eResearch | On May 13, WildBrain Ltd., (TSX: WILD), released its FQ3/2020 results for the period ending on March 31, 2020.
WildBrain posted revenue of $98.3 million down 11% from $110.0 million in FQ3/2019. The drop in revenues was mainly driven by the Company’s Global Distribution segment, including WildBrain Spark, the ad-based video-on-demand (“AVOD”) business.
The WildBrain Spark segment was negatively affected by changes implemented by YouTube in January 2020 along with the impact of COVID-19 on the global advertising industry beginning in March.
In FQ3/2020, the Company reached 10.3 billion views totaling more than 59.1 billion of minutes of videos watched on WildBrain Spark. These numbers represent an increase of 19% and 42%, respectively, on a quarter-over-quarter basis.
As for the nine-month period, the Company’s revenue was virtually unchanged at $332.7 million compared with $331.0 million the same period in F2019.
CHART 1: WildBrain Quarterly Revenue and EBITDA
The adjusted EBITDA in FQ3/2020 was $17.9 million versus $20.1 million in FQ3/2019. There was a positive impact of $1.9 million on adjusted EBITDA due to the adoption of the IFRS 16 in FQ3/2020. Nevertheless, adjusted EBITDA decreased by 10.9% and the normalized adjusted EBITDA for this one-off impact declined by $4.1 million in FQ3/2020.
The IFRS 16 accounting standard introduced a single accounting model and eliminated the distinction between operating and finance leases for lessees.
Currency Impact
The Company reported a currency exchange loss of $25.9 million in the FQ3/2020 due to its global operations. In the FQ3/2020 reporting period, WildBrain revalued its financial assets and liabilities denominated in a foreign currency at the prevailing exchange rates.
Net Loss Due Primarily to Write-down
The Net Loss of $221.7 million in FQ3/2020 was primarily due to a non-cash Goodwill impairment charge of $184.5 million. According to the Company, they took the impairment charge due to:
- Changes made by YouTube related to targeted advertising as it negatively affected WildBrain’s revenue going forward
- The potential impacts from the global economic uncertainties caused by the COVID-19 health crisis.
Financing for Growth Opportunities
On May 13, 2020, WildBrain announced that the Company has entered into a loan agreement of $25 million with Fine Capital. The net proceeds from the transaction will be used to fund acquisitions and other investments to drive WildBrain’s content and brand strategy across the Company, with a special focus on its ad-supported video-on-demand business – AVOD.
The funds will be directed into a newly formed subsidiary, named Subco, and Fine Capital will buy debentures from Subco with the net proceeds invested in organic and inorganic growth. Due to newly formed subsidiary’s capital structure involving Fine Capital, WildBrain expects no impact to its current debt covenants.
“With the $25 million financing announced today, we’re doubling down on our integrated IP strategy,” said Eric Ellenbogen, CEO of WildBrain. “This is not working capital for our business; we’ve taken measures to contain costs and to address working capital and cash flow”, added the CEO.
Headquartered in Canada, WildBrain is a global leader in kids and family entertainment and was formerly known as DHX Media.
The Company offers approximately 13,000 half-hours of filmed entertainment with an audience in more than 150 countries on over 500 telecasters and streaming platforms. With over 168 million subscribers, WildBrain operates one of the largest networks of kids’ channels on YouTube.
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