questions.

Across the IDW Media businesses, we are working to enhance shareholder value. At the heart of that strategy, we are building IDW into a brand that showcases meaningful and relevant stories from some of the most innovative and important content creators of our time. We are leveraging our own and/or controlled content [we're able] synergistically across IDW Publishing, IDW Entertainment and IDW franchise exploitation to reach audiences and create opportunities for fans to engage more meaningfully with their favorite characters and stories.

At the same time, we are working with our businesses to implement rigorous financial controls and eliminate unnecessary expenses. This process is ongoing and will take some time, but is essential to ensure that each IDW Media division is profitable in 2020 and increasingly profitable thereafter.

Our operational strategy starts at IDW publishing where we are sharpening our focus on increasing our vault of valuable, creator-owned or controlled IP and selling through channels that will generate stable, predictable revenues by minimizing or eliminating returns; and on developing creator-owned property is well-suited for digital media development. Already this year, IDW Publishing has released multiple new titles with excellent potential including the Johnny Boo series, Eve Stranger, and Lodger.

Other notable creator-owned releases this quarter included George Takei's graphic memoir, They Called Us Enemy. The book rocketed to number 2 on The New York Times bestseller list for paperback nonfiction. We included in our earnings release a wonderful picture of George with his fans at a book signing. That picture is a small demonstration of the power of great graphic books and creators to engage audiences.

This summer we also released Usagi Yojimbo #1, our first work by Stan Sakai, a graphic storytelling legend. The Usagi Yojimbo series has captivated audiences for over 35 years, and we are very proud that Stan Sakai has brought it to IDW Publishing.

Turning now to IDW Entertainment, we are preparing to deliver October Faction and V-Wars to Netflix before the end of the calendar year. These shows were produced under agreements negotiated by previous management, and left IDW with considerable exposure as a result of cost overruns and overly optimistic budgeting. As we have said previously, we are pivoting to new production financing models that emphasize predictable cash flows with minimal downside risk.

We expect to deliver Locke & Key to Netflix in the first calendar quarter of next year under a production services agreement that will provide us with a percentage of the production budget with little or no downside exposure. Going forward, Locke & Key is exemplary as a model for long-term, sustainable profitability as IDW Entertainment produces new series.

In terms of IDW Entertainment's pipeline, we now have identified approximately 16 titles suitable for streaming and traditional broadcast TV networks as well as for feature film platforms. Overall, we are very excited about the quality, breath, and potential of our pipeline properties. Because the development process from pitch to screen is complex, we expect that current pipeline project could be delivered, sold, produced as early as 2021.

And finally a quick word about CTM. Our business there rebounded sequentially with the summer travel season, and it continues to be a steady contributor.

To sum up, we are making good progress to realize the value of all IDW Media businesses. This quarter, notable successes at IDW Publishing and a robust pipeline at IDW Entertainment underscore the tremendous upside potential of these businesses.

To realize our full potential for shareholders and ensure that they benefit from our positive traction, we've also been working diligently to expand our shareholder base. We are working to share our story more broadly and make it more accessible. And we have taken important steps in that direction through these quarterly earnings calls; proactive investor outreach through conferences and presentations; and making our business operations and strategy more transparent to investors.

Now here is IDW Media's CFO, Ezra Rosensaft, to discuss the quarter's financial results and outlook.

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Ezra Rosensaft, IDW Media Holdings, Inc. - CFO [3]

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Thank you, Davidi, and thanks to everyone on the call for joining us. My remarks today cover our financial results for the third quarter of our 2019 fiscal year, the 3 months ended July 31. Throughout my remarks, I will compare third-quarter fiscal 2019 results to third-quarter fiscal 2018 results, unless otherwise noted. I will also discuss some aspects of our outlook to the coming months.

Results this quarter were consistent with recent trends. Consolidated revenue in the third-quarter 2019 was $11.5 million compared to $13.6 million a year earlier. The revenue decrease is almost entirely attributable to Wynonna Earp season 3 licensing which generated revenue of $2.4 million in the third-quarter 2018.

Our consolidated loss from operations was $1.5 million compared to $604,000 in the year-ago quarter. Note, however, that on an adjusted EBITDA basis -- a non-GAAP measure -- our Q3 2019 loss was $311,000 after excluding non-cash and nonoperating items such as depreciation and amortization, non-cash compensation, and interest expense. Please see our third-quarter financial report which we will file with the OTC later today for a reconciliation of consolidated adjusted EBITDA to net income attributable to IDW Media Holdings, the nearest corresponding GAAP measure.

As Davidi discussed in his remarks, this quarter IDW Publishing benefited from the early success of They Called Us Enemy. IDW Publishing generated $5.3 million in revenue for the quarter compared to $5.6 million in the year-ago quarter. Revenue from They Called Us Enemy was offset by the loss of theatrical and game license revenues from the levels achieved a year ago. Publishing's loss from operations was $1.2 million, increasing from $801,000 a year ago, reflecting the loss of game and licensing revenues and increased marketing spend.

IDW Entertainment revenue was $31,000, all of it generated by electronic sellthrough, or EST, of Wynonna Earp episodes. Entertainment's loss from operations increased slightly to $765,000 from $746,000 a year ago, reflecting the Wynonna Earp season 3 generated gross profit in the year-ago quarter, and higher legal and marketing spend offset by a reversal of accrued commission expense.

At CTM, revenue decreased a scant $43,000 compared to the year-ago quarter, remaining strong at $6.2 million. Income from operations decreased to $485,000 from $943,000 primarily on a change in our allocation of corporate overhead. Exclusive of allocated corporate overhead, CTM generated comparable income from operations and revenue to the year-ago quarter.

Consolidated net loss attributable to our stockholders was $1.5 million for the quarter or $0.20 per share compared to a net loss of $461,000 a year earlier or $0.08 per share. This quarter, our bottom line included a provision for income taxes of $1,000 compared to a prior-year benefit from income taxes of $202,000 or approximately $0.03 per share.

As Davidi stated, we are on track to return IDW to profitability next year. While the fourth quarter will reflect the impact of legacy decisions to finance the production of V-Wars and October Faction, we are making significant operational changes including enhanced financial controls that will become increasing impactful as we report results in 2020.

Now we will be happy to take your questions. Operator, back to you for the Q&A. Thank you.

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Operator [4]

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(Operator Instructions). As there are no questions in the queue, this concludes today's question-and-answer session as well as today's conference. Thank you for attending today's presentation. You may now disconnect.