IDW - IDW Media Holdings Inc. (IDW) Q4 2022 Earnings Call Transcript
Corus Entertainment Inc. (CJREF)
Q4 2022 Earnings Conference Call
January 19, 2023, 05:00 PM ET
Company Participants
Jen Belodeau - IMS Investor Relations
Allan Grafman - CEO
Brooke Feinstein - CFO
Conference Call Participants
Edward Reilly - EF Hutton
David March - Singular Research
Presentation
Operator
Greetings, Good evening, and welcome to the IDW Media Holdings Fourth Quarter and Full Year Fiscal 2022 Earnings Call. [Operator instructions].
I will now turn the call over to Jen Belodeau of IMS Investor Relations.
Jen Belodeau
Good evening. I'll take a brief moment to read the safe harbor. Any forward-looking statements made during this conference call, either in the prepared remarks or in 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 company's SEC filings. IDW 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 materially from those that they forecast. Please note that the IDW earnings release is available on the Investor Relations page of the IDW Media Holdings corporate website.
With that out of the way, I'll turn the conference over to Allan Grafman. Please go ahead, Allan.
Allan Grafman
Thank you, and thank you to everyone on the call for joining us. It's great to have you with us. My remarks today will provide an overview of our strategy and execution for the fourth quarter and full fiscal year 2022, which closed October 31, 2022. Additionally, now with just about five months in the CEO seat, I'll provide some thoughts around our vision for IBW and our strategy moving forward. After my remarks, Brooke Feinstein, our CFO, will provide details around our financial results, and then we'll be happy to take your questions.
So on to our results. Brooke will provide a deeper dive but at a high level, we finished 2022 with strong fourth quarter results, including consolidated revenue growth of 48%, enhanced operating results and improved profitability. Our delivery of the third season of Locke & Key during the quarter was the primary driver of this revenue growth.
For the full year of fiscal 2022, we achieved consolidated revenue growth of 11%, which included delivery of Seasons 2 and 3 of Locke & Key as well as Season 1 of Surfside Girls. We also made progress improving our full year operating results and profitability as compared to fiscal year 2021.
Now let's look to the future and where we're going in the coming year. We have spoken about our heightened focus on leveraging what we believe is one of the most valuable intellectual property libraries in our industry with hundreds of titles in our library today and hundreds of submissions coming in each year, our robust library is constantly growing. To frame how this creates tremendous opportunity for IDW, let me step back a bit to go through the basics of our strategy.
IDW along with its top shelf in print is a leading publisher of traditional comics as well as graphic novels, and we work with some of the best known creators in the industry to publish original titles for all audiences, kids, tweens, teens and adults. And some examples of titles you may recognize are March by the late Congressman John Lewis; They Called Us Enemy by George Takei; and Locke & Key by Joe Hill and Gabriel Rodriguez. These are well-known personalities and creators, and we're pleased to call them partners.
Our publishing team also reviews hundreds of submissions every year from first time or as yet undiscovered creators with the goal of identifying intriguing new stories and characters. With our solid content foundation and unique ability to find and publish new, original and creative concepts, IDW is well positioned to release and capitalize on exciting new visions.
We focus on attracting top talent and acquiring original content so that our team can identify, which submissions have the best opportunity to move from creative idea to published work to entertainment vehicle to financial success. And in today's environment of multiple media platforms, that entertainment vehicle can take many shapes. It could be a television show, a streaming series, a feature film, a podcast or perhaps even a short long video.
So at its core, our strategy is fairly simple. Continue to increase our industry recognition as the creative partner of choice that we are presented with the best content from the most talented creators. That's our first goal. Our second is to publish comics and graphic novels that resonate with broad audiences and are successful.
And our third goal is to develop those published content, graphic novels and comics into entertainment vehicles like TV shows, feature films, podcasts and other media platforms. To date, our success stories include Lock & Key, Surfside girls, Wynonna Earp, V Wars and October Faction.
We are confident that there are more successes to come, and we currently have about 10 entertainment projects in place being developed. At this time last year, we had virtually no new development deals to speak up. Having said that, it takes time to develop a premier entertainment project from the idea to having an agreement to getting it into production, getting it delivered and achieving success.
Predicting that timing is difficult, and I, along with the entire executive team know how frustrating that can be to shareholders. It is the nature of our business. We are focused on what we can control, growing IDWs reputation as the creative partner of choice so that we continue to see submissions of excellent material from inventive creators to continue to expand our library while also identifying creative material that we believe can go the distance on a variety of media platforms.
From what I've seen and experienced during my first 5 months as CEO, I believe our company is in the early stages of realizing its enormous potential. Looking into 2023, we are focusing on various strategic initiatives on the publishingdrive efficiency. We see tremendous opportunity for IDW Publishing and IDW Entertainment to continue to work together to optimize the financial returns of the intellectual properties which we control, and we will keep you apprised as we move through the year.
Over the medium to long term, our company is very we'll positioned to scale revenue and drive more consistent and enhance profitability. As we move through 2023, we have a lot of work ahead. Ultimately, we are well positioned to leverage the strength of our content library and to drive our project pipeline. IDW is a respective brand and we, the entire management team, are energized to discover new ideas and creators as we continue to grow our position as a leading independent media entity and to drive accelerated growth across all our platforms. Long-term investors will be rewarded.
Now I'll turn the call over to our CFO, Brooke Feinstein to go over our financials for the fourth quarter of 2022.
Brooke Feinstein
Thank you, Allan. My remarks today will focus on the fourth quarter and full fiscal '22 results, the three and 12-month periods ended October 31, 2022. Except where I indicate otherwise, I'll be comparing the fourth quarter of fiscal '22 results to the fourth quarter of fiscal '21, and I'll also be comparing full year fiscal 22 results to full year fiscal '21.
IDW Media Holdings fourth quarter consolidated revenue increased 48% to $10.5 million compared to $7.1 million a year ago. IDW's fiscal year '22 revenue was $36.1 million compared to $32.4 million in fiscal '21. Publishing revenue for the fourth quarter of '22 decreased to $5.7 million compared to $6.9 million in the prior year period. Primarily related to a decrease in the overall number of titles released in Q4 '22 and also reflected the strong comic release of Teenage Mutant Ninja Turtle: The last Ronin #4 in '21.
Publishing revenue for fiscal 22 increased slightly to $25.8 million, primarily due to increased non-direct market revenue, an increase in games revenue related to Batman Adventures and an increase in retailer exclusive revenue related to Sonic the Hedgehog.
In addition to strong book market sales for Teenage Mutant Ninja Turtle: The Last Ronin and They Called US Enemy. This was offset by a decrease in direct market revenue due to fewer titles being published and a decrease in digital sales compared to fiscal year '21.
In the fourth quarter of '22, IDW Entertainment reported revenue of $4.8 million, mainly related to the recognition of revenue for the delivery of Season 3 of Locke & Key. For the full fiscal year '22. IDW Entertainment reported revenue of $10.3 million, primarily driven by the delivery of Season 2 and 3 of Locke & Key as well as Season 1 of Surfside Girls.
Our consolidated income from operations was $300,000 in the fourth quarter of 22 compared to a loss from operations of $1.9 million in the prior year period.
For the full year ended October 31, 2022, we reported a loss from operations of $700,000 compared to a loss in operations of $8.7 million in fiscal year '21. IDW Publishing's loss from operations in the fourth quarter of '22 was $1.6 million compared to breakeven in the prior year period. In fiscal 22, IDW Publishing reported a loss in operations of $1.9 million compared to a loss of operations of $800,000 in fiscal '21.
IDW Entertainment's fourth quarter income from operations was $2.8 million compared to a loss from operations of $1.5 million in the fourth quarter of '21.
IDW Entertainment's income from operations for fiscal '22 was $3.1 million compared to an operating loss of $6.7 million in fiscal '21. Consolidated net income in the fourth quarter was $400,000 or $0.03 per share compared to a net loss of $700,000 or $0.06 per share in the prior year period. In fiscal '22, net loss was $700,000 or $0.06 per share compared to a net loss of $5.4 million or $0.51 per share in fiscal '21.
Now turning to our balance sheet. At October 31, we held $10 million in cash and cash equivalents and had no debt. Working capital, current assets less current liabilities totaled $18.5 million. As we head into 2023, our strong balance sheet provides us with the resources to execute on our strategy. Our plan is to continue deploying capital judiciously and increase operating efficiencies to drive long-term growth.
That concludes my remarks. Allan?
Allan Grafman
Wonderful. Thank you so much, Brooke. Now we welcome questions. Operator, back to you for Q&A.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Edward Reilly with EF Hutton.
Edward Reilly
Hi guys. Allan, you've been here for a few months now as CEO, I'm just wondering if you could maybe expand a bit on your top priorities for 2023
Allan Grafman
Ed, delighted. We just reviewed this and our priorities are really clear. We have a core focus, which consists of 3. At the Publishing group, we have some revenue growth that we're going to be focused on. And we have a key relationship with Penguin Random House that will be not only instrumental in our growth but which we are nurturing very, very assiduously and carefully.
On the Entertainment, we are maniacally focused on pushing the many options that we have into production. We don't control that but we know that there is breakout potential in what we have in place and in Media Holdings, we have some digital initiatives that we're working on that we will be bringing to bear this year. So that's the care focus.
There are some near-term opportunities. They fall into five categories, which I can enumerate very briefly: first, other companies have fallen to some challenges, some in the bankruptcy. If it makes sense, we'll have a conversation there. We're looking at a form of monetizing our intellectual property through Motion Comex. In the past, others have tried that. So we're exploring that carefully,
Third, we are exploring podcasts where we can contribute our intellectual property and return for a share. We're being very careful with how we use our resources. A fourth category is in mobile and games. We have a conversation possibly using our intellectual property in games. And our fifth category is short-form video.
So those are near term, which gets some of my attention, but we are really focused on our core. We're really focused on being the partner of choice because if we're that, we will succeed in every other important endeavor.
Edward Reilly
Okay. And then on the 10 Entertainment projects, are these options? Are these officially greenlit? Just wondering if you could maybe give us some indication of where some of these projects stand within the whole process.
Allan Grafman
So Ed, that is I'm so glad you asked that question because that has been that needed clarity with the Board and even internally. We have standardized how we're going to talk about these. We standardize how we talk about them amongst - within the company. How we talk about them with the Board and how we talk about them with external interested parties such as yourself. So first, what we don't talk about outside the company is when we're in negotiations, there are a large number, I have reviewed the list. It is a very large number of negotiations. We don't talk about that.
The second term that we do use is option. Options means a contract has been signed and modest money that moved. The third category, which is the most important category is where something has been put into green month and is moving towards production. That is where the opportunity is. That is we saw the operating leverage that was provided by Locke & Key. That is where we are maniacally focused. I've been super clear with the
Entertainment team that it's great to have tremendous number of negotiations, and it's great to have a large number of options. What we really need to do is cross the finish line, our step on home base and put something into production, that is outside of our control, to be clear but we're really focused on that.
So three categories. To be clear, negotiating, we don't talk about. Options, we do talk about, and we try to make clear what an option is, it's modest money. And the third category is put into production, that's significant. So I hope that clarifies a really important topic for you, Ed.
Edward Reilly
Yes. Absolutely. Just wondering if you can maybe silo the 10 entertainment projects between options and greenlit those categories in the grid.
Allan Grafman
So I'm sad to say that at this time, we have optioned a number of projects, which we've spoken about publicly. At this time, at this occasion today, none of those have been put into production. There is one small, which I believe we've announced, Brooke can jump in. There is a small production called Essex County, a book. Has that been announced?
Brooke Feinstein
Yes. That has been announced. We are not really involved in the production. We are just getting an executive producing fee on top of that, and that is being produced in Canada, the Canadian broadcast.
Allan Grafman
So thank you, Brooke. So we and that's a small production. So the positive is we control the IP, someone felt important enough to option and produce it. It could lead to great things. But at this time, it's modest.
Edward Reilly
Okay. Got you. And then any indication about renewal for your Surfside Girls Season 2?
Allan Grafman
So Surfside Girls at Apple has not been renewed in its current form. Its current form for all our listeners was live action, tween-oriented and it has not been renewed and furthermore, we're in conversations, and we have conversations. We're in discussions about the future of Surfside Girls, and we'll share more when we can.
Edward Reilly
Okay. Got you. And then you mentioned in a recent radio review that you expect to release 100 to 200 new titles during the year. Just wondering how this range of new titles compares to the number of new titles released this year.
Allan Grafman
I'm sorry. Could you are you speaking about the Publishing group?
Edward Reilly
Yes, Yes.
Allan Grafman
So the Publishing group has a significant increase in what we have planned. We have reviewed that. Our expectation is that we will be -- we are working towards being more successful by every metric, but of course, it's early in the fiscal year
Edward Reilly
Okay. And last one for me in the fourth quarter, it looks like SG&A was up quite a bit. Brooke, just wondering what's driving that,
Brooke Feinstein
Yes. So that's an easy one. We had the CEO severance in August, all that was booked, and it will be paid out cash wise over the next two years.
Edward Reilly
Okay. Great. Thank you, guys.
Operator
The next question comes from David March with Singular Research.
David March
Congrats on the quarter. First, just to follow up on that last question. Could you - Brooke, could you quantify the non-recurring SG&A?
Brooke Feinstein
I guess I could. It's about $700,000.
David March
Okay. That's helpful. And then as we start '23; I guess one question on the Entertainment side. Is there any residual revenue opportunity around Locke & Key hitting any part of the fiscal year this year? Or was all of that revenue realized in Q4?
Brooke Feinstein
Yes. So all of the revenue related to the prior seasons was all in this fiscal year. However, there are other opportunities that the Entertainment team is currently exploring. So that's kind of open.
David March
Okay. That's helpful. And then, I guess, just on the 10 projects, Allan, obviously, too early to pinpoint specific titles. But could you give us a sense generally speaking around genre that these titles fall in so that we have some idea of what to expect going forward?
Allan Grafman
So I can try to answer that, David, by two metrics. First, we have agreements with a significant different diversified group of partners including Universal, including 20th, tenth century, including Hulu, including Warner Bros including Cartoon Network, including Lionsgate. So we're diversified. We're not tied to. We're not hamstrong.
So we have a diversified set of relationships As it relates to genres, we are across all genres within the movie business is called four quadrants. So we do have properties that range from animated for the Cartoon Network and children through tweens, teens and adults. And so I would like to say that we have a wide enough portfolio of intellectual property and a diversified set of relationships that give us excellent opportunities. So I hope that answers your question, David
David March
Yes, that's helpful. And you've mentioned that you are exploring some opportunities perhaps it sounds like perhaps in mobile gaming. Did I hear that correctly? And could you talk-I mean, obviously, again, those titles, but could you talk a little bit broadly about what maybe some of the kind of low-hanging fruit might be there? And timing perhaps if you have any on any possible releases into iTunes and the Google Store and so forth?
Allan Grafman
So on timing I can't, except to say it's not near term. Console games, I was in the console business before, and I've also been in the mobile business. Console games take a very long time. Mobile games do not. We are focused on opportunities that will put our intellectual property into games quickly, cheaply and allow us to see if we can monetize it. Just to be clear, we do not invest our capital in these Initiatives.
We don't invest it really across podcasts or mobile games. We may put a little bit of money into some explorations in the future, including those categories. But it's we're in conversations, and I wouldn't be - I could call the negotiations, David, but I'm not going to I'm going to call them conversations. People who have come to us, ask if we're interested. We've said yes, and that's where we are. So it's early days.
David March
Sure. It makes a lot of sense. And then I guess lastly for me, I mean, you guys ended the year with $10 million in cash, which is a pretty solid position. I mean as you look forward, do you feel like that sufficient liquidity to fund operations going forward for the next multiple years if it'd be just given the pipeline that you see and the expense structure that you currently have?
Allan Grafman
So we have enough cash to execute our strategy in 2023 That being said, I don't want to project beyond that. We're focused and we're careful, and our strategy is to use what we're strong in and to partner with people who are stronger in other sectors, including cash. So we're focused on conserving cash, executing our plan, and we're going to be able to do that for 2022
David March
Sounds good. I'm sorry, just let me slip one more in. Do you have a number of projections for capital expenditures for this year?
Allan Grafman
Brooke?
Brooke Feinstein
And what do you mean exactly by capital expenditures?
David March
Just anything that's going to hit the investing line on the cash flow statement from a purchase of new.
Brooke Feinstein
Like assets and stuff. I mean we signed our two new leases this year, and you'll see those ROU assets on the balance sheet. And basically the old improvement and the private and equipment, all of that would have hit this year. So I would say very minimal
Operator
As there are no more questions, this concludes our question-and-answer session.
Allan Grafman
Thank you, all.
Operator
This concludes today's teleconference You may disconnect your lines at this time. Thank you for your participation.
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IDW Media Holdings, Inc. (IDW) Q4 2022 Earnings Call Transcript