DHX Media did not provide any insight into the progress of its strategic review during the company’s Q1 2018 quarterly conference call on November 14.
Executive chair Michael Donovan told investors that the special committee is conducting a “slow, deliberate” strategic review to explore all options to enhance shareholder value and that shareholders will be updated when the process is complete. The strategic review launched on October 2 following disappointing results that saw Q4 2017 revenues drop 15% compared to the same quarter in 2016. At the time, the company said it was considering the sale of part or all of the company, a sale of the assets of the company, a merger with another party, or other options.
With regards to its Q1 2018 results, DHX Media’s CEO Dana Landry said the company is on track to achieve its annual growth targets and that the company is committed to improving its bottom line, following its US$345-million acquisition of the Peanuts and Strawberry Shortcake brands in May.
The first quarter of fiscal 2018 saw revenue of US$77.3 million, up 83% from Q1 2017. Of that, 16% was organic growth, and 67% was acquisitive growth, primarily from Peanuts and Strawberry Shortcake. Consumer products revenues were US$28.4 million, up a whopping 828% compared to US$3 million in Q1 2017, a direct result from that acquisition. Consumer products now accounts for 42% of DHX Media’s revenue, up from 18% in Q1 2017.
Looking at its Peanuts integration, DHX Media said it expects to achieve US$4.5 million in company-wide cost reductions in fiscal 2018. As part of its efforts, the company has centralized its US brand operations and is reconsidering duplicate personnel functions.
Revenues from distribution and the company’s Wildbrain network on YouTube also increased year-over-year, up 58% to US$18.2 million, driven partially by the increasing demand for content from SVOD services. According to the company, services like Amazon Prime, Netflix and Alibaba will spend US$16.5 billion in 2017-18, up from US$7.8 billion in 2016.
Producer and service fee revenues increased 69% year-over-year to US$13.83 million, while proprietary production revenues were down 28% to US$2 million compared to Q1 2017. For Q1 2018, the company added 11 proprietary half-hours to its library, down 69% versus 35 proprietary half-hours for the same time period in the previous year. DHX Media had expected to deliver 13 half-hour episodes of Supernoobs season 2 during the quarter, but delivery was delayed.
Television revenues also dropped, falling 9% to US$11.05 million, in part due to lower subscriber revenues, but in line with company expectations. The company said it is reviewing its plan for advertising on its channels, which includes Family Channel and Family CHRGD.
For Q1 2018, consumer products revenues driven by its licensing agency CPLG were down 15% to US$3.9 million compared to Q1 2017, as revenues from third-party properties like Despicable Me and Minions tailed off.
Despite its ongoing review, Landry said the company is committed to expanding its content creation, distribution and consumer products businesses.